United Airlines says Boeing to compensate for damages caused by MAX 9 grounding
Reuters
Published Apr 17, 2024 04:17PM ET
Updated Apr 17, 2024 06:36PM ET
(Reuters) -United Airlines will receive compensation from planemaker Boeing (NYSE:BA) for financial damages incurred in the first quarter due to the grounding of 737 MAX 9 aircraft, the carrier said on Wednesday.
U.S. regulators had in January grounded some Boeing 737 MAX 9 aircraft for about three weeks for safety checks after a cabin panel blowout on an Alaska Airlines-operated MAX 9 jet.
The incident had forced United Airlines — a prominent Boeing customer — to temporarily suspend service on all 79 of its 737 MAX 9 aircraft, which resulted in a $200 million hit for the airline in the first quarter.
United Airlines said in a filing on Wednesday that a confidential agreement with Boeing will provide it with "credit memos" for future purchases to make up for the grounding damages and the rescheduling of deliveries.
A credit memo is an official written acknowledgement that money is owed back to a customer.
As of Feb. 5, 78 of the 79 737 MAX 9 aircraft operated by United Airlines had returned to service after receiving a final approval from the Federal Aviation Administration.
In response to a request for comment on Wednesday, Boeing pointed to its CFO Brian West's remarks at a conference in March.
West had then said "customer consideration is going to manifest itself in the quarter (after the grounding), in the P&L and we've got to take care of that".
Alaska Air (NYSE:ALK) had said earlier in April that Boeing paid about $160 million to the airline in the first quarter as initial compensation to address the hit from the grounding.
The mid-air panel blowout has undermined the reputation of Boeing, which has undergone a management shakeup and seen U.S. regulators put curbs on its production while its deliveries fell by half in March.
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Written By: Reuters
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