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Exclusive: Boeing nears 737 MAX order from Southwest worth billions - sources

Stock MarketsMar 10, 2021 06:50PM ET
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© Reuters. Southwest Airlines Co. Boeing 737 MAX 8 aircraft at Midway International Airport in Chicago

By Eric M. Johnson

SEATTLE (Reuters) - Boeing (NYSE:BA) Co is close to a multibillion-dollar deal to sell dozens of its 737 MAX 7 jets to Southwest Airlines (NYSE:LUV) Co, in potentially the company's largest 737 MAX order since the aircraft's safety ban was lifted, people familiar with the matter said on Wednesday.

If confirmed, the deal would head off a partial defection to Airbus SE (OTC:EADSY) by one of Boeing's largest customers and provide Boeing much-needed support after the nearly two-year grounding of the 737 MAX family, following fatal crashes in 2018 and 2019.

The order would include dozens of firm orders and potentially significant options, the sources said.

U.S. carrier Southwest said it does not comment on fleet decisions and has nothing to announce. Boeing declined comment.

The proposed deal follows speculation of a faceoff between the smallest member of Boeing's MAX family and the A220 from Airbus.

Each 737 MAX 7 carries a list price of roughly $100 million, though such jets usually sell for less than half their official value with typical market discounts, according to aircraft industry sources.

The exact terms of any deal and the timing of a possible announcement were not clear.

Boeing shares gained 6.4% to close at $245.34 on Wednesday. Southwest shares dipped 0.7% to close at $58.51.

The potential Southwest deal comes after Alaska Airlines agreed in December to buy 23 737 MAX 9 jets following a lifeline order from European budget airline Ryanair for 75 of the narrowbodies.

Southwest Chief Executive Gary Kelly said in November that the company wanted to make a decision soon about refreshing its aging 737-700 jets with 143 seats and was debating between the Boeing 737 MAX-7, which has yet to be certified, or the A220, which would mean a shift away from its all-Boeing fleet for the first time.

Speaking at an Aero Club of Washington virtual luncheon on Wednesday, Kelly said Southwest remained in negotiations with Boeing and reiterated the advantages to having a single fleet type, while acknowledging that the A220 is "a great plane."

Any deal for the MAX is not meant to increase Southwest's overall fleet size. It has parked dozens of planes while weathering the COVID-19 crisis.

The MAX 7 is the smallest of the four-member MAX family, with space for 153 seats in a two-class configuration and a range of 3,850 nautical miles.

Boeing's overall order backlog stood at 4,041 aircraft as of end-February.

March 10 marks the second anniversary of an Ethiopian Airlines 737 MAX crash, which occurred five months after a similar disaster on a Lion Air flight. All together, 346 people died.

Exclusive: Boeing nears 737 MAX order from Southwest worth billions - sources
 

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