Southwest Airlines (Southwest) has confirmed that it has reached a confidential agreement with The Boeing Company for partial settlement of an ongoing claim for damages the American carrier has suffered as a consequence of the grounding of the 737 MAX in March. Southwest has also confirmed its Board of Directors has authorized a discretionary, incremental profit-sharing accrual for employees, estimated to be in the region of US$125 million and which is tied to the projected reduction in operating income for 2019 as a result of the MAX groundings.
Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “Our People have done an incredible job managing through the MAX groundings, while providing the highest levels of Customer Service and one of the best operational performances in our history. On behalf of the Southwest Board of Directors, we are grateful to our employees for their extraordinary efforts throughout the year and are pleased to share proceeds from our recent agreement with Boeing.”
According to a Southwest press release, the incremental profit-sharing award will be funded as part of the Company’s annual 2019 profit sharing distribution in 2020, in accordance with normal Profit-sharing Plan policies and Board of Director approval. The Company plans to provide 2019 profit-sharing details early next year, including the percentage each eligible Southwest employee will receive. Southwest expects to account for most 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.
