Alaska Air Group ( ALK) plans to fly nothing but Boeing ( BA) 737s by the end of 2008.

The airline said it will accelerate the retirement of its MD-80 fleet in a move that will cost $750 million. The Alaska Airlines parent said it will save more than $115 million a year in operating costs primarily due to lower costs for fuel, maintenance, training and crew scheduling.

Alaska expects to take the delivery of 39 737-800s between 2006 and 2008, including the two aircraft that have already been delivered in 2006.

The company said that this plan will expand their fleet to 114 aircraft from 110 at the start of 2006. The move is expected to increase available seat miles 18% by the end of 2008.

The retirement of 15 company-owned MD-80 planes will result in an after tax charge between $80 million to $95 million during the first quarter of 2006. Alaska Air will take another $80 million to $95 million in costs to return 11 leased MD-80s.

"This decision represents a major milestone in our transformation and moves us significantly along the path toward becoming an undisputed leader in our industry. Having a common fleet and growing with next-generation, fuel- efficient Boeing 737s will make a major difference in our operating costs, fleet reliability and the onboard experience for our customers," said CEO Bill Ayer. "This move represents a significant upfront investment and will continue our momentum toward sustained profitability, growth and long-term job security and career opportunities for our employees."

On Monday, Alaska Air rose 52 cents to $30.86.
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