On Thursday 12th December, Southwest Airlines announced that they would share compensation received from Boeing regarding the grounding of the 737 MAX with their employees.
While the total amount of compensation awarded remains confidential - as does what percentage of it that Southwest employees will benefit from - the airline are showing a $125 million charge as employee compensation in financial statements. The money will be given to the carrier’s employees in the form of incremental profit sharing.
Southwest’s Board Chairman and Chief Executive, Gary Kelly, stated:
“Our people have done an incredible job managing through the MAX groundings, while providing the highest levels of customer service and one of the best operational performances in our history.”
He added:
“On behalf of the Southwest board of directors, we are grateful to our employees for their extraordinary efforts throughout the year and are pleased to share proceeds from our recent agreement with Boeing.”
In their investor update published on October 24th the US airline, a low-cost carrier, estimated a loss of $435 million in operating income through September and reported a loss of $210 million in revenue, which they attributed to the MAX grounding.
The airline, who operate a fleet of around 750 aircraft, only fly Boeing 737’s and about 34 of these are the 737 MAX model. They currently have around 260 MAX’s on order and so while the carrier continues to negotiate with Boeing for further damages, they could also accept other forms of compensation that Boeing may offer such as preferred delivery slots, or upgraded aircraft features. However, to date there is still no definitive news on when the MAX will be back in service with FAA Administrator Steve Dickson confirming on 11th December that the Max would not be cleared to fly until sometime in 2020.
In total, Boeing have apparently set aside $5 billion to compensate airlines for MAX related costs, as well as around $50 million to compensate families involved in the Lion Air crash in October 2018 and the Ethiopian Airlines crash in March 2019.
