Southwest Airlines, the world’s biggest operator of the 737 MAX, is still negotiating the details of compensation from manufacturer Boeing. However, in a note sent to employees, Gary Kelly, the airline’s CEO, has said he would like to share any payout with staff at the carrier, as the grounding “has affected all of you”.
In a note sent to employees of Southwest and shared by Bloomberg, Chief Executive Officer of Southwest, Gary Kelly, said that,
“We need to know what those monetary and other reimbursements will look like, and we’re looking at ways to share proceeds, as appropriate, with all of you as we’ve done in the past with profit sharing. I recognize this hasn’t just affected some of you, it has affected all of you.”
Southwest are well known for pioneering the low cost model, and achieving a balance of services that keeps passengers and, most importantly, staff members happy. Last year, profit sharing saw employees paid a bonus equivalent to 10.8% of their income; the scheme is noted for being one of the largest in the US.
Working on a payment
Like many other airlines, Southwest is looking for a compensation payout from Boeing in lieu of the grounding of its fleet of 737 MAXs. In fact, Southwest may be looking for more than most; as the world’s largest operator of the 737 MAX, the low cost carrier has been arguably hit the hardest by the loss of the type.
CNBC reports that Boeing is having ‘ongoing conversations’ with operators in terms of a compensation arrangement. Speaking at the Aspen Ideas Festival earlier this year, Denis Muilenberg is quoted as saying,
“We’re going to be working with all of our customers around the world to make things right, and I won’t get into the details of those because that’ll be done individually customer by customer”
Yesterday, the Washington Post noted that Southwest Airlines are still at the negotiation stage of proceedings. The airline is reportedly looking to agree a “business settlement” in relation to the grounding, which Kelly has said he is keen to share with employees.
The impact on Southwest
According to reporting in Bloomberg, Southwest has already evaluated the impact of the MAX as having lost it £225m of its 2019 operating income. Whether or not the beleaguered jet returns to service before the year is out won’t affect this total, as Southwest took the decision back in July to pull the MAX from schedules until January 5th.
As well as the loss of income and costs involved in storing 34 jets, Southwest’s growth has also taken a hit. The loss of these 34 planes is accompanied by 25 more missing deliveries, which the carrier had expected in 2019. As such, its capacity growth of 5% over the course of the year has been revised to reflect a contraction of an expected 1 – 2%.
Even when the jet is ungrounded, Kelly says it could take up to two months to get the aircraft ready for service again. Bloomberg quoted him as saying,
“It will take a comprehensive effort to being to weave the plane back into our network. We’re being thoughtful about that, we have a solid plan in place and we will be ready when the FAA releases an airworthiness directive that will unground the fleet.”
While it’s great to see an airline willing to give so much back to its staff, we don’t expect many others will do the same.