Grounding of 737 Max to cost dearly to American, South West Airlines


American Airlines and Southwest Airlines reported this week that continued grounding of Boeing 737 Max is likely to cost both of them minimum $1 billion and may go up higher. Southwest declared that the planes which were grounded in March after two fatal crashes within few months of each other have cost its $435 million in the intervening seven months. This is because the airline owns 31 Boeing 737 Max planes unlike any other airlines and is not able to use them. The airline company said that its losses are likely to mount during fourth quarter and continue into next year.

Even though American Airlines owns 24 Max 737 planes said that this situation will affect its profits and its pre-tax profits could be around $540 million. The airline was forced to cancel 9500 flights due to grounding of the Boeing jets during third quarter alone. Southwest told investors that it will continue to work with Boeing to get compensation for grounding of its planes which has affected its revenue and profits. The aircraft maker also announced before that it will set aside $5 billion to compensate its clients that have suffered loss in profits and revenue due to grounding of 737 Max.

This money will cover costs for airlines that together had 387 Max planes in their fleet during the time of grounding. Boeing had also been scheduled to deliver more than 400 Max 737 jets towards the end of this year which have been held back due to groundings. With just two major airlines reporting losses worth $1 billion a large gap could exist between what has been reported by the aircraft maker to its investors and the amount airlines are actually losing due to this crisis. Though Boeing is expecting to get approval for flying the jets by end of this year FAA says that there is no timetable for approval for these planes to fly again.

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