Boeing paid Alaska Air Group $160 million in the first quarter as compensation for the 737 Max 9 grounding that followed the rapid de-pressurisation of Alaska Airlines flight 1282.
That amount was equivalent to the losses Alaska sustained from the 5 January event that grounded its entire 65-strong fleet of Max 9s, Alaska revealed in a 4 April filing with the US Securities and Exchange Commission.
”We have received initial compensation from Boeing to address the financial damages incurred as a result of flight 1282 and the 737 Max 9 groundings,” Alaska says.
The losses are attributable to ”lost revenues, costs due to irregular operations and costs to restore our fleet to operating service”, says the all-737 operator. It is now expecting to take a $180-$195 million adjusted pre-tax loss on the first quarter.
Further compensation is “expected to be provided” from Boeing beyond the first quarter, Alaska says, ”the complete terms of which are confidential”.
The Seattle-headquartered carrier previously disclosed that it was expecting to take at least a $150 million profit loss due to the aircraft groundings, and that it had received compensation from Boeing. But it had not previously revealed the amount it had received.
Alaska voluntarily grounded all of its Max 9s following the 5 January mid-flight blow-out of a door plug on a flight bound for Southern California from Portland, Oregon.The Federal Aviation Administration subsequently ordered most of the global fleet out of service.
The jets were grounded for approximately one month while Alaska, Boeing and the FAA completed door plug inspections. During that period, Alaska was cancelling 110-150 daily flights in the absence of its Max 9s.
Asked to comment on the compensation package provided to Alaska, Boeing pointed to chief financial officer Brian West’s comments during the Bank of America industrial conference on 20 March.
“We put the customers in tight spot, the most important thing we do is communicate with them,” he said. ”We are in regular, very transparent communications and they know precisely where we stand and the progress that we’re making and we, at the same time, have to understand what their needs are as they think about their flight schedules and their passengers.”
West also says that, following the de-pressurisation of Alaska flight 1282 and “everything we’ve learned since, we acknowledge that we need to improve upon safety and quality and conformance”.
Alaska flight 1282 and the subsequent fallout has proven pivotal for Boeing, which recently committed to a major management overhaul – including chief executive David Calhoun’s departure at year’s end and the immediate retirement of Boeing Commercial Airplanes boss Stan Deal.
Former chief operating officer Stephanie Pope is now leading Boeing Commercial Airplanes.
Alaska says its ”operation and results were significantly impacted by Flight 1282 in January and the Boeing 737-9 MAX grounding, which extended into February. Absent these factors, our first quarter adjusted pre-tax profit would have improved approximately 80% over Q1 2023, versus our pre-grounding expectations of a 30% improvement.”
The carrier will account for the $160 million compensation package mostly as a reduction to aircraft assets, rather than factoring into earnings.
Alaska will likely be impacted throughout 2024 by Boeing’s ongoing quality and production issues, which have badly delayed 737 Max deliveries for rival US carriers such as Southwest Airlines and United Airlines and contributed to an environment of highly constrained aircraft availability.
