Southwest 737 order sets Boeing record

DALLAS – Southwest Airlines is placing a huge order for a redesigned and more fuel-efficient version of Boeing Co.’s most popular plane, the 737.

It’s the biggest firm order in Boeing’s history by number of planes – 208 – and by list-price value, at nearly $19 billion. Last month Boeing announced a deal with Indonesia’s Lion Air for 230 planes worth $21.7 billion, but that agreement isn’t finished.

Tuesday’s order should help Southwest address its biggest challenge – high fuel prices – when the planes start arriving in 2017. Southwest is on pace to spend $5.6 billion this year on fuel, its largest expense and one that is growing twice as fast as revenue.

Southwest committed to buy 150 of the yet-to-be-built 737 Max and will become the first carrier to get one. Boeing says the new plane will have about 10 percent better mileage than the most economical single-aisle jetliner in the skies today. Southwest will also buy 58 current 737 jets, adding to the 142 it already has on order.

Southwest is Boeing’s best customer for the 737; it has more than 550 of them. Southwest CEO Gary Kelly had left the door ajar to buy planes from Boeing’s European nemesis, Airbus, if Boeing couldn’t produce a more efficient 737 by the end of the decade.

So it was with a combination of jubilation and relief that the head of Boeing’s commercial airplanes division, Jim Albaugh, traveled to Dallas to appear with Kelly at a press conference to announce the order on Tuesday.

The companies declined to say how much Southwest would pay per plane, but it will be less than the list price. Southwest chief operating officer Mike Van de Ven said, “It’s a lot like buying a car: You get to negotiate a discount.”

Van de Ven said Southwest would spend an average of $1.2 billion a year from 2012 through 2022 on the new planes.