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Southwest Airlines accelerates fleet replacement

12-Sep-2011 1:35 PM

Southwest Airlines Senior VP Finance and CFO Laura Wright, at the Annual Dahlman Rose & Co Global Transportation Conference on 07-Sep-2011, stated Southwest Airlines has increased the number of B737-800s scheduled to enter the fleet next year to 33, all scheduled to replace the B737 classic, as part of an effort to continue reducing costs. Originally at 20 deliveries for 2012, the company has arranged for the lease of an additional five B737-800s which will be used out of its Dallas Love Field hub. The company expects to take delivery of 100 new -800s aircraft over the next few years, a large part of its cost-reduction strategy. Ms Wright also stated that due to fuel cost increases, which have resulted in declining profits for the carrier, it has become more aggressive in capacity cuts. Ms Wright also stated the carrier is anxious to enter the Atlanta market. It is planning to use Southwest metal to serve the 15 markets it originally announced in addition to the new points announced last week that AirTran did not serve – Phoenix and Las Vegas. Ms Wright elaborated on CEO Gary Kelly’s comments that Southwest would not retain AirTran’s B717s, stating it would be some time before they exited the fleet. AirTran brought 88 717s and 52 737s to the combined fleet. Ms Wright also explained the success of the company’s 2007 strategic plan, designed to increase revenues by USD1.5 billion, was driven by market-share increases rather than capacity growth. The additional revenues were offset, however, by rising energy costs. It is now in the midst of four follow-on initiatives including the acquisition of AirTran, its new FFP programme launched in Mar-2011, fleet replacement with the B737-800 and its new reservations system. Other initiatives in progress include additional revenue management techniques, in-flight connectivity, taking advantage of required navigation performance (RNP) and implementing an operations recovery/re-accommodation programme. Ms Wright added that merger synergies would yield USD400 million net by 2013, but it has forced the delay of its new reservations system, another initiative that will increase revenues exponentially.