Business

The 737 Max grounding cost Southwest $828 million in 2019

Posted January 23, 2020 7:29 a.m. EST

— Southwest Airlines reported a sharp drop in profit in the fourth quarter because of the continued grounding of the Boeing 737 Max. It said it will seek additional compensation from Boeing as the problem is expected to stretch deep into 2020.

The 737 Max was grounded in March following two fatal crashes that killed 346 people, and Boeing announced this week that it doesn't expect approval for the plane to fly again until the middle of 2020.

Southwest owns 34 of the Max jets, more than any other airline, and it had expected to end the year with 75 of the jets by the end of the year before the grounding halted deliveries of new planes. Boeing and Southwest reached a confidential agreement on compensation late in the year.

"We will continue discussions with Boeing regarding further compensation," said Southwest CEO Gary Kelly. Much of the compensation will come in the form of reduced pricing on future purchases from Boeing, the company said.

Southwest increased profit-sharing payments to employees by $97 million with money it got from Boeing.

Southwest reported its net income fell $140 million in the fourth quarter and $167 million in the year, mostly because of the loss of the Max jets. The airline has been removing about 330 weekday flights from its schedule due to the grounding. It has canceled flights only through early June, but in light of Boeing's new guidance on when the plane will be approved to fly, Southwest expects further cancellations throughout much if not all of the summer.

American Airlines, the world's largest airline and another Max customer, is also due to report results later Thursday morning.

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