Southwest reaches deal with Boeing over 737 Max, plans to share $125 million with employees

Southwest reaches deal with Boeing over 737 Max, plans to share $125 million with employees
By: WNG CNBG Posted On: December 12, 2019 View: 36

Southwest reaches deal with Boeing over 737 Max, plans to share $125 million with employees

A Southwest Airlines jet leaves Midway Airport on January 25, 2018 in Chicago, Illinois.

Scott Olson | Getty Images

Southwest Airlines said Thursday it has reached agreement with Boeing to compensate the airline for some of the financial damages from the grounding of the 737 Max.

Southwest didn't disclose the terms of the agreement, but the Dallas-based airline reiterated that it would share $125 million with its employees. Boeing didn't immediately respond to a CNBC request for comment.

The low-cost airline said talks with the manufacturer are ongoing and that it expects Boeing to cut prices on Southwest's current and future aircraft orders because of the grounding. Southwest shares were up 0.8% in premarket trading. Boeing shares were down 0.4% in Thursday's premarket.

The Boeing 737 Max has been grounded since mid-March after the the second of two fatal crashes in the span of five months. Southwest is the largest U.S. operator of 737 Max planes and had 34 in its fleet at the time of the grounding.

Boeing took a nearly $5 billion after-tax charge in the second quarter to compensate carriers for the flight ban, but the total cost isn't yet clear because the grounding is ongoing. The Federal Aviation Administration's top administrator told CNBC on Wednesday that recertification of the plane would stretch into 2020, dashing Boeing's forecast that regulators would sign off on the jetliners by the end of the year.

The prolonged grounding, now in its 10th month, has cost airlines including Southwest hundreds of millions of dollars in revenue. Southwest has cut routes and scaled back its growth plans with the planes grounded. U.S. carriers that operate the Max — Southwest, American and United — have taken the 737 Max out of their schedules until early March, almost a full year since regulators grounded the plane.

Southwest's pilots union sued Boeing in October, saying the grounding cost them more than $100 million in income.

This is breaking news. Please check back for updates.

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