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Southwest 737 Max order brings early Christmas to Boeing

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Boeing's decision to re-engine the 737NG instead of launching an all-new aircraft program may have been revealed over the summer when American Airlines announced a massive narrowbody fleet modernization program that will include the new variant, but the move to upgrade the 737 with CFM International Leap-1B engines was always first and foremost about one key Boeing customer: Southwest Airlines.

Yes, completely losing American to Airbus would have been a devastating blow. But the thought of losing Southwest as its signature 737 customer represented the nightmare scenario for Boeing, one that was officially avoided Tuesday morning with the announcement of the LCC's blockbuster firm commitment for 150 737 Max aircraft. Southwest is the world's largest 737 operator with a fleet of 559 and was the launch customer for the -300, -500 and -700 versions of the 737. The Dallas-based LCC has long been Boeing's most powerful advertisement for the aircraft.

The carrier's consistently profitable business model has been based, above all else, on the efficient utilization of the 737. The aircraft underpins Southwest's success, both in terms of profitability and operational efficiency, Boeing has been able to tell potential narrowbody customers around the world. But Southwest has been signaling for some time that the 737-700 (and even the -800 model the LCC is now incorporating into its fleet) won't do the job much longer. At ATW's Eco-Aviation conference in June 2010, Southwest executive VP and COO Mike Van de Ven warned that the 737NG was unable to deliver the "step change" in efficiency that the airline industry would need as this decade progresses.

"The time has come to develop a replacement to the workhorse narrowbodies," he said then. He explained that today's single-aisle aircraft only enable airlines to make "marginal improvements" in fuel burn efficiency, adding that "marginal improvements won't allow us to meet our environmental responsibilities and economic challenges. Our industry needs better economics."

And hanging on while Boeing developed and produced an all-new aircraft by 2020, particularly in the aftermath of the numerous 787 program delays, was simply too long and too risky a wait for Southwest, especially with the Bombardier CSeries and Airbus A320neo aircraft set to start appearing by mid-decade on routes on which the LCC would be competing.

Boeing Commercial Airplanes president and CEO Jim Albaugh said at the Tuesday signing ceremony in Dallas that he had a very direct conversation with Southwest chairman, president and CEO Gary Kelly during negotiations for the Max order: "Gary's message to me was simple: 'Make sure I have the most efficient aircraft in the market. I've had the most efficient aircraft and make sure I continue to have it.'"

For Boeing, it was critical that Kelly continued telling the world about the 737's virtues. "It truly is Christmas come early for Boeing," Albaugh said.

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