SOUTHWEST RUNS INTO TURBULENCE; BOEING DELAYS MAY HURT GROWTH.

Byline: Andy Dworkin and Terry Maxon The Dallas Morning News

Southwest Airlines Co. may have to postpone expansion plans and revamp its winter schedule because of production line delays at jet maker Boeing Co.

The delays mean that Southwest will get only two of the four 737-700-model passenger jets it ordered for delivery this year, Ron Woodard, president of Boeing's commercial aircraft group, said Tuesday.

Dallas-based Southwest had planned to add a new city to its route system in early 1998, but it is rethinking those plans in light of Boeing's problems, airline Chairman and CEO Herbert D. Kelleher said.

The added service was based on the assumption that Southwest would get four 737-700s in November and December and 21 next year. Boeing is now telling Southwest that the carrier will get two 737s in December and that each 1998 delivery will be a month later than scheduled.

That uncertainty probably means that Southwest is better off delaying its expansion, Kelleher said.

``When you open a new city, you need a cluster of airplanes,'' Kelleher said. ``We may have to put it off for a quarter until we have enough airplanes to start the kind of new service that we want.''

Although enough planes may be delivered in time to add a new city, Southwest needs to be sure of the delivery dates far in advance, he said.

``If you're going to open the new service in the first quarter, you need to be announcing it now. And one thing about opening a new city, it's kind of bad to announce you're going to be there and not show up,'' Kelleher said.

He declined to say what new city Southwest is planning to serve.

The Boeing delays could cause other headaches for Southwest as well. The airline has already printed a winter schedule listing new flights that would require the new airplanes. Because it's too late to delete those flights, the airline is telling customers that no seats are available, Kelleher said.

Southwest is also having to find new ways to train employees, because it had hoped to put two of the 737-700s to that use, Kelleher said.

While airline officials had known since October that Boeing was delaying production of the new 737-700 model since October, Southwest leaders had previously predicted the holdup wouldn't affect the carrier's operations.

On Oct. 3, Seattle-based Boeing suspended production of the new 737 version and its 747 jumbo jet for several weeks when suppliers fell behind on deliveries. Boeing is trying to increase construction from about 350 jets this year to more than 500 next year to meet a big upswing in customer demand.

Boeing also used the time to redesign the 737-700's horizontal stabilizer, the small wings at the tail of the airplane, which were not stiff enough. Southwest, the first buyer of the 737-700 model, has ordered 68 of the jets.

In a Tuesday morning teleconference, Boeing President Harry Stonecipher said that ``some customers are happy, some aren't'' about the delays. But no customers have postponed or canceled jet orders, he added, and the company hasn't lost sales because of the holdups.

Boeing officials said the delays mean they will build about 335 planes this year, five to 15 fewer than their goal. But they hope to deliver 25 jets this month and 52 next month. The company's workers will have the option of working overtime during the holidays to keep up that pace.

By next spring, Boeing wants to build 43 of its ``7 series'' passenger jets per month. For the first nine months of this year, it averaged nearly 27 jets monthly.

The delays in production, while they delays caused headaches for airlines and hurt Boeing's stock price in the short term, they have helped the manufacturer catch up on work, executives said. For example, the number of jobs behind schedule on the 747 production line has dropped from 14,000 to fewer than 3,000.

Despite such progress, Stonecipher said, it will be months before Boeing executives can be sure they and their suppliers can stick to the new, faster production schedule.

``Certainly we're apprehensive about how we hold this progress, and until we get into early next year, we won't be certain we've solved the problem,'' he said.