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Southwest Airlines Co. is working with Boeing Co. on reimbursement for the lengthy grounding of the 737 Max and plans to share part of the payback with employees.
The carrier, the largest operator of the narrow-body jet, is in talks with the manufacturer and the U.S. Federal Aviation Administration about changes that will be made to the plane before it can resume flying, Chief Executive Officer Gary Kelly told employees Monday.
Southwest also is in discussions with Boeing on a “business settlement” related to financial damages from the March worldwide grounding after two deadly crashes, he said in a regularly scheduled message. The airline has said that the grounding cut $225 million from 2019 operating income.
“We need to know what those monetary and other reimbursements will look like, and we’re looking at ways to share proceeds, as appropriate, with all of you as we’ve done in the past with profit sharing,” Kelly said. “I recognize this hasn’t just affected some of you, it has affected all of you.”
Southwest in July became the first U.S. carrier to pull the Max from its schedule into next year, through Jan. 5. It has 34 parked Max aircraft, and has said 25 deliveries that had been scheduled this year are expected to slip into 2020. The workhorse plane’s grounding means Southwest’s flight and seat capacity will shrink by 1% to 2% this year, compared with original plans to expand by 5%.
Boeing has taken a $5.6 billion pretax charge to compensate customers of the narrow-body jet.
While Boeing expects the Max could get regulatory approval to return to service in the fourth quarter, Southwest has said it could take two months to get aircraft out of mothballs and comply with any changes ordered by authorities.
“It will take a comprehensive effort to being to weave the plan back into our network,” Kelly said. “We’re being thoughtful about that, we have a solid plan in place and we will be ready when the FAA releases an airworthiness directive that will unground the fleet.”
©2019 Bloomberg L.P.