Alaska Air paid $160m compensation by Boeing over MAX 9 blow out

The airline said the blow out and subsequent FAA groundings had caused it to lose out on revenue and incur costs.

Noah Bovenizer April 05 2024

Alaska Air has received $160m from Boeing as compensation for the losses it incurred as a result of the door plug blow out incident on one of its 737 MAX 9 aircraft in January. 

In a filing to investors, the airline revealed the incident and subsequent groundings of some MAX 9 aircraft by the US Federal Aviation Administration (FAA) had cost the company around $160m in pretax profit. Boeing addressed the difference in its initial compensation package. 

Alaska’s statement said its lost revenues had primarily come from a loss of flights, “irregular operations”, and costs to restore its fleet to operating service after the groundings. 

However, it added: “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.” 

Following the announcement, Alaska Air’s stock jumped 4.4% while Boeing shares also saw a rise of almost 1% before dropping again on Friday. 

While Alaska had initially said it would include the payment in its Q1 results for the year, the filing said that the airline would now not account for the compensation in its adjusted loss results, which it expects to be between $1.15 to $1.05 per share, a total pretax loss of between $195m to $180m. 

The compensation is just the latest hit to Boeing, which has had a tumultuous start to the year after FAA and National Transportation Safety Board (NTSB) investigations raised serious concerns about its quality control procedures, particularly around the 737 MAX production line. 

As a result, the company has undergone a massive shakeup of much of its senior management, initially just letting go of 737 MAX programme leader Ed Clark in February, before recently revealing that CEO Dave Calhoun would be leaving the company at the end of the year, alongside the immediate retirement of Boeing Commercial Airplanes CEO Stan Deal. 

However, despite all the issues recorded at the manufacturer, Alaska recently said that it remained committed to the company and would do “everything we can to contribute to the critical work under way to ensure excellence in production quality and safety.”

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