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Business

United blames $200M earnings hit on fallout from Boeing’s midair door blowout

By
Shannon Thaler
Published April 17, 2024, 10:21 a.m. ET

United Airlines suffered $200 million in losses during the first quarter — which it blamed on Boeing’s grounding of its 737 MAX 9 planes in the wake of its disastrous midair fuselage blowout.

Chicago-based United — which had to cancel hundreds of flights as a result of the three-week grounding — said it would have reported a quarterly profit without the disruption, The Guardian earlier reported.

Still, United said it “continues to expect full-year 2024 adjusted diluted earnings per share of $9 to $11” — in line with the $9.14 per share FactSet analysts are expecting of the airline’s annual earnings.

The airline has also “made several adjustments to its long-term fleet strategy,” including swapping its Boeing MAX 10 aircraft orfers to Boeing MAX 9s from 2025 through 2027, it said on Tuesday.

United Airlines Boeing 777-200 aircraft taking off from Amsterdam Schiphol Airport, passing an air traffic control tower
United Airlines said in its latest earnings report that the $200 million in losses it suffered in Q1 was because Boeing grounded its 737 MAX 9 planes for three weeks. NurPhoto via Getty Images

United has also ensured that it has “the right to convert more Boeing MAX 10 into MAX 8 or MAX 9 as needed.”

Representatives for United did not immediately respond to The Post’s request for comment.

Boeing’s 737 MAX jets are most widely used by United, Southwest Airlines and Alaska Airlines, which was operating the Boeing plane that experienced a door blowout at 16,000 feet on Jan. 5.

In the wake of the incident — which has since escalated into a full-blown safety and reputational crisis for Boeing — the Federal Aviation Administration delayed certification of the MAX 10 models, the largest in its family of 737 MAX aircraft, and barred the plane maker from expanding production of its best-selling 737 MAX narrowbody jets.

After news of the delays in February, United’s chief financial officer Mike Leskinen said the carrier was “deeply disappointed” with Boeing over the hold up in the delivery of its new MAX 10 aircraft — specifically as it threw a wrench into the airline’s growth projections.

The CFO added that the delays have raised questions about the carrier’s ability to expand its domestic capacity by almost 30% by 2026 under its “United Next” plan.

United was counting on an upgraded fleet that would include 277 MAX 10 jets.

In addition, it had already slashed its 2024 forecast for MAX 8 delivery from Boeing from 43 to 37, and said it expects to receive 15 fewer MAX 9s this year.

United is so reliant on Boeing that it revealed plans to pause pilot hiring in May and June until aircraft deliveries from Boeing resume, though that timeline remains unclear.

Boeing logo on the property in El Segundo, Calif. with a mention of financial compensation to Alaska Airlines over a fuselage blowout incident
Boeing has paid Alaska Airlines roughly $160 million for financial damages related to the fuselage blowout that occurred earlier this year, according to a regulatory filing. AP

The airline took it a step further earlier this month, when it was even asking its pilots to take voluntary unpaid leave in May because of delays in Boeing deliveries, according to a memo sent to pilots.

The voluntary pilot leave programs could possibly extend into summer and fall.

It wasn’t immediately clear what incentives, if any, United was giving pilots to take a month-long leave from work.

United isn’t the only airline to suffer from Boeing’s delivery delays: Alaska Airlines said in a regulatory filing that it lost “approximately $160 million” in its first quarter in pretax profit, “primarily comprising lost revenues, costs due to irregular operations and costs to restore our fleet to operating service.”

The filing with the Securities and Exchange Commission added that the $160 million cash was “equivalent” to what the airline lost from the “terrifying” incident on Jan.5.

Damaged fuselage of Alaska Airlines Flight 1282, with a gaping hole from a door blowout at 16,000 feet, taken by the National Transportation Safety Board
On Jan. 5, Alaska Airlines Flight 1282 experienced a door blowout at 16,000 feet. AP

Boeing, however, has since agreed to give Alaska Airlines roughly $160 million as an “initial payment” for “financial damages” resulting from the flight that experienced a midair door blowout.

Boeing is also “expected” to provide “additional compensation” in the future, per the documents, though it wasn’t immediately when or how much more the airplane manufacturer would be handing over — or when.

Southwest Airlines, which exclusively flies Boeing 737 planes, will also hire 50% fewer pilots and 60% fewer flights attendants than it originally planned to in 2024, CNN earlier reported.

The drastic reduction is a response to Boeing’s plans to cut deliveries to Southwest by roughly 40% and trim capacity from earlier plans, offering about 1 percentage point fewer seats than it had planned.