Southwest CEO says the airline doesn't have enough planes for 2022 as demand spikes
Southwest Airlines is coming out of the pandemic in growth mode. But one thing holding it back is a lack of airplanes.
Outgoing CEO Gary Kelly told CNBC's Squawk on the Street on Thursday that the airline's fleet won't be large enough to support its existing model in the upcoming years, let alone an expansion.
"We don't feel like we have enough airplanes for 2022 and 2023, and that's just doing what you know us to be famous for," Kelly told Jim Kramer, referring to the airline's low-cost domestic flying.
Southwest is already one of the top four largest US airlines by fleet size with nearly 700 aircraft in storage, according to Cirium data, and has around 80 more aircraft stored or parked.
The focus for the nation's largest low-cost carrier is on a fleet standardization centered on the Boeing 737 Max. Southwest has been steadily increasing its orders for the embattled jet, including a June order for 34 aircraft, and likely getting great deals from Boeing in terms of price.
Boeing has been clearing out its backlog of unclaimed 737 Max aircraft, as the Wall Street Journal reported, but has likely been dropping pricing owing to the aircraft's 20-month grounding in the US.
Kelly also hinted at a potential international and intercontinental expansion of Southwest's route network using its current fleet.
"With the Boeing 737, just looking at North and South America, we have all kinds of growth opportunities," Kelly said. Southwest is yet to serve Canada, for example, and every South American country is accessible from Southwest's Fort Lauderdale, Florida base with the 737 Max 7 and its 3,850-nautical mile range.
Even the current generation Boeing 737s in Southwest's fleet can access countries as far south as Ecuador, Brazil, and Bolivia from Florida.
Southwest's aircraft woes show how quickly the domestic travel landscape has changed since the vaccine rollout began. Just a few months ago, the airline sold three Boeing 737-700 aircraft to new startup Avelo Airlines, which will be used to open a base in New Haven, Connecticut later this year.
"If Southwest knew then what it knows now about the demand, would they have gotten rid of their 737-700 fleet, or as many of the aircraft in that fleet as they did?" Henry Harteveldt, a travel industry analyst and cofounder of Atmosphere Research Group, told Insider.
Inexpensive pre-owned Boeing 737s aren't difficult to come by but Southwest can't just go shopping for new planes. The multi-million-dollar investment would come with a time commitment that would run counter to Southwest's future fleet plans.
"The economics of acquiring an airplane are far more complex than the economics of deciding to buy or lease a used car," Harteveldt said.
This article originally appeared on Business Insider