Southwest strikes partial compensation deal with Boeing for 737 Max losses; to share proceeds with employees

Boeing will be paying Southwest Airlines for the losses incurred by the airline company for the months-long grounding of 737 Max jets.

The U.S. airline company on Thursday said that it has reached a confidential agreement with Boeing for a part of the financial losses the company has suffered over the past few months owing to the grounding of 737 Max.

However, the total amount Boeing will be paying wasn't revealed.

Southwest to share compensation with employees

Southwest Airlines
Southwest Airlines Pixabay

The airline company said that will also be sharing a part of the compensation proceeds with its employees. The company also said that it is expects a $125 million charge to account for the payment. The amount will find an entry as employee compensation in its financial statements.

However, this is not the complete compensation, as the airline company continues to initiate talks with Boeing for further compensation for grounding of all its 737 Max aircrafts.

"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," Garry Kelly, chief executive officer of Southwest Airlines said in a statement.

Southwest continues to cancel flights

Both Southwest Airlines and United Airlines has been cancelling flights of all its 737 max planes till March 2020, almost a year since the aircrafts were grounded across the world following two fatal crashes in Ethiopia and Indonesia that killed 346 people.

Southwest Airlines has 34 Boeing 737 Max aircrafts in its fleet, the highest by any airline company in the world. Since the grounding the company has cancelled 175 weekday flights. The company has since then been paying more fuel costs, as it has been flying more fuel-consuming planes in place of 737 Max.

737 Max further hurting Boeing

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Boeing seems to be gearing up for bad days. The company reportedly has set aside $5 billion to compensate airline companies for losses being incurred because of the grounding of 737 Max.

American Airlines estimates that 737 Max grounding will cost the company around $450 million for this year. The company, which has 24 grounded 737 Max jets, is already in talks with Boeing for compensation and it's likely that other airline companies too will take the same route.

Moreover, Boeing's deliveries of 737 Max jets too have come to a halt since the grounding. Southwest was expected to receive another 41 737 Max airlines in 2019. And if this wasn't enough, the US Federal Aviation Administration on Wednesday said that it will not give Boeing any approval to fly 737 Max until the end of 2019.