There have been many 737 operators, but few with the attachment to the 737 like Southwest Airlines. The following chart shows how attached they have become to each other. The recent bump in growth came with absorbing the 737 from . Another airline closely associated with the 737 is Ryanair – but its fleet size is about half that of Southwest.

2015-05-21_15-17-09Between 2000 and April 2015, Southwest ordered 575 Boeing 737s. (This is second only to the 606 ordered by Ryanair) The table shows the breakdown of Southwest’s orders and deliveries between 2000 and April 2015. The MAX orders are thought to consist of 30 MAX7 and the remainder .

2015-05-21_15-18-14There is obviously a lag between what gets ordered and what gets delivered. The next chart shows a breakdown of orders and deliveries over time. Southwest last ordered a new -700 in 2011 and also took its last delivery of this model from Boeing in 2011. The acquisition of AirTran came with a number of -700s.

1It appears Southwest has not entirely lost its interest in the -700 – only new ones from Boeing appear to be out of favor. The airline has been buying up -700s in the pre-owned market. The next chart shows the -700 fleet kept growing since 2011 – it appears by 81 aircraft.

2Looking forward it would seem the airline will be taking 800s and MAX8 from Boeing. There are those 30 MAX7 on order, but it looks like a fair bet they will be converted to MAX8. All this means Southwest is adding capacity.  Quite a lot of it and more than competitors like.

This capacity growth is not finding favor with the big three US network carriers. As we have said many times, oligopolies are great while they last. But it always happens – the urge to “cheat” is irresistible. Southwest is not really cheating by growing its capacity. Noting the CFO’s comments – Southwest seems comfortable that they will be able to keep their aircraft at good load factors even as its capacity grows a lot faster than GDP.  But the big network carriers see it as cheating.

Although Southwest now has a fleet size comparable to the big three, it operates a much simpler operation with one fleet type. We think it highly likely Southwest will start poaching traffic in nearby markets beyond the US border as well as keep some marginal markets going because of low fuel costs. This will be growth traffic for Southwest but taking away from the big three.

Analysts are correct that industry will soften as airlines start to compete for market share they don’t want to lose. The market has already responded to the obvious impact on stock prices.  So who can bleed the longest?  The US DoT offers some guidance – see the table below.  It would seem Southwest can handle a market share fight.2015-05-21_15-41-41Happily for the American traveler, this is all music to the ears and wallet. Especially when this comment was made: “Capacity is being added, not by us, but by some of our competitors, and we will obviously respond to that,” American Airlines Chief Executive Doug Parker said on CNBC on Tuesday. Nothing says lower fares like a market share tussle.

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