WestJet (TSX: WJA) announced today it has entered into a letter of intent to purchase 65 737 MAX aircraft from Boeing, consisting of 40 737 MAX 8 and 25 737 MAX 7 aircraft, with delivery scheduled to begin in September 2017.
"We are proud to continue our long-standing relationship with Boeing and are thrilled that we will be among the first North American airlines to fly the new 737 MAX in its first year of commercial operation. This pending order reinforces our strategy of maintaining the flexibility in our fleet plan while enabling us to introduce new fuel-efficient technology and enhance our inflight guest experience," said WestJet President and CEO Gregg Saretsky. "Our strong balance sheet allows us the opportunity to support our low-cost business model and contribute to our profitable growth through the renewal of our fleet with a lower operating cost aircraft."
The 737 MAX aircraft will be equipped with CFM International LEAP-1B engines, and is expected to reduce fuel burn and CO2 emissions by 13 per cent as compared with the most fuel-efficient single-aisle aircraft currently available. Additional design updates, including Boeing's Advanced Technology winglets and the Boeing Sky Interior, will also contribute to these improvements in fuel efficiency and WestJet's overall guest experience. Boeing currently has firm orders from five other airlines in North America for its 737 MAX aircraft.
"Since the very beginning, the Boeing 737 helped play a role in WestJet's growth and success," said Brad McMullen, Vice-President of North America Sales, Boeing Commercial Airplanes. "We are pleased to see that the 737 MAX will continue the tradition of supporting WestJet's vision to be one of the most successful international airlines in the world. The 737 MAX's efficiency, reliability and passenger amenities will be a successful combination with WestJet's famous customer service."
The airline will substitute 15 of its existing Boeing Next-Generation 737 aircraft orders currently scheduled to deliver between December 2014 and 2018, with Boeing 737 MAX aircraft, for a net increase of 50 committed deliveries to its fleet plan. Including this pending order, WestJet's future Boeing 737 aircraft deliveries total 92, with commitments for the proposed Boeing 737 MAX 7 and MAX 8 aircraft, including substitution rights to the 737 MAX 9, scheduled for delivery from 2017 through 2027. WestJet notes that as a result of the flexibility built into its fleet plan, which includes its lease renewal options but excludes any potential sales other than the previously announced sale of 10 737 Boeing Next-Generation aircraft in 2014 and 2015, the fleet could be as large as 162 737 Boeing aircraft or as few as 120 737 Boeing aircraft a decade from now.
As a result of this pending order, WestJet now anticipates its capital expenditures to range between $210 million and $220 million for the third quarter of 2013, and between $690 million and $710 million for the full-year 2013. Previously, WestJet's guidance was between $100 million and $110 million for the third quarter of 2013, and between $610 million and $630 million for the full-year 2013. The increase in full-year 2013 capital expenditure incorporates reduced deposits forecasted in the fourth quarter of 2013 as a result of the Boeing Next-Generation 737 aircraft substitutions. Including this pending order, WestJet's cumulative aircraft capital expenditures from 2014 to 2017 will be lower than previously expected due to the substitution of 15 existing Boeing Next-Generation 737 aircraft orders that were scheduled to deliver between December 2014 and 2018 to Boeing 737 MAX aircraft delivering in 2017 and beyond.
WestJet expects that a definitive purchase agreement will be entered into prior to September 30, 2013.
WestJet's current fleet consists of 103 Boeing Next-Generation 737, and four Bombardier Q400 NextGen aircraft. With one of the youngest fleets in the airline industry, WestJet expects to continue its growth while controlling operating costs and providing an award-winning guest experience.
Logos, product and company names mentioned are the property of their respective owners.