Southwest Took $150 Million Hit From 737 MAX Groundings, Mechanics Dispute

Mar 27, 2019

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Southwest Airlines says its bottom line has taken a hit due to the groundings of the Boeing 737 MAX planes, as well as a dispute with mechanics and weather-related problems.

Those factors caused about 9,400 flight cancellations for the airline, and Southwest predicts that its profits for the first quarter of 2019, which ends Sunday, will take a $150 million hit due to those interruptions.

Southwest flies the largest fleet of Boeing 737 MAX 8 planes in the US, with 34 of the plane model. According to a memo from analysts at Cowen, the grounding of those 34 MAX jets, which has lasted two weeks so far, caused about 2,800 of Southwest’s flight cancellations. An equal amount of cancellations were due to unscheduled maintenance disruptions due to contentious contract negotiations with the mechanics, and the remaining 3,800 cancellations were caused by weather.

The airline has adjusted its flight schedule to accommodate 737 MAX groundings through April 20 and is examining options for further operational adjustments if the grounding stretches longer. The MAX jets were grounded worldwide after two similar, fatal crashes involving the plane, the second of which occurred on Ethiopian Airlines on March 10 and killed 157 people. The US Federal Aviation Administration was the last regulatory body in the world to mandate MAX planes be grounded, on March 13. Software installed on the MAX to keep it from stalling may have been the principal cause of the first crash last October, and may also have played a part in the March accident.

Although it’s unclear how long the 737 MAX will be grounded, Southwest does expect its revenue to grow in the second quarter of 2019 now that it has settled the contract dispute with its mechanics.

Earlier this year, Southwest said that the shutdown of the US government cost it a total of $60 million due to a “softness in passenger demand and bookings as a result of the government shutdown.”

Featured image of a Southwest 737 MAX 8 by Emily McNutt/TPG

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