Alaska Air Receives Compensation from Boeing for Midair Mishap and Grounding of 737 Max 9
Key Takeaways:
- Alaska Air announced that it was getting monetary compensation from Boeing following the January midair incident when a door plug in a 737 Max 9 blew out.
- The airline said the mishap and the subsequent grounding of the Max 9 planes significantly affected operations and financial results, costing it $160 million in the first quarter.
- Alaska Air explained that Boeing paid the $160 million, and it expects additional compensation from the plane maker.
Alaska Air Group reported that it was receiving compensation from Boeing for financial damages incurred related to a January incident when a door plug on an Alaska Airlines Boeing 737 Max 9 plane blew out in midair. The carrier stated in a regulatory filing that the mishap, followed by the grounding of 737 Max 9s because of it, “significantly impacted” operations and financial results that extended into February, costing about $160 million in the first quarter. Alaska Air mentioned that the negative impact primarily comprised “lost revenues, costs due to irregular operations, and costs to restore our fleet to operating service.”
Boeing paid the airline an initial $160 million in cash during the first quarter, and Alaska Air expects additional compensation from the plane maker “to be provided beyond Q1, the complete terms of which are confidential.” The carrier clarified that the money from Boeing won’t be counted towards earnings, and it anticipates a first-quarter loss in the range of $1.05 to $1.15 per share. It noted that about $0.95 of that would be attributable to the incident and grounding.
Despite losing some bookings due to the accident and the 737-9 Max grounding, Alaska Air reported that results for February and March were above the company’s original pre-grounding expectations. The carrier attributed this to network adjustments, strong demand, and the recovery of business travel.
Shares of Alaska Air Group rose early Thursday to as high as $44.29, their highest intraday level since last August, but ended the trading session down 0.3% at $41.76. Boeing shares finished 0.9% lower at $183.29.
Conclusion:
Alaska Air’s receipt of compensation from Boeing for the midair mishap and subsequent grounding of its 737 Max 9 planes highlights the financial impact such incidents can have on airlines. While the initial $160 million payment from Boeing helped offset some of the losses incurred by Alaska Air, the carrier is still expecting additional compensation from the plane maker in the coming quarters.
The incident serves as a reminder of the importance of safety and maintenance in the aviation industry, as well as the potential financial consequences when accidents occur. Despite the challenges faced by Alaska Air as a result of the mishap, the company remains optimistic about its future performance, citing strong demand and positive results in February and March.
As Alaska Air continues to navigate the aftermath of the midair incident, investors will be watching closely to see how the carrier manages its recovery and how Boeing fulfills its commitment to provide additional compensation. The aviation industry as a whole will also be paying attention to ensure that safety remains a top priority for all airlines and aircraft manufacturers.
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