Low cost carrier,
Southwest Airlines Co.
) has ordered 85 split scimitar winglets from Aviation Partners
Boeing (APB) that are expected to reduce its fuel consumption and
augment the efficiency of its fleet. Notably, the company has
been using APB's blended winglets on its entire 737-800 fleet for
the last 10 years.
The Dallas-based airline has ordered the new winglets for 52
of its existing
The Boeing Co.
) 737-800 aircraft and 32 new ones that are expected to be
delivered this year. Southwest wants to add the latest winglet
technology in its fleet by the first half of 2014 once APB
receives the Federal Aviation Administrator's clearance for using
Split winglets in aircraft.
The sword-like split winglets will be added to its existing
blended ones but will add new strengthened spars, aerodynamics
scimitar tips and a large ventral stake. These modern
aerodynamics in wings are expected to enhance Southwest's fuel
savings to 5% per aircraft by reducing drag. This translates into
an annual savings of $14 million.
The Southwest contract strengthens APB's split scimitar
winglets- the most successful product in its history. Since its
launch, the company has received 1,451 split winglet orders
including 111 from
Alaska Airlines Group Inc.
) in Oct 2013.
Fuel is a major expense for the airline industry and
volatility of fuel prices is a lingering concern for the
carriers. Southwest is also vulnerable to fuel price volatility
as fuel makes up almost 35% of the company's operating expenses.
We believe enhancing fuel efficiency will reduce the company's
operating cost somewhat thus paving way for improved margins.
Fleet redesigning and reduced fuel expenses have aided
Southwest's third quarter 2013 earnings. Adjusted earnings of 34
cents per share surpassed the Zacks Consensus Estimate of 32
Southwest currently carries a Zacks Rank #2 (Buy). Another
stock worth mentioning within this sector is
JetBlue Airways Corp.
) which carries the same rank as Southwest.
ALASKA AIR GRP (ALK): Free Stock Analysis
BOEING CO (BA): Free Stock Analysis Report
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
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