Key Points:
- Boeing compensates Alaska Air Group with $160 million for losses incurred while temporarily grounding 737 MAX 9 jets.
- Alaska Air Group adjusts its first-quarter adjusted loss per share calculation to exclude the compensation.
- Boeing’s production decline of 737 MAX jets is expected to impact the airline industry’s ability to meet travel demand.
- Airbus SE faces high demand for single-aisle jets, with production fully booked until the decade’s end.
Alaska Air Group announced on Thursday that Boeing had made an initial payment of approximately $160 million to the airline in the first quarter as compensation for the impact of the temporary grounding of 737 MAX 9 jets. This payment, equivalent to lost profits in the quarter, addresses the financial hit incurred by Alaska Air Group due to the grounding.
The U.S. aviation regulator ordered the grounding of 171 and 737 MAX 9 jets following a mid-air cabin panel blowout experienced by an Alaska Airlines-operated MAX 9 jet in January. Despite some initial setbacks, Alaska Airlines reported that February and March exceeded their pre-grounding expectations.
Alaska Air Group will exclude the compensation from its calculation for first-quarter adjusted loss per share, which is expected to be $1.05 to $1.15. Initially, the airline had planned to include the payment in its financial results.
Boeing, the manufacturer of 737 MAX jets, faced a manufacturing and reputational crisis following the panel blowout incident, which affected Boeing and its supplier, Spirit AeroSystems. Reuters reported a significant decline in 737 MAX production at Boeing in recent weeks, which is anticipated to impact the airline industry’s ability to meet the surge in travel demand.
Last month, Alaska Air Group disclosed that its 2024 capacity plans were uncertain due to the Boeing crisis. CEO Ben Minicucci says the airline does not anticipate receiving all 47 planned deliveries from Boeing over the next two years. Meanwhile, Airbus SE, the aviation industry’s other major aircraft supplier, faces high demand for single-aisle jets, with its production fully booked until the end of the decade.
