Alaska Airlines makes a big bet with the enlarged Boeing 737 Max order

Alaska Airlines has agreed to buy almost two dozen additional ones Boeing 737 Max aircraft, the first order from a US aviation company since regulators cleared the aircraft to fly after two fatal crashes last month.

Alaska said Tuesday it will buy 68 of the 737 Max 9 aircraft, out of the 32 it previously ordered. Alaska will buy 23 of these from Boeing and lease 13 more from Boeing Air lease. Alaska also announced options to purchase an additional 52 Max aircraft.

The Federal Aviation Administration overturned its basic order, which was put in place after two nearly new Max jetliners crashed in 2018 and 2019, killing all 346 people on board the flights.

Boeing struggled with its nearly two-year experience of the coronavirus crisis and cut demand – and prices – for its aircraft.

Brad Tilden, CEO of Alaska Airlines, declined to disclose the terms of the contract, but told CNBC that nine of the Max jetliners he bought are White Tails, aircraft that were built but do not have an owner.

The order from Alaska, based in Seattle near Boeing’s Max production plant, will convert the airline to an almost exclusively Boeing fleet in the coming years. It will save the company on maintenance and other costs that are vital to the airline’s race to cut costs due to depressed demand for travel amid the pandemic, Tilden said. Last week, Alaska forecast a decline in December revenue and a year-over-year decrease in passenger numbers of up to 70%.

The airline’s fleet is a mix of Boeing and Airbus jets that emerged from the merger with Virgin America in 2016. Most of the Airbus jets will be replaced by the new Boeing aircraft.

“We said: What can we do to take advantage of this crisis fundamentally and permanently and improve Alaska’s competitive position?” said Tilden. “We said if we can return to a single fleet for the most part, it would be in our best interests.”

The airline is now starting to train its pilots, including those certified to fly the Airbus narrow bodies, on the Max. Tilden said the company has 830 of approximately 3,000 pilots trained at Airbus, a number that will drop to about 145 by late summer 2023.

European low-cost airline Ryanair announced an order for 75 Max jets for its 135 aircraft order earlier this month, the largest order in two years.

Alaska plans to fly the Max in the first quarter and receive its first Max jet in January and a total of 13 planes in 2021, followed by 30 in 2022, 13 in 2023, and 12 in 2024. It had none of the planes receive aircraft at the time of grounding in March 2019.

American Airlines is expected to be the first US airline to return the Max to commercial service on December 29 with first routes between Miami and New York’s LaGuardia. United Airlines Max flights are scheduled to take off from the Houston and Denver hubs on February 11th.