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Southwest to Share $125 Million with Employees from Boeing Compensation Payout Connected to 737MAX

Southwest to Share $125 Million with Employees from Boeing Compensation Payout Connected to 737MAX

The Boeing 737MAX has been grounded since March following two fatal crashes in Indonesia and Ethiopia within the space of less than six months that resulted in the deaths of 346 innocent people.  Yet despite the fact that there’s still no timeline for the aircraft to be recertified, Boeing has still managed to reach compensation agreements with the families of loved ones killed in the two accidents and airlines that operate the MAX.

While details of these compensation agreements are strictly confidential, Southwest Airlines has been able to confirm that its recently reached a settlement with Boeing for a portion of projected financial damages related to the grounding of the 737MAX.  Southwest is one of Boeing’s largest customers of the aircraft type, with 61 MAX jets currently grounded and around 250 still to be delivered.

Southwest Airlines Photo by Owen CL on Unsplash
Southwest Airlines Photo by Owen CL on Unsplash

In a recent update, Southwest said it was pro-actively cancelling around 175 flights every week because of the ongoing debacle and claimed it didn’t expect to start flying the 737MAX until March 2020 at the earliest.

While Southwest isn’t allowed to say how much Boeing has agreed to pay out in compensation, the Dallas-based budget carrier today said $125 million would be paid out in a discretionary, incremental profit-sharing accrual with employees.  Some of the compensation from Boeing is being used to bolster the profit-sharing pot that was a little less full than usual because of a projected reduction in operating income linked to the MAX grounding.

“On behalf of the Southwest Board of Directors, we are grateful to our employees for their extraordinary efforts throughout the year and are pleased to share proceeds from our recent agreement with Boeing,” explained Gary C. Kelly, Southwest’s chief executive.

Negotiations between Southwest and Boeing for more compensation payouts in relation to damages from the 737MAX fiasco continue and will remain secret the airline explained.  While Southwest is looking at a variety of options, it expects to a substantial part of the compensation to form a price reduction in existing and future aircraft orders.

Southwest was also keen to point out that it remains confident about the longterm future of the 737MAX and is actively monitoring information from the Federal Aviation Administration.  The FAA recently confirmed it won’t recertify the 737MAX until some point in the new year

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