In the second quarter, Boeing recorded a charge of nearly $5 billion after tax for expected compensation to airline customers with grounded aircraft. However, the total cost of compensating customers may be higher as most agreements have not yet been negotiated and grounding has not yet been concluded. Southwest Airlines said Thursday it has entered into a confidential compensation agreement with Boeing for part of the expected financial damage related to the grounding of its 737 Max aircraft. “SWAPA believes that the agreement between the Southwest and Boeing only consolidates our legal right,” he wrote. “We look forward to obtaining the specific details of the Boeing/Southwest agreement in the discovery process during litigation.” In a statement on the deal, the Southwest Airlines Pilots Association said the deal “does not compensate at all for the losses” suffered by its pilots and other employees. The union, which had filed a lawsuit against Boeing claiming more than $100 million in lost grounding revenue, said it would continue to take legal action. This amount is small in the context of Southwest`s market capitalization, which exceeds US$28 billion. The aviation sector will not move much in this news. But the confidential deal could move Boeing`s shares, as each new data point looks, to some extent, like progress in getting the 737 MAX back into commercial service.
The company stressed that the agreement was only a partial comparison and that it continued to “conduct ongoing discussions with Boeing about compensation for damages related to the Max-Groundings.” DALLAS, Dec. 12, 2019 /PRNewswire/ — Southwest Airlines Co. (NYSE: LUV) recently entered into a confidential agreement with The Boeing Company (Boeing) to indemnify Southwest for a portion of the anticipated financial loss related to the grounding of the airline`s Boeing 737 MAX aircraft. In light of this agreement, Southwest`s Board of Directors has authorized a quietly incremental profit-sharing for Employees, related to the expected reduction in operating income for 2019 due to max-groundings operations. The company currently estimates this additional profit share at approximately $US.125 million. Gary C. Kelly, Chairman and Chief Executive Officer, said: “Our people have done an incredible job of perceiving the max foundations while delivering customer service and one of the best operational performance in our history. On behalf of the Southwest Board of Directors, we are grateful to our employees for their extraordinary efforts over the course of the year and are pleased to share the proceeds of our recent agreement with Boeing. NEW YORK/WASHINGTON (Reuters) – Southwest Airlines Co said on Thursday it had reached a confidential compensation agreement with Boeing Co for part of an expected $US 830 million loss for 2019 operating profit due to grounding its 737 MAX aircraft. .