Southwest reaches partial compensation agreement with Boeing for MAX damages

 Southwest reaches partial compensation agreement with Boeing for MAX damages

By Tracy Rucinski and David Shepardson

NEW YORK/WASHINGTON (Reuters) - Southwest Airlines Co said on Thursday it had reached a confidential compensation agreement with Boeing Co for a portion of projected financial damages related to its 737 MAX aircraft grounding.

The U.S. airline also said it would share the proceeds from Boeing with its employees. The world's largest 737 MAX operator expects the profit sharing accrual to be about $125 million.

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 and United Airlines Holdings Inc 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.

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

"The missed deadlines and extended grounding have hurt our customers, our team members and our shareholders," American spokesman Ross Feinstein said on Thursday. "We are working to ensure that Boeing’s shareholders bear the cost of Boeing’s failures, not American Airlines’ shareholders."

United declined to 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 had 34 MAX jets in its fleet when global regulators grounded the aircraft in March, the most of any U.S. airline. The airline was supposed to receive 41 more 737 MAX planes in 2019, but most of those deliveries are now scheduled for 2020.

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

On Wednesday, Federal Aviation Administration chief Steve Dickson confirmed the agency will not unground the 737 MAX before the end of 2019.

Federal officials told Reuters earlier this week the FAA is not expected to authorize the plane to fly until January at the earliest, citing significant work still to be done. 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)

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Updated Date: Dec 13, 2019 00:11:54 IST