Boeing Pays Alaska Airlines $160M for Max Grounding

Boeing has paid Alaska Airlines approximately $160 million in cash during the first quarter to cover losses due to the grounding of the Boeing 737 Max 9 aircraft, the carrier noted Thursday in a U.S. Securities and Exchange Commission filing.

The U.S. Federal Aviation Administration grounded the Max 9 following a Jan. 5 door-plug blowout shortly after Alaska Airlines flight 1282 departed Portland, Ore.

Alaska said its "operation and results were significantly impacted" by the incident. The $160 million covers a loss in pre-tax profit, "primarily comprising lost revenues, costs due to irregular operations and costs to restore our fleet to operating service," according to the filing. Alaska said it expects additional compensation to be provided beyond the first quarter, the terms of which it said are confidential.

The carrier added that without these factors, first-quarter adjusted pre-tax profit would have improved about 80 percent year over year, "versus our pre-grounding expectations of a 30 percent improvement." Alaska said that the improvement to its core business performance has been driven by "strategic network adjustments, strong demand within the quarter and continued recovery of West Coast business travel."

Despite some "book away" following the January incident and aircraft grounding, "February and March both finished above our original pre-grounding expectations due to these core improvements," according to Alaska.

The carrier added that while it initially planned to have the Boeing payment accounted into its earnings, the carrier instead is recording it as a reduction to aircraft assets. As a result, the airline now expects an adjusted pre-tax loss of $180 million to $195 million, factoring in the $160 million grounding affect, compared with a pre-tax loss estimate of $20 million to $35 million.

The events also affected Alaska's capacity outlook. Excluding the grounding impact, capacity was expected to increase about 3 percent year over year. The events had a negative 5.5 percent affect, and the carrier now expects first-quarter capacity to fall about 2.5 percent compared with Q1 2023.

On March 25, Boeing announced that CEO David Calhoun would step down at the end of the year, with Boeing Commercial Airplanes president and CEO Stan Deal retiring immediately. Boeing chair Larry Kellner also declined to run for reelection at the company's annual shareholder meeting.