UPDATE: Southwest Sees Aircraft Inspections Completed 'Late Tuesday'

Southwest Airlines Co. (LUV) said Monday it would complete inspections of its grounded 737-300s by late Tuesday after grounding part of the fleet following Friday's mid-air incident when a hole opened up in one aircraft, forcing an emergency landing.

The carrier voluntarily stopped flying 79 of its oldest 737-300 models and had returned 57 to service by Monday afternoon, according to a blog post on its Web site. Inspections found cracks in the fuselage of three planes that will see them remain grounded "until appropriate repairs can be completed."

More than 760 737-300s made by Boeing Co. (BA) are in service, according to consultant Ascend Worldwide, though other carriers have not followed Southwest in grounding planes, and the manufacturer said Monday that it had not identified the need for "fleetwide action."

Southwest said in a blog update on its website that it had cancelled 70 of around 3,400 scheduled flights Monday.

Deutsche Lufthansa AG (LHA.XE), the second-largest operator of 737-300s, said Monday it has no plans to ground any of the 33 it flies. Lufthansa said its 737-300s have a different configuration from Southwest, though it will react and conduct upgrades according to information given by Boeing.

"We continue to monitor the in-service fleet, and no fleetwide action has been identified. If the investigation determines a need to communicate to the fleet, we will take appropriate action," Boeing said in a statement.

Lufthansa's UK-based unit bmibaby operates 11 of the type and said it was reviewing information received from Boeing. Jet2, another UK-based low-cost airline that flies 24 of the type, declined immediate comment.

Southwest has 169 737-300s, and is gradually replacing the fleet with newer types on a one-for-one basis while maintaining a freeze on net fleet expansion.

More than 70 of the type are flown by Air China Ltd. (0753.HK), China Southern Airlines Co. Ltd. (1055.HK) and China Eastern Airlines Corp. Ltd. (0670.HK), according to Ascend, while US Airways Group Inc. (LCC) has 18 and Air New Zealand Ltd. (AIR.NZ) has 15.

Southwest Airlines' shares were recently down 2.2% at $12.39 amid the broader sector decline driven by a rise in Brent crude prices.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; [e-mail]