Southwest To Share $125 Million 737 MAX Compensation With Staff

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**Update: 12/12/19 @ 23:00 UTC – Southwest has shared further information on its plans for the compensation money, details below.**

Southwest Airlines has reached a confidential agreement with Boeing for compensation over the grounding of the 737 MAX. Even though the total is undisclosed, the airline has revealed that $125 million of it will be distributed among its employees.

Southwest 737 MAX
Southwest will be splitting the money that it receives from Boeing across the company. Photo: Southwest Airlines

Big investment

The plane type has been grounded since March of this year, following two fatal incidents. However, before this happened, several airlines had made great commitments to the aircraft. According to Planespotters, Southwest had received 34 MAX jets, with three of these on lease. These planes are all now catching the sun in the Mojave desert.

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Additionally, it had expected 41 more of them this year. Although, as Boeing continues to work with regulators on its reintroduction, the carrier still hasn’t received them. Altogether, the firm has 280 737 MAXs on order.

Previously, Boeing shared that it has reserved up to $5 billion, to be used to pay airlines compensation for damages caused to them. Altogether, it is estimated that United States carriers are losing $1 billion due to the ongoing saga. With Southwest being the firm with the largest grounded 737 MAX fleet on the planet, it is due a sizeable slice of the compensation pie.

Boeing 737 MAX Side
The airline was heavily relying on the 737 MAX aircraft for upcoming operations. Photo: Southwest Airlines

Company-wide impact

Business Insider reports that the airline will share this amount with its staff, in an effort to make up for damages. In October, the Southwest Airlines Pilots Association filed a lawsuit against the plane manufacturer. The staff members claim that the grounding has caused them to lose over $100 million in wages.

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The group claims that the 737 MAX was rushed into production and was deemed to be safe even though it wasn’t. The association represents 10,000 Southwest pilots, claiming that the issues have caused fewer opportunities for the workers to work and earn money.

While the plane is still grounded, Southwest is also looking to increase the amount owed to them. There are several direct and indirect costs associated with this grounding, which Southwest will be looking to report to Boeing.

American Airlines also revealed that it is looking to increase its expected compensation amount. The airline has stated that it is working with Boeing to ensure that the manufacturer’s shareholders bear the costs of their mistake.

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Southwest 737 MAX close
Southwest’s pilots have had their jobs affected by the grounding. Photo: Southwest Airlines

Costs covered

Ultimately, by distributing $125 million to its staff, Southwest would be able to at least cover the wage losses. A company press release reveals that this amount will be distributed as part of the Company’s annual 2019 profit sharing distribution in 2020. The percentage each eligible Southwest employee will receive will be revealed next year.

Southwest Chairman and CEO Gary C. Kelly shared his praise for the company’s staff.

“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,” he said, according to the press release.

“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.”

The 737 MAX remains grounded, with the Federal Aviation Authority stating that it is not expecting to authorize the plane before January.

What do you think about Southwest’s idea to share its compensation? Let us know your thoughts in the comment section.

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