Southwest Airlines has "strongly requested" Boeing develop a more fuel-efficient successor to the 737-700 that would incorporate technologies...

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Southwest Airlines has “strongly requested” Boeing develop a more fuel-efficient successor to the 737-700 that would incorporate technologies developed for the 787 Dreamliner, Southwest Chief Executive Gary Kelly said yesterday.

His remarks carry enormous weight. Southwest is the world’s largest operator of 737s and arguably Boeing’s most important customer.

Kelly made his comments during an interview at the Fairmont Olympic Hotel, after spending the morning defending Southwest’s proposal to move its Seattle operations to Boeing Field from Seattle-Tacoma International Airport.

Southwest is better insulated from rising oil prices than any other U.S. carrier, thanks to an aggressive hedging strategy that locked in much of its present and future jet-fuel needs at prices well below current levels.

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Yet not even Southwest will remain profitable if oil prices remain above $60 a barrel unless it can substantially reduce the cost of owning and operating aircraft.

“We are now facing energy prices that no airline can make money at, at least with today’s [ticket prices],” Kelly said. “So we’re anxious to partner with Boeing to find a successor aircraft” to the 737-700.

New engines will account for more than half of the 787’s fuel savings. Kelly is eager for engine makers to design thriftier power plants for the 737 family as well.

Southwest’s 737-700s are all powered by engines built by CFM, a joint-venture of General Electric and Snecma of France, but that monopoly may not last.

“We’d love to see multiple manufacturers provide engines. We have a great relationship with GE, but it would be nice to see some other competition in the market for us to choose from,” Kelly said.

The low-fare airline has taken delivery of 27 Boeing 737-700s already in 2005 and is due to receive seven more by the end of December. Southwest has 217 737-700s in its fleet, as well as 194 737-300s and 25 737-500s.

Southwest’s talks with Boeing on a new jet are in the early stage, and Kelly said it would be premature to even speculate about when such a plane might be introduced.

Southwest is happy with the 737-700, and Kelly admitted it hasn’t been long since Boeing introduced the Next Generation family of 737s to replace its original single-aisle jets.

Still, the “brutally competitive” nature of the airline business and the rise of energy prices makes planning ahead unavoidable.

“There’s an idea, there is a desire on everybody’s part, and the Next Generation [737 family] is 8 years old, so I think it’s time — which is hard to believe, but — I think it is time to be thinking about the successor aircraft,” Kelly said.

Southwest was one of the last Boeing customers to receive an airplane before the Machinists union went on strike at Boeing earlier this month. Kelly is hopeful the dispute will end quickly, but the airline is not taking sides.

“We haven’t offered any input at all as to what we would like to see [Boeing] do or not do,” he said.

Delayed deliveries are also not a concern to Southwest, due in part to Hurricane Katrina.

Southwest normally uses about 15 jets to serve 57 daily departures from New Orleans. Now that those flights are halted, the planes can fill in any shortfall in Southwest’s autumn schedule that might otherwise result from a strike at Boeing.

David Bowermaster: 206-464-2724 or