Before we get into which airlines have agreed to compensation from Boeing following the grounding of the 737 MAX last March, let’s take a look at why they feel Boeing owes them money.
As we all know, a worldwide grounding of the Boeing 737 MAX came into effect after two fatal crashes killed 346 people. Immediately after the grounding, airlines that had the 737 MAX in their fleets had to cancel flights.
The grounding forced them to compensate for the missing aircraft by leasing planes and delaying the retirement of older aircraft they already had.
The MAX grounding hit airlines who had aircraft on order
The grounding of the MAX also had a hit on airlines who were supposed to take delivery of new aircraft in 2019, forcing them to cancel expected flights.
The inability to operate the MAX also meant that many airlines were stretched to their limits, forcing them to cancel flights and bump passengers. In the third quarter of 2019 alone, American Airlines said that it had canceled 9,475 flights due to the grounding of the MAX and expected to cancel 140 flights per day until the aircraft is back in service.
At the time of the grounding, American Airlines had 24 Boeing 737 MAX jets in its fleet with another 76 on order.
With more than 370 Boeing 737 MAX planes in service and dozens more due to be delivered, the longer it drags on, the more money airlines lose.
Nobody can say for certain when the MAX will fly again
While Boeing says that it has found a fix for the MCAS software believed to be responsible for the two crashed the aircraft, it is still at the mercy of the FAA and other safety regulators before it can be recertified as airworthy. This is yet another headache for operators of the MAX who first thought it would return to service sometime in the fourth quarter of 2019. This, of course, did not happen with all kinds of assumptions now being made that it will be flying again sometime this spring.
The latest rumor coming out of the FAA is that they are considering requiring pilots to complete training on a 737 MAX simulator before they are allowed to fly the aircraft. If this is the case, it will delay the 737 MAXs return to service even longer than what is now anticipated.
In any business, uncertainty can be a costly commodity and especially so with airlines who are constantly having to rewrite their schedules every month the MAX fails to return to service.
Now we have gotten through the busy holiday period, it would appear that more airlines are prepared to receive compensation from Boeing for revenue lost due to the MAX grounding.
Several airlines have agreed to compensation
Southwest Airlines was the first airline, and coincidently the biggest operator of the Boeing 737 MAX with 34 aircraft, to accept compensation. Southwest Airlines announced in December that it had reached a confidential agreement with Boeing for compensation.
Southwest had said that the grounding of the MAX will cost it $830 million in 2019. So we can assume Boeing paid a proportion of that amount to the Texas-based carrier.
Turkish Airlines agreed to compensation from Boeing on New Year’s Eve for its grounded 737MAXs. While just like with the Southwest Airlines deal, no figure as to the amount was disclosed, Turkish daily newspaper Hurriyet, however, said it was $225 million.
Just yesterday, January 6th, 2020 the Mexican national flag carrier, Aeromexico, said it had agreed to terms with Boeing, but yet again did not elaborate on how much money it was worth.
The United States’ largest airline, American Airlines also announced on Monday that it too had reached a deal with Boeing and while not disclosing the amount, did say that it would be paid over several years. American Airlines also said that $30 million of the settlement would be put in the airline’s employee profit-sharing program.
Interestingly Ryanair, who does not yet have any 737 MAX jets but has several on order, has said that it will discuss compensation with Boeing after it has received the aircraft.
It’s funny how everyone is tight-lipped about how much compensation they are getting over the MAX groundings and why they are accepting payments from Boeing now when the plane is still grounded. What do you think? Please let us know in the comments.