Southwest Airlines is considering selling some of its older Boeing 737-800 and newer 737 Max jets and entering into aircraft sale-leaseback agreements to improve its weakened financial position.

Chief Executive Bob Jordan discussed Southwest’s plans to use its current and future narrowbody Boeing jets at its investor day on Sept. 26 as the company unveiled a comprehensive offering strategic revision The aim was to regain his lost form.

“With our moderate growth plan, we have a unique opportunity to capture value and profit from excess aircraft that we do not need,” says Jordan. “Against this background, we are aiming for direct sales of (737)-800 aircraft. We are also looking at sale-leaseback offers where we can be opportunistic.”

Demand for narrowbody jets is strong due to Boeing’s ongoing delivery delays – compounded by what increasingly looks like one Protracted machinists’ strike – and the recall of hundreds of Pratt & Whitney Geared Turbofan (GTF) engines that power the Airbus A320neo and A220 aircraft. These restrictions are causing airline growth around the world to be slower than expected.

“So the secondary market for used aircraft will remain strong for many years to come,” says Jordan. “That means we have a lot of flexibility for sale-leasebacks on the -800s and the new Maxes.”

In sale-leaseback transactions, an airline sells its aircraft to a lessor and leases them back to generate cash. It is a strategy often used by ultra-low-cost carriers Frontier Airlines.

“The fact that Southwest has to borrow from Frontier is a pretty sad commentary,” said William Swelbar of Swelbar-Zhong Consultancy on social media. He and other airline analysts believe it would be a mistake for Southwest’s turnaround plan to rely too heavily on such financial maneuvers.

Chief Financial Officer Tammy Romo says leveraging the value of Southwest’s all-737 fleet is not a “central” part of the transformation.

“We can achieve our ROIC (return on invested capital) goal without our fleet strategy,” she says.

The company’s financial results have been flat in recent quarters as it reported first-half profit of $137 million – down 74% from a year ago. Southwest is under intense pressure from minority shareholder Elliott Investment Management and other investors to return to consistent profitability.

Jordan says the company is on one Path to sustainable success with a series of changes to its network, aircraft cabins, boarding processes and flight schedules. If effective, the initiatives would save between $500 million and $700 million annually by 2027. Then the company hopes to achieve double-digit profit margins again.

Until then, Southwest plans to grow its capacity by 1-2% annually.

Southwest plans to have an entirely new fleet of 737 Max jets with an average age of five years by 2031 as the older 737NGs are sold and retired. Such a modern fleet could enable a period of “very few” aircraft retirements and minimal capital costs in the 2030s, Jordan says.

According to Cirium fleet data, the airline has 243 737 Maxes in service and 480 on order from Boeing. This includes 285 slots for the 737 Max 7, the smallest variant of the Max family. The type still needs to be certified by the Federal Aviation Administration.

Southwest Chief Operating Officer Andrew Watterson told reporters that the company has no regrets about choosing the Max 7 over GTF-powered A220s because many of those Airbus jets are grounded for P&W engine inspections.

“The Max 7 still seems to be the right decision,” he says. “We are disappointed that it is late but it does not affect our plans at the moment. But at some point we need it.”

Whether Southwest will sell some of the 737 production slots it holds with Boeing is an open question that Jordan declined to elaborate on.

“Our agreement with Boeing and what we do and don’t do is obviously very confidential,” he says. “We are committed to unlocking the full value of our order book and we have a number of techniques in place to achieve this.”