American staff gain $US30 million from 737 MAX deal

January 07, 2020

American Airlines staff are the latest to be compensated for Boeing’s 737 MAX woes after the US carrier announced Monday it had reached a confidential compensation deal.

A portion of the financial settlement with Boeing will be returned to the airline’s staff through an additional $US30 million accrual in the company’s 2019 profit-sharing program.

The payment will be distributed in March 2020 and will be based on American’s estimate of the financial damage incurred by the grounding of its MAX fleet in full-year 2019.

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There is still no date for when the troubled airliner will return to service and American has taken the MAX out of its schedule until April 7.

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Recent US media reports have suggested Boeing also faces a wiring issue with the plane and that US regulators are rethinking their position on requiring additional simulator training for MAX pilots.

However, there was no indication in Monday’s statement that American was joining rival United Airlines in removing the grounded aircraft from schedules until June.

“Despite the ongoing challenges the grounding has brought, American Airlines team members continue to do an incredible job caring for our customers,”  American chief executive  Doug Parker said in the announcement.

“Our ability as an airline to weather these unprecedented times is thanks to our phenomenal team, and it was important to us that we get a deal done before the end of the year.

“On behalf of the Board of Directors, we are proud to take the step of including this compensation in our 2019 profit-sharing program, even though the compensation will be received over several years.”

The global MAX fleet has been grounded since March after flight control software in the plane was linked to two fatal crashes.

Boeing has reached compensation deals with a number of airlines amid reports in The Wall Street Journal that it is considering tapping debt markets as well as deferring capital expenditures, freezing acquisitions and cutting R&D spending to preserve cash.

Southwest Airlines, Aeromexico and Turkish Airlines are among those to announce deals.

American said it currently did not expect any material financial impact from the agreement to affect its fourth-quarter 2019 earnings.

“The company anticipates accounting for substantially all of the compensation as a reduction in cost basis of grounded MAX aircraft and certain future MAX aircraft deliveries,” it said.

“American will continue its conversations with Boeing regarding compensation for damages related to the MAX grounding beyond 2019, and any future compensation will be similarly shared with its team members.”