Boeing pays Alaska Airlines $160 million in compensation over 737-9 MAX incident

Boeing has paid Alaska Airlines approximately $160 million in compensation during the first quarter of 2024, revealed in a stock filing by the airline. ""As a result of the flight 1282 accident and the Boeing 737-9 MAX grounding, we lost approximately $160 million in Q1 pretax profit, primarily comprising lost revenues, costs due to irregular operations, and costs to restore our fleet to operating service,"" the filing said. The flight 1282 accident on January 5, 2024, saw an Alaska Airlines 737-9 MAX aircraft's door plug blow out shortly after take-off from Portland International Airport. The aircraft was forced to make an emergency landing back at Portland with all passengers and crew surviving the incident. The ensuing Federal Aviation Administration Investigation (FAA) had temporarily grounded 737-9 MAX aircraft in the US, followed by scathing findings from an FAA's report as well as the company's CEO Dave Calhoun announcing he would depart the company by the end of 2024. ""We have received initial compensation from Boeing to address the financial damages incurred,"" the filing continued. The compensation was paid in cash and is equivalent to the profits lost in the first quarter from the 737-9 crisis. The airline expects additional compensation beyond the first quarter, but the terms of which are for now remaining confidential. As a result of the compensation, the airline has adjusted its first quarter earnings forecast, with its loss per share not including the Boeing compensation and is expected to be approximately $1.15 to $1.05; a wider loss per share than the previously anticipated 55 cents to 45 cents loss per share. ""The company initially expected to include the compensation from Boeing as a revenue benefit but will now not see it on the income statement, just on the cash flow statement,"" said TD Cowen in its insight report. ""As a result, the 1Q loss will be greater than initially expected."" TD Cowen has maintained its buy rating for Alaska Air Group. ""We will account for the compensation predominantly as a reduction to aircraft assets, which is the driver of the negative revision to our EPS expectation,"" the airline said. The loss per share adjustment reflects around 95 cents in relation to the lost earnings.