Monday, 16 December 2019

Southwest Airlines says it will share proceeds from Boeing agreement with staff

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Southwest Airlines has recently reached an agreement with Boeing for compensation related to the grounding of the airline’s fleet of Boeing 737 Max aircraft.

In light of this agreement, which has been kept under wraps and secret, the Southwest Board of Directors has decided to put some of the cash into the firm's profit-sharing plan for staff. The Company currently estimates this incremental profitsharing accrual to be approximately $125 million.

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.”

This incremental profit-sharing award will be funded as part of the Company’s annual 2019 profit-sharing distribution in 2020, in accordance with normal ProfitSharing 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 continues to engage in ongoing discussions with Boeing regarding compensation for damages related to the 737 Max groundings. Of course, the discussions and the settlement with Boeing are confidential. While still evaluating the applicable accounting principles, the Company currently expects to account for substantially all 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.

The Boeing 737 Max fleet has been grounded since the Federal Aviation Administration’s (FAA) order was issued on March 13, 2019. Southwest Airlines continues to monitor information from Boeing and the FAA on the impending 737 Max software enhancements and training requirements. The airline remains confident that, once certified by the FAA, the enhancements will support a safe return of the 737 Max aircraft.

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