Southwest may buy older planes to meet lift needs

ORLANDO, Florida Tue Mar 12, 2013 2:45pm EDT

ORLANDO, Florida (Reuters) - Southwest Airlines Co, which is poised to expand service in the next few years, is considering buying used planes to help meet its needs, an executive said on Monday.

"We are trying to, with a combination of new and used aircraft, make sure that we have enough lift to fulfil our schedules," Brian Hirshman, senior vice president of technical operations, told Reuters in an interview at the International Society of Transport Aircraft Trading conference.

"We're constantly looking at what our capacity and demand is," he added.

Dallas-based Southwest has made a number of fleet changes in the past year. The carrier began flying the Boeing 737-800, a larger model, last year. It started adding six seats to existing 737 planes last year to increase revenue potential. It has also agreed to lease 88 smaller 717 planes it acquired in the 2011 purchase of AirTran to Delta Air Lines (DAL.N).

At the end of 2012, Southwest had 694 planes, including the 717s that will be leased to Delta starting this year.

"Next year we have firm orders of 31 airplanes from Boeing, all -800s, and we're looking at is that enough or do we need to substitute that with some used airplanes," said Hirshman.

Hirshman, who joined Southwest in 2010 and began his career as a Northwest Airlines mechanic, said used planes that were 10 to 12 years old were priced favourably now as Boeing is launching newer models. Southwest only flies Boeing planes.

In late 2011, Southwest agreed to be the launch customer for the Boeing 737 MAX that is due out around 2017, ordering 150 of the new planes that will be equipped with fuel-efficient engines supplied by CFM International, a joint venture of General Electric and France's Safran. At that time, Southwest also ordered 58 of 737 Next Generation models.

"There's a really sweet spot in the market right now, just before the MAX comes out," Hirshman said. "The values on NGs ... have some really attractive pricing," he added.

Southwest, which faces labour and fuel cost pressures as competition rises, will have opportunities to expand service in coming years. Restrictions on non-stop flights it can launch from its base of Dallas Love Field will be lifted in 2014 when the Wright Amendment, federal legislation that was introduced in the 1970s, expires.

Last year, the carrier won approval from Houston's City Council to expand William Hobby Airport as it looks to add service to Mexico, the Caribbean and Central and South America. International flights on Southwest are expected to begin there in 2015.

Hirshman said Southwest was also evaluating other expansion opportunities and looking to make sure it has enough planes.

"It's not an imperative by any means, it's really more of an opportunistic strategy," Hirshman said. "Should we find the right airplanes at the right prices, we'll consider picking them up." (Reporting by Karen Jacobs; Editing by Richard Chang)

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