The 737 Max grounding will cost Alaska Airlines $150 million
Originally Published: 25 JAN 24 08:07 ET Updated: 25 JAN 24 08:29 ET By Chris Isidore, CNN
New York (CNN) — The grounding of the 737 Max 9 after a January 5 incident that blew a hole in the side of an Alaska Airlines plane earlier this month will cost the airline about $150 million, Alaska announced Thursday.
The loss is significant to an airline the size of Alaska, which reported on Thursday an adjusted income of $38 million in the final three months of the year and $583 million for the full year. The fourth quarter income was better than forecast for Alaska.
The door plug blew off an Alaska Airlines flight on January 5, leaving a gaping hole in the side of the plane. While no passengers were killed, the incident led the Federal Aviation Administration to order a grounding of all 737 Max 9 jets. With 65 of the planes Alaska has the second most 737 Max 9 jets in its fleet, behind only United, which has also warned it expects a first quarter loss at least partly due to the cost of the grounding.
On Wednesday, the FAA spelled out inspection procedures to return the planes to flight. Alaska Air said the first of its grounded jets will be back in service on Friday with more planes added every day as reviews are completed and each aircraft is deemed airworthy.
“We expect inspections on all our 737-9 Max to be completed over the next week,” it said.
Alaska Airlines CEO Ben Minicucci told NBC in an interview Tuesday that the carrier found “some loose bolts on many” Boeing 737 Max 9 during its inspections.
Even with the $150 million hit from the grounding, Alaska said it still expects to report a full-year 2024 profit of about $381 million to $635 million, but that guidance suggests it could fall short of estimates of $583 million, according to analysts surveyed by Refinitiv. Analysts are forecasting a loss of $79 million in the first quarter.
Alaska and United are the only US airlines with the 737 Max 9 jet in their fleets. But it doesn’t mean they’re the only affected by the problems at Boeing.
Southwest Airlines said Thursday that it now expects fewer 737 Max deliveries from Boeing this year than it had booked because one of the models it orders, the 737 Max 7, has yet to be certified by the FAA. Its order book calls for the delivery of 27 of the Max 7 this year, along with 53 of the Max 8, but the airline said that “should no longer be relied upon.”
“The FAA will ultimately determine the timing of the [737 Max] 7 certification and entry into service, and the company therefore offers no assurances that current estimations and timelines are correct,” it said.
American Airlines CEO Robert Isom said he doesn’t expect a delay in the deliveries of the planes it is due to get from Boeing this year. But he also had criticism of the aircraft maker.
“We need them to produce a quality product every time. We need everyone at Boeing getting their act together. It’s just essential,” he said in an interview on CNBC. “It’s not acceptable. We don’t need the distraction.
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