Southwest Airlines will switch all 31 pending aircraft orders for 2016 to larger versions of the Boeing 737 as the carrier expands within the U.S. and adds new international markets.
The swap will bring Southwest’s 737-800 fleet to 135 by the end of next year, the Dallas-based airline said in a statement Wednesday.
The move to the larger -800 reflects Southwest’s plan to focus on roomier planes as it expands the number of flights to Mexico, Central America and the Caribbean. The -800s will add 32 seats per plane, a 22 percent increase from the -700s.
“We schedule those airplanes on the proper routes and fill them up and it drives really nice economic benefits,” Chief Executive Officer Gary Kelly said following Southwest’s annual shareholder meeting Wednesday in Houston. “We think we have more that we can grow.”
Southwest will evaluate its needs before deciding whether to take 25 of the larger version in 2017 and 2018 instead of the -700s on order, he said. Southwest hasn’t taken a new -700 since 2011, buying at least 45 used versions of the plane instead.
The airline provided input during the -700s development, was its first operator and relies on the plane for two-thirds of the company’s fleet.
Capital expenditures for 2015 are expected to be about $1.8 billion, including about $1.1 billion for aircraft, the company said.
The airline also said it will repurchase another $1.5 billion of stock and boosted the quarterly dividend to 7.5 cents a share.
“We want to be good investors, good stewards of our cash, and make investments we feel we’ll make sufficient returns on capital we are investing,” Kelly said. “We are investing in Southwest Airlines for that reason.”
The buyback program follows the completion this month of a $1 billion repurchase initiated a year ago.
The carrier is among U.S. airlines that have adopted programs such as buybacks to increase shareholder value since returning to profits in 2010. Earlier Wednesday, Delta Air Lines approved a $5 billion stock-repurchase plan, more than double last year’s program, and boosted its dividend by 50 percent.
Southwest reported record profit in 2014 and this year’s first quarter on lower fuel prices and strong domestic travel.