Alaska Airlines has received $160 million in initial compensation from aircraft manufacturer Boeing during the first quarter of 2024 after a plug door blowout that took place in January.
Background
The carrier said its Q1 results have been significantly dampened by the incident, after images of the gaping fridge-sized hole left in the plane’s fuselage just after take-off from Portland International went viral. The plane was forced to make an emergency landing and no one was harmed.
Nearly 200 Boeing 737 MAX 9s were then grounded worldwide by the US Federal Aviation Administration (FAA) for safety inspections. The National Transportation Safety Board reported that there were four bolts missing from the MAX 9 in question and has not closed its investigation. The FAA continues to hold Boeing to heightened auditing. Meanwhile, the FBI has written to passengers on the flight’s manifest to let them know the flight could be investigated as a possible crime.
Compensation
Alaska has said as a result of the incident and grounding it has lost around $160 million in first-quarter pretax profit. The compensation from Boeing would cover losses “primarily comprising lost revenues, costs due to irregular operations, and costs to restore our fleet to operating service,” the filing to the US Securities and Exchange Commission said.
Boeing CFO Brian West made the compensation payment common knowledge during the Bank of America Industrials March Conference when he referred to “customer consideration that is going to manifest itself in the quarter.” West told delegates that Boeing would make good their customer relationships, saying, “”We’ve got to take care of that and we’re well down the road to do that. And we continue to stand behind our customers with that responsibility.”
Changes at Boeing
As well as the current agreement and further as yet undisclosed compensation payments, Boeing is dealing with its reputational disaster by attempting to show that it is instigating cultural change after a series of safety incidents involving its aircraft.
Whistleblowers had already accused the manufacturer of rushing to complete orders and failing to carry out essential checks. Since the blow out, Boeing has committed to transparency in dealing with the problems. CEO Dave Calhoun has announced he will make his departure at the end of 2024 and the company has overhauled its years-long incentives system from one rooted in financial targets to one based on safety and build quality.
