Aviation cash out: Alaska Airlines pockets $160 million as compensation after 86-day wait

In the wake of a turbulent incident involving an Alaska Airlines Boeing 737 MAX 9 in January, which forced a diversion due to a blowout of an exit door plug, the aviation industry has been reeling with consequences. While no fatalities occurred on flight 1281, the aftermath saw several passengers filing lawsuits against the aircraft manufacturer, Boeing. Airlines across the board indicated their intent to seek compensation for the grounding fallout. The severity of the blowout’s backlash even prompted significant leadership changes within Boeing.

However, Alaska Airlines disclosed that it received $160 million from Boeing during the first quarter as compensation. However, the airline emphasizes that this sum falls short of their anticipated reimbursement, signaling an ongoing negotiation process with Boeing. The grounding of the 737 MAX 9 fleet, comprising 65 aircraft, substantially impacted Alaska Airlines’ first-quarter financials.

Chief Financial Officer Shane Tackett outlined the airline’s expectation for full compensation to offset first-quarter losses. Although specific financial results are slated for later release this month, Alaska Airlines has already reported robust demand despite the incident.

“Although we did experience some book away following the accident and 737-9 MAX grounding, February and March both finished above our original pre-grounding expectations due to these core improvements,” stated Tackett.

According to recent filings, Alaska Airlines anticipated an 80% improvement in first-quarter pre-tax profit compared to Q1 2023.

Boeing, which has faced numerous challenges since the January incident, has seen mixed fortunes. While American Airlines, Japan Airlines, and Thai Airways have made significant purchases, concerns loom over delivery delays. United Airlines, for instance, has pivoted its future plans away from certain aircraft deliveries, notably the MAX 10, with CEO Scott Kirby urging Boeing to focus on MAX 9 production.

Consequently, several airlines have been compelled to scale back expansion plans for 2024 due to delayed aircraft deliveries. Southwest Airlines, for instance, recently revised its schedules through year-end, prompting a temporary halt in hiring flight attendants and pilots. To mitigate passenger inconvenience, Southwest has streamlined its booking change process through its app and website.

The ongoing developments underscore both the financial and operational repercussions stemming from the Alaska Airlines incident, as airlines and manufacturers navigate the path to recovery while prioritizing passenger safety and service continuity.