Southwest Airlines, hit hard by global regulators’ grounding of 737 MAX jets after two fatal crashes, will share $125 million from a Boeing settlement with its employees.
The Dallas-based airline said Thursday it had reached a confidential agreement with Boeing for a portion of financial damages.
Southwest ($LUV) said the money will be given to employees as part of a profit-sharing distribution for workers. Additionally, it continued to hold talks with Boeing ($BA) for further compensation.
Boeing’s 737 MAX fleet has been grounded since March 13 after crashes on Lion Air and Ethiopian Airlines killed 346 people. Southwest had to scale back its growth plans and said it suffered a $435 million loss in revenue between January and September.
When regulators grounded the jets, Southwest had 34 in circulation and was supposed to receive 41 more before the end of the year. Without the planes, Southwest said it has been forced to cancel 175 flights each weekday.
A Boeing spokesperson told Cheddar “We are working closely with all of [Boeing’s customers] to support them through this difficult time” but would not divulge whether or not the company is nearing settlements with any other airlines. "Potential concessions and other considerations for customers could come in many forms, including delivery timing, features, services and not necessarily cash payments. Timing, amount and form of potential concessions and other considerations will be unique for each customer."
Boeing is facing several other legal challenges from shareholders, pilots, and airlines, including the pilots union at Southwest, which claims the grounding of the jets — and subsequent cancellation of flights — has cost them more than $100 million in income.
"SWAPA appreciates that Boeing has finally acknowledged the importance of compensating Southwest employees for the incredible financial damages they have incurred as a result of the grounding of the 737 MAX. However, this agreement doesn’t get anywhere close to compensating the very real and significant losses SWAPA pilots and other employees have experienced – and continue to experience – as a result of Boeing’s negligence and fraud," the Southwest Airlines Pilots Association said.
Worldwide, almost 400 jets were grounded after the two air disasters and Boeing, which has already taken a financial hit, is expected to face additional compensation costs. The company’s hopes of putting the MAX back into circulation by the end of 2019 were dashed yesterday when the administrator of the Federal Aviation Administration, Stephen Dickson, said reviews would not be completed before the beginning of 2020.
This story was updated December 12 with additional comments from Boeing and the Southwest Airlines Pilots Association