Southwest Reaches Compensation Deal With Boeing Over 737 MAX -- 2nd Update
December 12 2019 - 1:06PM
Dow Jones News
By Alison Sider
Southwest Airlines Co. and Boeing Co. said they struck a deal to
compensate the airline for some of the damage from the nine-month
grounding of the 737 MAX.
The carrier said Thursday it would share $125 million of the
proceeds with its employees. Southwest didn't disclose the full
terms of its agreement with Boeing, which it said covered a portion
of its projected financial damages. It said it is continuing to
negotiate with the aerospace giant.
The 737 MAX has been grounded around the world since March,
following two fatal plane crashes within five months. The grounding
has been costly and disruptive for airlines, forcing them to cancel
thousands of flights and go without planes they had built into
their schedules.
Southwest had 34 MAX jets in its fleet when the aircraft was
grounded in March and was due to receive dozens more over the
course of the year. The airline has said the grounding resulted in
a $435 million reduction in operating income in the first nine
months of the year.
Boeing took a $5.6 billion charge against its second-quarter
earnings to cover payments to customers. Those payments are
expected to be a mix of cash and discounts on aircraft features,
services and deliveries over a number of years. The company has
said insurance policies would cover $500 million in customer
compensation, as well as any damages paid to the families of the
346 victims of the two crashes.
Icelandair Group Hf in September said it reached a deal with
Boeing to cover a fraction of what it said amounted to $140 million
in costs up to that time for grounding its six MAX jets and delays
to the delivery of another 10.
Other U.S. carriers have said they are negotiating with Boeing
but want to see how high their costs climb before reaching a
settlement. All three U.S. airlines that fly the MAX have removed
it from their schedules until March. American Airlines Group Inc.
has said it expects the grounding to decrease its 2019 earnings by
$540 million.
"This was their failure, not ours," American Chief Executive
Doug Parker said at a conference last month. "Boeing is saying all
the right things about their commitment to their customers and the
damage they have done to us."
Southwest employees have said they have lost income because the
airline is flying fewer flights without its MAX planes. The union
that represents the airline's nearly 10,000 pilots sued Boeing
earlier this year and said it plans to continue to pursue its legal
action.
"This agreement doesn't get anywhere close to compensating the
very real and significant losses SWAPA pilots and other employees
have experienced, " the Southwest Airlines Pilots Association said
in a statement.
Southwest said it would provide profit-sharing details early
next year, including how much each Southwest employee would
receive.
Dave Sebastian contributed to this article.
Write to Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
December 12, 2019 13:51 ET (18:51 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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