Boeing Compensates Alaska Airlines with $160 Million for Panel Blowout Incident during Flight
In a recent development, Boeing has compensated Alaska Airlines with an initial payment of $160 million for a panel blowout incident that occurred on one of its Boeing 737 Max 9 jetliners in January. The compensation covers Alaska’s pretax loss related to the accident, including lost revenue and the cost of returning its Max 9 fleet to service after the planes were grounded for three weeks.
The incident took place when a panel that plugs a gap left for an extra emergency exit blew off an Alaska Max 9 as it was flying at an altitude of 16,000 feet over Oregon. Fortunately, the pilots were able to land the aircraft safely, and no injuries were reported. However, both Alaska Airlines and United Airlines, which also operates Max 9s, quickly grounded their fleets as a precautionary measure.
The Federal Aviation Administration (FAA) subsequently grounded all Max 9s in the United States, triggering investigations by the FAA, the National Transportation Safety Board, and even the Justice Department. The latter is looking into whether the incident violated the terms of a settlement that Boeing reached in 2021 to avoid criminal prosecution for allegedly misleading regulators during the certification process of Max jets.
Alaska Airlines’ compensation from Boeing could potentially set a precedent for similar payments to other customers affected by the grounding and delays in production and delivery of new aircraft. United Airlines, for instance, has had to ask its pilots to take unpaid time off due to delays in receiving new planes ordered from Boeing.
In its regulatory filing, Alaska Airlines stated that it expects additional compensation beyond the initial payment received in the first quarter. However, the specific terms of this compensation remain confidential. Boeing declined to comment on the filing but referred to previous statements made by its chief financial officer, Brian West, who acknowledged that customer considerations following the accident would impact the company’s financial results.
Despite the setback caused by the blowout incident and the subsequent grounding of its Max 9 fleet, Alaska Airlines remains optimistic about its prospects. The airline stated that it saw strong demand for travel and a recovery of business travel on the West Coast. In fact, both February and March performed better than expected, indicating a positive trend for the future.
Financially, Alaska Airlines expects to report a loss of between $1.05 and $1.15 per share for the January-March quarter, with 95 cents per share of the loss attributed to the blowout incident. Analysts had predicted a loss of 86 cents per share for the quarter, highlighting the significant impact of the incident on the airline’s financial performance.
The news of Boeing’s compensation to Alaska Airlines has had a positive effect on the stock market. Shares of Alaska Air Group rose by more than 4 percent, while Boeing experienced a gain of over 1 percent in afternoon trading.
In conclusion, Boeing’s $160 million compensation to Alaska Airlines for the panel blowout incident demonstrates the company’s commitment to addressing the financial damages incurred by its customers. While the terms of the additional compensation remain undisclosed, this payment could potentially pave the way for similar arrangements with other affected airlines. As investigations into the incident continue, both Boeing and its customers are hopeful for a swift resolution that allows for a return to normal operations and sustained growth in the aviation industry.
