Southwest’s 737-700 Engine Strategy As It Phases Out Fleet

DALLAS—All of Southwest Airlines’ engines were covered by OEM maintenance contracts until the end of 2021, when its GE contract for the CFM56-7B engines powering its Boeing 737-700s expired. 

The airline took on “engine level management of that fleet” primarily driven by its fleet renewal and planned retirement of the -700 fleet, says Ken Barone, director fleet asset management at Southwest Airlines, speaking at Aviation Week’s Engine Leasing, Trading and Finance.

The 737-700 fleet accounts for 425 of the airlines’ 776 aircraft and should retire over the next 10 years.

In particular, “We moved to a pay-at-shop-visit structure instead of the power-by-the-hour structure,” adds William Abbott, Southwest Airlines MD of powerplant programs. 

While value of the original service agreement “was significant,” at this stage of the -700 fleet’s life, “we needed to lean into flexibility and look at all of the tools we had available to us,” Barone says. 

For instance, Barone says it would not have been responsible to spend maintenance money on green-time that Southwest most likely would not use. It also is looking at parts manufacturer approval (PMA) and designated engineering representative (DER) options.

Southwest Airlines already uses PMA for its fleet. In 2022, the use of 341 PMA parts in 2022 saved the airline $54 million, Barone says. Given that Southwest owns 690 of its aircraft and only leases 86, it is not strapped to lease-return conditions that typically prevent use of alternative parts.

Barone stresses that Southwest doesn’t just use PMA parts to lower costs—the parts also can increase reliability, availability, and supply chain redundancy.

As Southwest retires its -700s, the airline plans to use some of those assets, including the engines, to support its flying fleet.

“Southwest is in a really good spot as we retire the -700s and bring on the LEAP-powered MAXs,” Abbott says. Although “we haven’t been able to tear down as many assets as we probably would have liked to at this point” due to MRO slot availability, the tear downs will “provide material for us and for the industry.”