United Airlines Forms Agreement With Boeing To Recover Q1 Financial Damages

United Airlines, one of Boeing’s biggest customers, has struck a deal with the plane maker for compensation for the losses incurred from the grounding of 737 MAX 9 aircraft earlier this year. The events following the Alaska Airlines blowout incident in January were a major embarrassment for Boeing and cost a lot of money to carriers like United that suffered from operational disruption following the temporary grounding of the MAX 9 variant.

United Airlines to be compensated

United Airlines has announced that it has entered an agreement with Boeing to receive compensation for the financial losses suffered due to the grounding of its 737 MAX 9 fleet earlier this year.

While Alaska Airlines suffered a midair blowout incident with one of its Boeing 737 MAX 9 variant aircraft in January, it impacted all airlines operating the type. The Federal Aviation Administration (FAA) jumped into action and ordered carriers to ground the variant for inspection until it was deemed fit to fly again.

Photo: The Global Guy | Shutterstock

Naturally, this meant that carriers like United, which rely significantly on the type for daily operations, suffered massive financial losses due to flight cancelations and delays. And it was assumed that they would demand to be compensated by Boeing at some point.

Alaska Airlines got the ball rolling when it received $160 million from the plane maker, although it expects more. United, however, has not revealed the details of the deal but will receive compensation in the form of “credit memos for use on future purchases from Boeing.”

Costly groundings

While Alaska Airlines became the face of the 737 MAX 9 blowout incident, United was also among the worst affected airlines due to the plane’s grounding. The airline is the biggest operator of the variant, having 79 Boeing 737 MAX 9s in its fleet, with another 31 to be delivered. Alaska has 65 MAX 9s in its fleet.

Photo: The Global Guy | Shutterstock

Related

Boeing 737 Max 9 Issues Cost United Airlines Nearly $200 Million In Q1 Profits

The airline reported a net loss of $124 million in Q1 2024.

It was a big blow to United, which, despite generating impressive revenue in the first quarter of 2024, announced that it made a net loss of $124 million, primarily because of losing $200 million due to issues related to the MAX 9 aircraft.

The carrier posted an operating revenue of $12.5 billion, up 9.7% compared to the first quarter of 2023. The grounding severely impacted the company’s balance sheet, and without it, United would have reported a quarterly profit.

Crucial Boeing customer

United Airlines is a significant customer for Boeing, one it cannot afford to lose. The carrier operates hundreds of Boeing planes, both narrowbody and widebody, for the bulk of its operations, although it also operates many A320 family of airplanes and has 45 A350s on order.

Photo: Karolis Kavolelis | Shutterstock

Related

Boeing Issues Prompt United Airlines To Reevaluate The 737 MAX 10

United Airlines is in the early stages of planning a future without the Boeing 737 MAX 10 in its fleet.

But United has had to adjust its delivery estimates for this year in light of the recent issues that Boeing is facing with its production slowdown. United has also asked Boeing to halt MAX 10 production for now and switch to MAX 9 instead.

The airline has converted a portion of its MAX 10 orders to MAX 9 and also signed lease agreements to acquire 35 new Airbus A321neos. United would need more planes for its growth, and Boeing wouldn’t want to lose its valuable customer to Airbus completely. Compensation is a good start!

What are your views on this? Please leave a comment below.