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Alaska Airlines says the grounding of some Boeing planes will cost the airline $150 million

By DAVID KOENIG, AP Airlines Writer
Published: January 25, 2024, 8:50am

DALLAS (AP) — Alaska Airlines said Thursday that the grounding of its Boeing 737 Max 9 jetliners will reduce full-year profit by $150 million and slow down the airline’s planned growth.

The planes have been grounded since shortly after the midflight blowout of a panel in the side of an Alaska plane over Oregon on Jan. 5.

Federal regulators announced late Wednesday that they approved an inspection process that, if followed by airlines, can allow Max 9s to resume flying. Alaska hopes to begin doing that on Friday and gradually bring back all 65 of its Max 9s by early February.

Alaska — which operates an all-Boeing 737 fleet — said it has started a review of Boeing’s production quality. The airline, however, is not breaking up with the troubled aircraft maker.

“Until this incident, we were happy with the Max,” said CEO Ben Minicucci, “but we are going to hold Boeing’s feet to the fire to make sure that we get good airplanes out of that factory.”

Alaska officials said some customers have booked flights on other airlines since flight 1282, but they portrayed the impact as limited and short-term. They did not provide numbers.

“I think at first, people will have some questions, some anxiety, just like they did” after two crashes involving Boeing Max 8s that forced Boeing to get the plane re-certified, Minicucci said, “but I believe over time the confidence will get back into this airplane.”

The Alaska CEO and his counterpart at United Airlines — frustrated that the Max 9 grounding forced them to cancel hundreds of flights — used stronger language to blast Boeing earlier this week. American Airlines CEO Robert Isom chimed in on Thursday, calling Boeing’s safety issues “unacceptable.”

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“Boeing needs to get their act together,” he said on a call with analysts and reporters. “All of Boeing needs to come together and to get back on the right track.”

Alaska detailed the financial fallout from the Boeing safety issue while reporting fourth-quarter financial results.

Earlier this week, United — the only U.S. carrier besides Alaska to operate the Max 9 — said it expects to lose money in the first quarter because of the grounding.

On Thursday, both Alaska and Southwest Airlines said they will receive fewer new planes than they expected this year because of ongoing production problems at Boeing.

Southwest has ordered more than 300 Boeing 737 Max 7 jets, which will be the smallest of the Max lineup, but Boeing is already behind schedule in gaining regulatory approval for the plane. That process will likely be pushed back even further by the new round of the safety concerns over the Max 9 and Boeing’s quality issues.

Some lawmakers in Congress oppose a Boeing request for the FAA to certify the Max 7 before Boeing fixes an anti-ice system on the plane. The same problem exists on current Max 8s and 9s. The FAA let airlines keep using those planes while reminding pilots to limit use of the anti-ice system in some conditions.

Airline financial reports on Thursday showed that the carriers are struggling under the pressure of higher labor costs.

Alaska posted a $2 million loss in the fourth quarter, compared with a $22 million profit a year earlier. Revenue rose 3%, to $2.55 billion.

The Seattle-based carrier forecast full-year 2024 adjusted earnings of $3 to $5 per share.

American saw its profit drop sharply and forecast that it will lose money in the first quarter of 2024. American earned $19 million in the fourth quarter, down from $803 million a year earlier.

Excluding one-time items, mostly contract-ratification bonuses for pilots, the airline said adjusted profit was 29 cents per share. Analysts expected American to earn 11 cents per share, according to a FactSet survey.

Revenue declined 1%, to $13.06 billion, slightly higher than analysts had forecast.

The Fort Worth, Texas-based airline said it expects to lose between 15 cents and 35 cents per share in the first quarter, typically the slowest travel period of the year. However, American forecast that it will earn between $2.25 and $3.25 per share for all of 2024.

“Demand remains strong, and we have seen robust bookings to start the year,” Isom said.

Southwest lost $219 million in the fourth quarter, nearly identical to its results in the same quarter a year earlier. Excluding one-time costs, mostly tied to a new contract with pilots, the airline said adjusted earnings were 37 cents per share.

Wall Street expected Southwest to earn 12 cents per share.

Revenue increased more than 10%, to $6.82 billion, beating analysts’ forecast and setting a record for the Dallas-based carrier.

In afternoon trading, shares of American Airlines Group Inc. rose 9%, and Alaska Air Group Inc. gained 4%, but Southwest Airlines Co. fell less than 1%. The stock market rallied on a report of stronger-than-expected economic growth in the fourth quarter.

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