American Settles With Boeing for Massive Income Hit From the 737 Max Grounding
American Airlines Group has reached a settlement with Boeing over last year’s financial blow from the 737 Max grounding, and the carrier said it would share about $30 million of the proceeds with employees.
The companies are still in talks over compensation for damages beyond 2019, American said in a statement Monday. The Max’s absence since March shaved at least $540 million from American’s 2019 pretax income, the airline has said, and the benefits from the confidential settlement with Boeing will be received over several years.
American is the second U.S. carrier after Southwest Airlines to negotiate 2019 compensation with Boeing. The deal won’t have a material affect on American’s results for the fourth quarter of last year, and the company expects “substantially all” of the settlement to be in the form of reduced aircraft costs for grounded planes and future deliveries. Employees will receive their payment through the airline’s profit-sharing program in March.
“Our ability as an airline to weather these unprecedented times is thanks to our phenomenal team, and it was important to us that we get a deal done before the end of the year” American Chief Executive Officer Doug Parker said.
The Fort Worth, Texas-based airline has pulled the Max from its flight schedules through April 6 as aviation regulators continue to oversee safety changes to the aircraft. Southwest has taken the plane out of schedules through April 13, while United Airlines Holdings has removed it until early June.
U.S. regulators issued the flying ban for the Max on March 13 after crashes at two airlines within five months killed 346 people. Boeing said in July it had taken a $5.6 billion pretax charge to cover potential costs incurred by airline customers due to the grounding.
Earlier on Monday, Grupo Aeromexico SAB announced its own compensation agreement with Boeing.
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