Southwest, Boeing reach compensation agreement on 737 Max; American delays jet's return

Southwest Airlines said Thursday it reached an agreement with Boeing for compensation for a portion of the projected financial damages related to the grounding of the 737 Max jet.

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The airline said it intends to share the proceeds of the $125 million settlement with its employees. The payment is just a fraction of the projected $830 million hit that Southwest expects to see on its operating income in 2019. Southwest flies 34 Max jets, the most of all U.S. airlines.

“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," Southwest CEO Gary Kelly said in a statement.

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The Southwest Airlines Pilots Association (SWAPA) said in a statement regarding the agreement that it appreciates Boeing’s acknowledgment of compensating Southwest employees but the current settlement was not satisfactory.

“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 union said in a statement.

TickerSecurityLastChangeChange %
BABOEING COMPANY316.60-6.45-2.00%
LUVSOUTHWEST AIRLINES CO.56.25-0.30-0.53%
AALAMERICAN AIRLINES GROUP INC.26.11-1.53-5.54%
UALUNITED AIRLINES HLDG.77.63-4.27-5.21%

SWAPA, which filed a lawsuit against Boeing in October alleging more than $100 million in lost wages, said it will continue to pursue legal action against the airplane maker.

Southwest Airlines did not return a request for comment.

In addition to Southwest, American and United airlines fly the beleaguered jet. American, the world’s largest airline, announced Thursday it was pulling the jet from service through April 6, 2020. It expects to cancel 140 flights per day through April 6 due to the suspension. American flies 24 Max jets and expected 40 by the end of the year.

American’s decision comes one day after the Federal Aviation Administration said the aircraft would not be approved to return to fly passengers before January.

Also on Thursday, Boeing CEO Dennis Muilenburg and Stanley Deal, who was recently named the chief of Boeing Commercial Airplanes, “had a productive meeting" with FAA Administrator Stephen Dickson, according to The Associated Press, citing a Boeing spokesperson.

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Meanwhile, American and United are both having discussions with Boeing regarding compensation over the aircraft’s grounding. American expects to be compensated for the lost revenue.

“The missed deadlines and extended grounding have hurt our customers, our team members and our shareholders,” American spokesperson Ross Feinstein told FOX Business. “We are working to ensure that Boeing’s shareholders bear the cost of Boeing’s failures, not American Airlines’ shareholders.”

A Boeing spokesperson did not respond to FOX Business' request for comment on the settlement.