Alaska Airlines has received $160 million in initial compensation from Boeing for the panel incident that occurred on one of its Boeing 737 Max 9 jetliners in January. The payment covers Alaska’s pretax loss related to the accident, including lost revenue and the cost of returning its Max 9 fleet to service after the grounding. The terms of the additional compensation from Boeing are confidential, but Alaska expects further payments. Boeing has not commented on Alaska’s filing, but the company’s chief financial officer previously mentioned that customer considerations after the accident will impact Boeing’s financial results.
The panel incident, which involved a panel blowing out of an Alaska Max 9 while flying over Oregon, led to the grounding of all Max 9s in the United States, affecting both Alaska and United Airlines. Investigations by the Federal Aviation Administration (FAA), National Transportation Safety Board, and the Justice Department are ongoing. The incident is also being examined in relation to a settlement Boeing reached in 2021 to avoid criminal prosecution for allegedly misleading regulators during the certification of Max jets. This incident could potentially lead to further compensation for other Boeing customers who experienced grounding and delays in production and delivery of new aircraft.
In response to the grounding and delays, United Airlines has asked pilots to take unpaid time off due to the delays in receiving new planes from Boeing. Alaska Airlines expects to report a loss of between $1.05 and $1.15 per share for the January-March quarter, with 95 cents per share of the loss related to the accident. Analysts were expecting a loss of 86 cents per share for the quarter. Despite the financial impact of the incident, Alaska mentioned that its first-quarter profit would have been better without the blowout, and the airline saw strong demand for travel and recovery of business travel on the West Coast.
Alaska Airlines stated that the initial compensation from Boeing will help address the financial damages incurred as a result of the panel incident and the grounding. The airline received $160 million in cash from Boeing during the first quarter, with expectations of additional compensation beyond that period. Despite some booking declines following the incident and Max 9 grounding, Alaska reported that February and March finished above original expectations. Following the news of the compensation from Boeing, Alaska Air Group shares rose more than 4% and Boeing gained more than 1% in afternoon trading on Thursday.
Overall, the compensation received by Alaska Airlines from Boeing for the panel incident on its Max 9 jetliner in January has provided some relief for the financial losses incurred by the airline. The ongoing investigations by regulatory agencies and potential further compensation for other Boeing customers indicate that the repercussions of the incident are far-reaching. Alaska’s expectation of additional compensation beyond the first quarter suggests that the financial impact of the grounding and delays will continue to unfold. Despite the challenges faced, Alaska remains optimistic about the strong demand for travel and the recovery of business travel on the West Coast.
