Discount Airlines Driving Boeing 737 Sales & High Earnings Forecast

In late January, despite predicting a decline in overall sales, Boeing forecast higher earnings for the year ahead and its shares reached an all-time high. The predicted earnings boost is due in large part to the success of the narrow-body 737 and re-designed 737 MAX, assembled at Boeing’s factory in Renton, Wash.

 

The 737 is particularly appealing to discount airlines across the globe, as it accommodates short- to medium-range travel and around 150 to 200 passengers—ideal for the type of routes offered by low-cost carriers like Southwest, Alaska and Ireland’s Ryanair. It’s the best-selling commercial airliner in history, with nearly 14,000 orders as of January 2017.

 

Introducing, the 737 MAX

In development since 2011, the 737 MAX will serve as the successor to Boeing’s 737 Next Generation series. Upgrades include the brand new CFM LEAP-1B engine and a redesigned winglet that offers greater fuel efficiency. Designed with budget airlines in mind, the 737 MAX reduces maintenance costs by 6 percent compared to previous models and, according to Boeing’s calculations, has 8 percent lower operating costs than the nearest competitor.  

With plans to deliver the 737 MAX to airlines by May 2017, Boeing has increased output at the Renton factory to an impressive 47 jets per month.

 

Recent orders from low-cost carriers

 

Southwest

Of all the discount airlines across the world, Dallas-based Southwest Airlines is perhaps the most closely associated with the Boeing 737, having built its entire business model around the jet. By using the 737—and only the 737—exclusively for all of its flights, Southwest spends less on maintenance, training and replacement parts. It credits much of its success to the decision to use only one type of plane.

As Boeing’s largest customer, Southwest consulted on the design of the 737 MAX and is the official “launch customer” for the upgraded model. The airline placed 200 orders, with the first delivery expected in July 2017 and the first flights planned for the following October.

 

Norwegian Air Shuttle

Southwest may be the 737 MAX launch customer, but budget carrier Norwegian Air Shuttle will be the first to actually fly the brand new jet. It will receive its first 737 MAX in May and begin flights as early as June.

 

SpiceJet

Indian discount airline SpiceJet made headlines earlier this year when it placed an order for 100 Boeing 737 MAX planes. Of India’s many low-cost airlines, SpiceJet is Boeing’s only major customer, and this latest order, worth $11 billion, further secures its place in India’s burgeoning air travel industry.

The deal also creates opportunities for SpiceJet, which hopes to become India’s first long-haul, low-cost airline. The airline plans to expand its reach, offering longer flights to new destinations in the region. As SpiceJet CEO Ajay Singh explained earlier this month, “narrow body aircraft give us another hour of flying and this opens up several new destinations for us to explore.”

 

Good news for Washington aerospace

The continued success of the 737 is fantastic news for Washington state’s aerospace industry. Produced in Renton since 1970, the plane doesn’t only provide Boeing jobs, but also contributes to local jobs with Boeing suppliers.

Boeing’s presence in Washington has led the Pacific Northwest to become the largest aerospace cluster in the world. According to the Washington State Department of Commerce, the state is home to 1,400 aerospace-related businesses and 35 of the state’s 39 counties are home to at least one aerospace-related company.


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