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American Airlines extends 737 MAX cancellations until April

Southwest to give employees $125 million from Boeing compensation

Photo Credit: Flickr/Victor

American Airlines (NASDAQ: AAL) said Thursday it is pushing back scheduling passengers on its Boeing 737 MAX jetliners until April 7, adding further expense and capacity constraints to its system.

The news comes one day after Federal Aviation Administration head Stephen Dickson testified before Congress that the agency won’t rush a review of corrective steps taken by manufacturer Boeing Co. and a final airworthiness recertification for the MAX. The administrator also said about a dozen technical milestones must still be met before any approval is granted, pushing completion of the process into 2020.

Reuters reported that the FAA has expressed displeasure with Boeing about continuing to raise unrealistic public expectations for the plane’s return to service. Dickson was scheduled to meet Thursday, Dec. 12, with Boeing CEO Dennis Muilenberg to discuss the safety review.

The FAA and other aviation authorities grounded the 737 MAX in March after two crashes killed 346 people. Investigations discovered that automated flight-control software received faulty signals of a stall and put the aircraft through maneuvers the pilots couldn’t control because they did not have adequate training on how to react to the situation.

Boeing (NYSE: BA) officials repeatedly suggested this fall that the FAA might lift the MAX flight ban as soon as November or December. Boeing has slowed production of the MAX to 42 per month, but officials have said they might need to temporarily shut down the factory if the FAA approval process drags on. The Wall Street Journal reported last month that Boeing was trying to convince regulators to let it start delivering aircraft before new pilot training had been approved, although airlines wouldn’t fly with passengers until the training was completed.

American has 24 idle MAX aircraft and an additional 76 on order. In October, the Dallas-based carrier said it expects the cancellations of MAX flights to negatively impact its full-year pre-tax income by about $540 million. The MAX is more fuel efficient than previous models, and airlines have incurred other expenses, such as leasing older aircraft to fill scheduled routes or refunding the cost of tickets to passengers who don’t want to fly on a MAX plane.

That was before the airline blacklisted the 737 MAX from its schedule once again in November, this time through March 5, when the FAA ungrounding didn’t materialize.

The latest schedule revision will likely result in the cancellation of about 140 non-MAX flights as airline managers juggle aircraft to cover the MAX routes with a different aircraft to minimize the number of customers affected, American said. On Dec. 22, it will update its reservation system for passengers booked on MAX flights through April 6.

Once the FAA gives the go-ahead to resume flights, airlines will require several weeks to bring parked planes up to proper maintenance standards, train pilots on the new software and work the planes into their schedules. Airlines have said they will gradually phase in 737 MAX aircraft over several weeks once they start flying.

Meanwhile, Southwest Airlines (NYSE: LUV), which has the largest 737 MAX fleet, said it reached an agreement with Boeing on compensation for a portion of damages associated with the grounding and will share proceeds with its employees, who are likely to receive less profit-sharing income this year because of the MAX’s unavailability. Further compensation talks with Boeing are continuing.

Southwest said it expects to give employees about $125 million from the Boeing funds.

“While still evaluating the applicable accounting principles, the Company currently expects to account for substantially all of the compensation as a reduction in cost basis of both existing and future firm aircraft orders, which will reduce depreciation expense in future years,” the airline said in a statement.

Southwest Airlines CEO Gary Kelly said Thursday the airline probably will need to push back the date for the MAX return to service, according to Reuters. It currently has removed the MAX from its flight schedule through March 6.

Southwest operates an all-737 narrow-body fleet, but still managed to move 200 million pounds of cargo last year.

Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals and a Silver Medal from the American Society of Business Publication Editors for government and trade coverage, and news analysis. He was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. He won Environmental Journalist of the Year from the Seahorse Freight Association in 2014 and was the group's 2013 Supply Chain Journalist of the Year. In December 2022, he was voted runner up for Air Cargo Journalist by the Seahorse Freight Association. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at [email protected]