Southwest – Has Boeing Screwed its Best Customer?

Boeing announced that it will not be seeking an exemption for a known safety issue on the 737 MAX 7. Instead, Boeing plans to certify the aircraft with a permanent fix. That fix, however, is planned to be completed in 2026. Southwest eliminated the MAX 7 from its 2024 plans, and may need to push the aircraft out further into 2026, when Boeing had planned the fix that must be retrofit to the entire MAX fleet.

Interestingly, Boeing

has not indicated the fate for the proposed 737 MAX 10 waiver, for which a request will apparently continue to go forward. It will certainly be interesting to see whether Boeing’s Washington lobby can defeat Congressional critics in approving an exemption . While there is a possibility that Boeing may pull back that exemption as well, we would have expected both the pulled simultaneously.

The MAX 10 has more orders than the MAX 7, with a higher price and margin, so it contributes more to Boeing’s cash flow. While we hope Congress does the right thing and fails to grant another exemption for Boeing, we believe the old adage applies here: “if pro is the opposite of con, progress is the opposite of Congress.”

Southwest is Curbing Growth Plans

Southwest is by far the largest customer for the 737 MAX, and has 305 firm orders for the MAX 7 to replace its existing 737-700NGs. The MAX 7 is already late, as the original schedule for certification was missed and has been further delayed as the FAA tightened certification requirements in the wake of the two fatal MAX 8 crashes. Boeing expected certification of the aircraft in late 2023, moved to early 2024, but now in the wake of the MAX 9 issues and the decision to not request a waiver, pushed the certification to late 2025 at the earliest and most likely mid 2026 for initial deliveries.

The company deleted the MAX 7 from 2024 fleet plans and will likely need to do that for 2025 as well. The implications for Southwest are far reaching. First, to continue to maintain its market share, Southwest needs lift to replace the older 737-700s that were delivered more than 20 years ago.