Boeing Pays Alaska Airlines $160 Million Initial Compensation for Grounding of Max 9 Jets

Alaska Airlines announced on Thursday that Boeing paid them about $160 million as initial compensation for the temporary grounding of 737 Max 9 jets. The $160 million compensation is equivalent to the lost profits for the quarter. The airline also mentioned that it expects additional compensation. 

In January, a door panel of a nearly new Alaska Airlines-operated Boeing 737 Max 9 blew out mid-flight. This incident led the Federal Aviation Administration to temporarily ground 171 jets for around three weeks. 

Grounded 171 Jets

On Thursday, Alaska announced that its first-quarter “results were significantly impacted by Flight 1282 in January and the Boeing 737-9 MAX grounding which extended into February.” 

Despite the near-disaster last January, Alaska said that the demand was strong. Alaska said, “Although we did experience some book away following the accident and 737-9 MAX grounding, February and March both finished above our original pre-grounding expectations due to these core improvements.” 

Alaska CEO Ben Minicucci said that the airline doesn’t expect to have all 47 deliveries from Boeing completed in the next two years. On Wednesday, Boeing reported that the production of 737 Max aircraft sharply fell in recent weeks, which could have an effect across the airline industry. 

$160 Million Compensation and Delayed Boeing Deliveries

Because of the January incident, Boeing slowed down its aircraft deliveries and production, coupled with additional scrutiny from authorities. However, Alaska isn’t the only airline affected by Boeing’s quality issues. United Airlines informed its pilots that the airline is offering unpaid time off in May because of Boeing’s delayed deliveries. 

Unfortunately, another aircraft supplier, Airbus SE, can’t accommodate new orders until the end of the decade for  single-aisle aircraft. 

Boeing didn’t issue a comment regarding the $160 million compensation paid to Alaska Airlines. Instead, it referred to last month’s comment made by its CFO Brian West. West said that customer consideration “is going to manifest itself in the quarter.” He added, “We’ve got to take care of that and we’re well down the road to do that. And we continue to stand behind our customers with that responsibility.”