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Alaska Airlines Faces Financial Impact Following Boeing Compensation
Alaska Airlines is gearing up to release its earnings in a few weeks, but a recent Securities and Exchange Commission filing has shed light on a significant development. The airline has been handed a mixed bag of news, involving a substantial financial boost alongside projected losses in the wake of recent setbacks.
Boost from Boeing Compensation
One positive note from the filing is Alaska Airlines receiving a $160 million compensation from Boeing. This compensation stems from an incident in January involving a 737 Max 9 door plug blowout, leading to the grounding of planes. The airline had previously made a strategic shift, retiring its Airbus fleet to focus solely on the 737 Max planes. However, this grounding temporarily disrupted operations until safety assessments gave the green light for the planes to resume flying.
“As a result of the Flight 1282 accident and the Boeing 737-9 MAX grounding, we lost approximately $160 million in Q1 pretax profit, primarily comprising lost revenues, costs due to irregular operations, and costs to restore our fleet to operating service,” the carrier stated in the filing.
The initial compensation from Boeing is aimed at alleviating the financial strain incurred during the period of disruptions. Furthermore, the airline is set to receive additional compensation from Boeing in the future, though specific details on the amount and terms were not disclosed.
Projected Losses and Challenges Ahead
Despite the positive boost from Boeing, Alaska Airlines is bracing for substantial losses for the quarter. Projections indicate a potential doubling of losses from -55 cents a share to as much as -$1.15 a share. CEO Ben Minicucci addressed the challenges faced by the airline during an investor conference, attributing the setbacks to the month-long process of getting the grounded planes back in operation.
“I’m really pleased at Q1, and when we looked at it in December, the revenue trends were strong,” Minicucci shared at the conference. “Of course, then Flight 1282 happened.”
The aftermath of Flight 1282 and the 737 Max grounding has presented hurdles for Alaska Airlines, impacting its performance in what is typically the weakest quarter for the company. Despite the anticipated losses, Alaska Airlines saw a positive uptick in its stock, with a 5% increase in early Thursday trading.
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