Southwest Airlines to share proceeds from Boeing 737 Max agreement with employees

Boeing is going to be paying its airline customers billions of dollars to compensate for the months-long grounding of the 737 Max. At least one of those airlines, Southwest, said Thursday it will share some of that money with its employees.

Southwest has 34 of the 737 Max jets in its fleet, more than any other airline in the world. It recently reached a confidential agreement with Boeing on compensation for the grounding, the company said in a statement. Southwest has canceled about 175 weekday flights due to the loss of the jet, and it has had higher fuel costs from flying less fuel efficient planes in place of the Max. In its most recent financial report it said that the worldwide grounding, which began in March, cost it $435 million through the end of September.

Since the airline has a profit sharing plan, its employees would lose out on pay even if the airline were compensated in full by Boeing. But Southwest said Thursday it will add $125 million to its profit sharing pool with money it gets from Boeing.

“Our people have done an incredible job managing through the Max groundings, while providing the highest levels of customer service and one of the best operational performances in our history,” said Southwest CEO Gary Kelly. “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.”

Nearly 400 of the Boeing 737 Max jets were grounded worldwide in March after two fatal crashes that killed 346 people. In July, Boeing took a $5 billion charge to account for the compensation it would have to pay airlines, but the expected length of the grounding has grown since then, and the compensation cost is expected to grow as well. But Boeing’s hopes to get the plane approved to fly again before the end of the year were dashed yesterday when Stephen Dickson, administrator of the Federal Aviation Administration, said the agency’s review process would stretch into 2020.

Boeing is also being sued by the pilots union at Southwest, as its members who were slated to fly the 737 Max have lost pay due to the canceled flights. The suit, filed in October, put lost wages at $115 million at that time.

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