The continued grounding of the Boeing 737 Max is costing airlines hundreds of millions of dollars.
American Airlines (AAL), Southwest Airlines (LUV) and European budget carrier Norwegian all revealed this week that the inability to utilize the troubled plane will cost the combined airlines nearly $600 million.
It’s not just the airlines feeling the pinch: Boeing (BA) also said earlier this week that its earnings fell 21% in the first three months of the year because of the crisis. The company didn’t break out the complete cost of its results from the 737 Max crisis, but in a presentation to investors, it said it had booked a charge related to fixing the plane’s problems.
Airlines started grounding the 737 Max in March after one of the planes flown by Ethiopian Airlines crashed, killing everyone on board. It was the second accident involving the jet model in less than six months, after another flown by Indonesia’s Lion Air crashed last October. The crashes killed 346 people in total.
The grounding is about to enter its second month and Boeing hasn’t said when a fix for the 737 Max will be rolled out.
Southwest, which has more of the 737 Max planes than any other US airline, said in its earnings report Thursday that the grounding and other “several unexpected events” – including the government shutdown – cost it $200 million in the first quarter. The low-cost carrier has canceled some flights that planned to use the 737 Max until August 5.
Southwest exclusively uses Boeing 737 aircraft, but CEO Gary Kelly said its fleet lineup could change.
“That doesn’t mean we will be an all-737 carrier into perpetuity,” he told CNBC Thursday. Kelly also said he’s “not happy” about the grounding the Boeing 737 Max. “Our negotiations and our relationship with Boeing is something I’ll take up with them privately,” he said.
European discount carrier Norwegian said Thursday the grounding will cost it NOK 500 million, or $58 million US dollars, in 2019.
“We have had some productive meetings with Boeing where we have discussed how we can maneuver through the difficulties the MAX situation is causing Norwegian,” Bjørn Kjos, Norwegian’s CEO, said in a statement.
Norwegian has 18 of the 737 Max planes in its fleet, mostly for trans-Atlantic flights between Europe and the East Coast of the United States. The airline has ordered more than 100 of the 737 Max 8 planes.
It has also demanded compensation from Boeing. “It is quite obvious we will not take the cost related to the new aircraft that we have to park temporarily,” Kjos said in March. “We will send this bill to those who produce this aircraft.”
It’s unclear how much Norwegian, and other airlines, might be able to receive from Boeing. That type of compensation is set in the terms of closely guarded sales contracts between the aircraft maker and its customers. For example, issues like late delivery of aircraft can cause Boeing or rival Airbus to compensate its customers.
Boeing CEO Dennis Muilenburg said the company is working to improve these relationships with airlines as it develops a fix for the 737 Max.
“We have to earn and re-earn the trust of the flying public,” he said. “That’s work ahead of us, and we take that very seriously.”
Chris Isidore contributed to this report.