Southwest Airlines on Thursday became the first US carrier to give up on seeing the Boeing 737 MAX return to the skies this year, as the worldwide grounding of the top-selling aircraft dented quarterly profits for two major airlines.
Domestic-oriented Southwest said it has begun talks with Boeing about compensation for the impact from widespread flight cancelations and delayed deliveries of new planes that forced it to slow down its ramp-up of service to Hawaii.
American also has taken a hit amounting to $400 million from the MAX crisis but despite that both airlines reported higher second-quarter profits on strong consumer demand.
Boeing MAX planes have been grounded since mid-March following two crashes that claimed 346 lives. Boeing has said it expects to win regulatory approval around October to resume flights, but has warned that the timeframe could be extended.
American reported an 18.9 percent jump in second-quarter profits to $662 million, as total revenues rose 2.7 per cent to USD 12 billion.
Results also were dented by flight cancelations due to an ongoing dispute with maintenance workers and bad weather.
American now estimates the total impact of the MAX grounding to be USD 400 million for 2019, up USD 50 million from the prior estimate.
Executives said they are were in close contact with the Federal Aviation Administration and Boeing and unlike Southwest still believe the plane will be ready to fly by November 2.
American”s chief executive, Doug Parker, said he had “high-level” conversations with senior Boeing executives about compensation but did not discuss details of any payments.
American now anticipates capacity growth of only 1.5 per cent this year, down from 3.0 per cent because of MAX cancelations, executives said.
Southwest reported a 1.1 per cent rise in profit to USD 741 million, as revenues climbed 2.9 per cent to USD 5.9 billion.
Southwest now plans to resume flights on the MAX on January 5, more than two months later than previously expected. The airline said it could take up to two months to resume flights once the plane is cleared by regulators to perform maintenance and to address FAA directives, including pilot training.