Southwest Reaches Max Compensation Deal with Boeing

 - December 12, 2019, 9:48 AM
An undelivered Southwest Airlines 737 Max 8 sits parked outside Boeing's narrowbody factory in Renton, Washington. (Photo: Barry Ambrose)

Southwest Airlines has reached a confidential agreement with Boeing over compensation for a portion of the projected financial damages related to the grounding of the airline’s 737 Max jets, Southwest said on Thursday. The U.S. low-cost airline added it continues talks with Boeing over future compensation for the groundings through a reduction in cost basis for existing and future firm aircraft orders.

As a result of the agreement, Southwest plans to issue a $125 million profit-sharing disbursement for employees tied to the projected reduction in operating income for 2019 due to the Max groundings. The company said it plans to provide 2019 profit-sharing details early next year, including the percentage each eligible Southwest employee will receive.

Southwest had taken delivery of 34 Max 8s out of a firm order for 280 before the FAA grounded the model on March 13 following the crashes in Indonesia and Ethiopia that killed 346 people. The airline also placed a firm order for 30 of the larger Max 9. The grounded airplanes account for some 4.5 percent of Southwest’s total fleet, making it one of the airlines most affected by the grounding. 

“Southwest Airlines continues to monitor information from Boeing and the FAA on the impending 737 Max software enhancements and training requirements,” the airline said in a statement. “The airline remains confident that, once certified by the FAA, the enhancements will support a safe return of the 737 Max aircraft.”

Southwest Airlines’ flight schedules now reflect an expectation that the Max will return to service by March 6. However, on Wednesday FAA administrator Stephen Dickson said the certification process would extend beyond the year-end target set by Boeing and run into 2020.