November 07, 2012
Southwest Airlines is suing Wells Fargo Bank over its refusal to accept the return of one Boeing 737 aircraft that has come off lease and another that comes off lease early next year after the bank accused the carrier of returning the aircraft with replacement engines that do not comply with the terms of the contracts.
Wells Fargo is “demanding” that Southwest pay a penalty, the airline says in a suit filed with the U.S. District Court for the Northern District of Texas. According to Southwest, the lessor is demanding $3.3 million for one off-lease aircraft; no damages have yet been requested for the second 737.
The dispute centers on two leases that Southwest signed in 1994; Wells Fargo Bank Northwest is the successor-in-interest on the leases, which originally were signed with General Electric Capital. The lease on one of the Boeing 737-300s expired Sept. 30, and the lease for the second expires March 29, 2013.
In its lawsuit, Southwest says the new engines it put on the first aircraft are the same model—CFM56-3B1—but have greater average remaining cycles for their life limited parts and fewer engine flight hours elapsed since the last engine refurbishment. Southwest says its leases allow the return of the aircraft without engines owned by the lessor, as long as they are in at least as good condition as the engines being replaced and meet the terms on remaining cycles and flight hours.
In a Sept. 28 letter to Southwest, however, Wells Fargo says the technical data it received from Southwest regarding the first aircraft show the replacements are “not equivalent” to the original engines. The bank emphasizes in the letter that the replacement engines must have equivalent value, utility, modification and remaining warranty status, including the same or higher-rated takeoff power.