U.S. Markets closed

Southwest reaches partial compensation agreement with Boeing for MAX damages

By Tracy Rucinski and David Shepardson
FILE PHOTO: A number of grounded Southwest Airlines Boeing 737 MAX 8 aircraft are shown parked at Victorville Airport in Victorville, California

By Tracy Rucinski and David Shepardson

NEW YORK/WASHINGTON (Reuters) - Southwest Airlines Co <LUV.N> said on Thursday it had reached a confidential compensation agreement with Boeing Co <BA.N> for a portion of projected financial damages arising from the grounding of its 737 MAX aircraft.

The airline, the world's largest 737 MAX operator, also said it would share with its employees proceeds of about $125 million from Boeing.

Southwest said it continues to engage in talks with Boeing for further compensation related to the MAX grounding, adding that the details of the talks and the settlement were confidential. Boeing declined to make an immediate comment.

Southwest, American Airlines Group Inc <AAL.O> and United Airlines Holdings Inc <UAL.O> are scheduling flights without use of the aircraft until early March 2020, nearly a year since the plane was grounded after crashes killed 346 people in Indonesia and Ethiopia.

Federal Aviation Administration (FAA) chief Steve Dickson confirmed Wednesday the agency will not unground the MAX before the end of 2019.

Southwest Chief Executive Gary Kelly said Thursday that the March date was based on FAA approval in December and would "likely" need to be pushed back again.

American and United both remain in discussions with Boeing about compensation. American has 24 MAX aircraft and had expected 40 by the end of 2019. American has said it expects to be compensated by Boeing.

"The missed deadlines and extended grounding have hurt our customers, our team members and our shareholders," American spokesman Ross Feinstein said. "We are working to ensure that Boeing’s shareholders bear the cost of Boeing’s failures."

United declined comment.

With the MAX parked, Southwest has scaled back growth plans and canceled more than 100 daily flights, wiping $435 million from its earnings between January and September.

Southwest has 34 MAX jets in its fleet, the most of any U.S. airline. The airline was supposed to receive 41 more MAX planes in 2019.

In October, the Southwest Airlines Pilots Association filed a lawsuit against Boeing alleging the MAX grounding caused over $100 million in lost wages.

The union said Thursday "this agreement doesn’t get anywhere close to compensating the very real and significant losses SWAPA pilots and other employees have experienced." The union added it "will continue to pursue our legal action" and does not expect the plane's return to service until at least April.

Federal officials told Reuters this week the FAA is not expected to authorize the plane to fly until January at the earliest, citing significant work. Some U.S. officials think it may not be until at least February that Dickson gives the green light.


(Reporting by Sanjana Shivdas in Bengaluru, David Shepardson in Washington and Tracy Rucinski in New York; Editing by Shinjini Ganguli and Steve Orlofsky)