Boeing (BA, Financial) bagged another order for its cash cow, the 737 aircraft from Alaska Airlines to expand its fleet. The Seattle based airline has ordered for six more Boeing 737-900 extended range. The contract is valued at $594 million at list price. Of the total order, four are to be delivered in 2016, and the remaining are to be delivered in 2017.
The single-aisle aircraft has been the key revenue and profit generator for the American aircraft manufacturer. Even during the oil plunge, orders for these planes have continued to flow. These latest order from Alaska Airlines is another proof of the robust demand and popularity of the plane.
A look in details
Alaska Airlines Executive Vice President and Chief Revenue Officer Andrew Harrison said that the fuel efficient 737 will help it cement its dominance and rule the Pacific Northwest network. The airline’s fleet is one of the youngest in North America. Presently the operator is upgrading its fleet with the next generation 737.
Picture from Alaska Airline
The company plans to replace its 737-400 fleet with 737-900ER over the coming years. This will assist the carrier to make operational gains by saving on fuel cost. The 737-900ER can fly 25% more passengers on the same fuel. This will reduce the per seat cost, widen margins and increase profitability.
Alaska Airlines is expected to take the deliveries of 19 737s in the next year, and this includes four 737-900ERs. The latest order also means more of business for Spirit AeroSystems (SPR, Financial) that manufactures the 737 fuselage and various other components. The carrier also declared that the 737-900ERs will have big overhead cargo bins which will be able to hold 48% more bags than the existing bins.
Alaska Airlines has been a dedicated customer of the 737 aircraft with 137 planes in service. Besides, the operators also has a firm commitment for 73 737s and options for adding another 40 planes to the order book. The latest order has increased the total order from Alaska to 79 planes. The orders show the carrier’s confidence in the 737 which is a matter of pride for Boeing. "As hometown partners, Alaska and Boeing have a shared vision to put the most innovative and fuel-efficient airplanes in the skies. The 737-900ER is a testament to that vision," says Boeing Commercial Airplane president Ray Conner.
The narrow body’s popularity grows from strength to strength
The 737 aircraft was launched in 1964. The company’s bagged nearly 13,000 in net orders for the plane. According to Boeing’s website, so far this year through February 17, the company has received net orders for 23 planes, of which 17 are for the 737. The 737 order books show an unfilled order tally of 4,269 through January, which makes for more than 75% of the plane maker’s backlog.
Chart taken from www.b737.org.uk/sales
The demand for 737 has remained strong even in the face of declining oil prices in 2014 when crude oil dipped to almost half. The aircraft saw bumper deliveries last year as the company dispatched 485 737s. Order trends were also impressive. Boeing bagged a total of 1,196 units in order for the narrow body which remains its top selling plane. The year 2009 was a slump when Boeing’s 737 book to bill ratio was less than 1. However, ever since 737 annual orders have been higher than deliveries.
Alaska Airlines is the fourth largest operator serving the Hawaiian Islands. As per PBN research, in 2013 the airlines operator flew more than 1.1 million passengers to Hawaii. Air traffic is expected to get higher with time. With this Boeing can expect to receive more such 737 orders from the airline whether it expands or replaces its fleet.
