Southwest to save by delaying delivery of planes

DALLAS — Southwest Airlines Co. is delaying delivery of new airplanes and filling the gap with used planes to reduce spending over the next five years.

It’s also raising its dividend and could soon buy back more of its own shares.

Southwest said Wednesday that it will delay 30 firm orders for Boeing 737 jets, which CEO Gary Kelly said would cut capital spending through 2018 by more than $500 million. The airline is also giving up or delaying options for additional planes.

Meanwhile Southwest will buy 10 used 737s from Canada’s WestJet over the next two years. They average about 11 or 12 years old and should bide Southwest over until Boeing begins producing a new, more fuel-efficient 737 model called the Max late in this decade, Southwest officials said.

The airline isn’t disclosing financial details of the Boeing and WestJet deals, which were announced at the Dallas company’s annual meeting.

Kelly offered an upbeat forecast for summer and suggested that April might turn out to be the weakest travel month of 2013.

“We’re certainly feeling better about May-June than we were about April,” Kelly told reporters after the meeting. “There is a softness in the economy right now, so our folks are working very hard to generate traffic. I think we’re going to see very full airplanes.”

Kelly said, however, that he was uncertain whether the airline could boost prices. Southwest and other airlines reported a drop in a key per-mile revenue ratio in April.

Southwest is raising the quarterly dividend due on June 26 to 4 cents per share, up from a penny per share. It’s also boosting share-buyback authority to $1.5 billion from $1 billion. The company has bought $725 million in its own stock since August 2011, increasing the value of remaining shares.

Southwest is alone among major U.S. carriers in being consistently profitable for many years and having an investment-grade credit rating. It was the only major U.S. airline to offer a dividend until Delta Air Lines Inc. announced last week that it too will begin paying a dividend. Delta also increased its share-buyback program.

Other kinds of companies routinely pay dividends and buy back shares, but the lack of dividends is fitting in the airline industry, where most big operators have lost billions and gone through bankruptcy in the past decade. Delta’s dividend and the increase at Southwest are further signs that the airlines believe they’ve turned a corner.

Mergers have reduced competition among airlines, helping to prop up fares, and the carriers have raised billions from new fees.

Southwest shares rose 36 cents, or 2.6 percent, to close at $14.34. Shares of Delta, United Continental Holdings Inc. and US Airways Group Inc. were each up more than 3 percent in a broad market rally.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.