By Tracy Rucinski and David Shepardson
NEW YORK/WASHINGTON (Reuters) - Southwest Airlines (NYSE:LUV) Co said on Thursday it had reached a confidential compensation agreement with Boeing (NYSE:BA) Co for a portion of a projected $830 million hit to operating income in 2019 arising from the grounding of its 737 MAX aircraft.
The airline, the world's largest 737 MAX operator, said it would share with its employees proceeds of about $125 million from Boeing.
Southwest said it continues to discuss with Boeing further compensation related to the MAX grounding, adding that the details of the talks and the settlement were confidential. Boeing declined to make an immediate comment.
Southwest, American Airlines (NASDAQ:AAL) Group Inc and United Airlines Holdings Inc are scheduling flights without use of the aircraft until early March 2020, nearly a year since the plane was grounded after crashes killed 346 people in Indonesia and Ethiopia.
Federal Aviation Administration (FAA) chief Steve Dickson confirmed on Wednesday the agency will not unground the MAX before the end of 2019.
Speaking at a Wings Club event, Southwest Chief Executive Gary Kelly said the March date was based on FAA approval in December and would likely need to be pushed back again.
American and United remain in discussions with Boeing about compensation. American has 24 MAX aircraft and had expected 40 by the end of 2019. American has said it expects to be compensated by Boeing.
"The missed deadlines and extended grounding have hurt our customers, our team members and our shareholders," American spokesman Ross Feinstein said. "We are working to ensure that Boeing’s shareholders bear the cost of Boeing’s failures."
United declined comment.
With its 34 MAX jets parked and 41 more expected in 2019 still pending delivery, Southwest has scaled back growth plans and canceled more than 100 daily flights.
Once the jets are flying again, Kelly said he has a clear route strategy with plans to boost service to Denver, Houston and Baltimore. The carrier launched flights to Hawaii this year.
In a statement about the settlement, the Southwest Airlines Pilots Association said the agreement "doesn't get anywhere close to compensating" the losses its pilots and other employees have experienced. The union, which filed a lawsuit against Boeing alleging over $100 million in lost wages from the grounding, said it will continue to pursue legal action.
Federal officials told Reuters the FAA is not expected to authorize the plane to fly until January at the earliest, though some U.S. officials think Dickson will not give the green light until February at earliest.
"Hopefully we'll have a clean start in 2021," Kelly said.