American Airlines’ Boeing 737 Max levels sit parked outside of a maintenance hangar at Tulsa International Airport (TUL) in Tulsa, Oklahoma, May 14, 2019.
Patrick T. Fallon | Bloomberg | Getty Effigies
American Airlines is planning to share with employees a portion of the compensation it expects to receive from Boeing for the not quite 10-month grounding of the 737 Max, a disruption that carriers have said cost them more than $1 billion in takings.
American’s talks with Boeing are still ongoing, a spokesman said. Several other 737 Max customers, classifying Icelandair, Turkish Airlines and Southwest Airlines, have recently reached agreements with the manufacturer, but the final amounts, whether in gelt compensation or discounts on aircraft, isn’t yet clear because the grounding is ongoing.
The grounding of the 737 Max after two crashes — one in Indonesia in October 2018 and another in Ethiopia the ensuing March — has roiled Boeing, prompting the manufacturer to suspend production of the bestselling plane and costing former CEO Dennis Muilenburg his job. It has also unnatural airlines to cancel thousands of flights and curb growth plans. That has meant less overtime for employees, they suggest.
The Federal Aviation Administration has repeatedly said it doesn’t have a set timeline for clearing the planes to fly again and that it drive individually review each 737 Max before they can fly.
That uncertainty has forced airlines to repeatedly remove the jetliners from their outline, a trend that becomes even more disruptive because airlines expected to have even more 737 Max airliners delivered since the grounding. American had 24 of the 737 Max planes in its fleet at the time of the grounding and had expected that immensity to double this year.
“As we’ve said before, we expect American will be compensated for the lost earnings that the Max base has caused,” American Airlines spokesman Ross Feinstein said. “We anticipate that part of any compensation American obtains will be eligible for profit sharing for our team.”
A Boeing spokesman said the company doesn’t comment on “our private exchanges with customers.” The company took a $4.9 billion aftertax charge in the second quarter to compensate airlines for the footing.
American in October forecast the Max grounding would cost it $540 million in pretax income in 2019. The full monetary toll on airlines isn’t yet known because it’s not clear when the planes will fly again. American and Southwest removed the slips from their schedules until April, while United pulled them until early June.
“We withstand highly confident that the losses that American Airlines have incurred won’t be incurred by American shareholders, but see fit be borne by the Boeing shareholders,” American CEO Doug Parker said on an earnings call in October.
Southwest, which said the deposit cost it $435 million in operating income during the first nine months of the year, didn’t disclose the phrases of its compensation but said last month that it would share $125 million with its employees. Southwest’s captain union sued Boeing in October, alleging the grounding cost its pilots more than $100 million in receipts.
American Airlines pilots’ union, the Allied Pilots Association, said it has not ruled out following suit.
“All actions be there on the table,” said union spokesman Capt. Dennis Tajer. “Further action depends on the success of this orbit in repairing the financial harm to our pilots.”
American is expected to report full-year and fourth-quarter earnings in the second half of the month.