Alaska Air says Boeing paid it $160 million in compensation for MAX 9 grounding

WASHINGTON (Reuters) -Alaska Air Group said on Thursday that Boeing had paid about $160 million to the airline in the first quarter as initial compensation to address the hit from the temporary grounding of 737 MAX 9 jets.

The payment is equivalent to lost profits in the quarter, the carrier said in a filing, adding it expects additional compensation.

Alaska shares rose 4.4% on the news. Boeing shares were up almost 1%.

An Alaska Airlines-operated MAX 9 jet experienced a mid-air cabin panel blowout in January, which led the Federal Aviation Administration to ground 171 jets for about three weeks.

“Although we did experience some book away following the accident and 737-9 MAX grounding, February and March both finished above our original pre-grounding expectations,” Alaska said.

The airline had earlier planned to include the payment in its results but will exclude the compensation from first-quarter adjusted loss per share, which is expected to be $1.05 to $1.15.

In response to questions about the payment, Boeing referred to comments by CFO Brian West made last month. He said Boeing payments to customers stemming from the Jan. 5 incident, known as customer consideration, would be included in Boeing first-quarter earnings.

Alaska and United Airlines bore the brunt of the 737 MAX 9 aircraft grounding after the panel blowout sparked a manufacturing and reputational crisis at Boeing and supplier Spirit AeroSystems.

Reuters reported on Wednesday that Boeing’s 737 MAX production has fallen sharply in recent weeks, which is expected to ripple through the airline industry.

Last month, Alaska said its 2024 capacity plans were in flux due to the Boeing crisis. The carrier does not expect to get all of the 47 deliveries from the planemaker planned over the next two years, Alaska CEO Ben Minicucci has said.

The aviation industry’s other major aircraft supplier Airbus SE is sold out until the end of the decade for single-aisle jets.

(Reporting by Abhijith Ganapavaram in Bengaluru and David Shepardson in Washington; Editing by Shinjini Ganguli, Sriraj Kalluvila and Cynthia Osterman)