Multiple airlines are striking compensation deals with Boeing following 737 Max grounding

on Jan 3, 2020
Updated: Mar 11, 2020
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  • Turkish Airlines reportedly struck a compensation deal worth $225 million with Boeing.
  • The Boeing Company bore a loss of $9 billion in 2019 following 737 Max grounding.
  • Southwest Airlines also finalized a confidential deal with Boeing that covers for $850 million of its estimated loss.
  • European TUI Airways also announced the ongoing negotiations with the Boeing Company.
  • Boeing fired its CEO Dennis Muilenberg towards the end of 2019.

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Boeing Co. has finalized a compensation deal with Turkish Airlines regarding the 737 Max, an aircraft that was suspended for commercial flights after two fatal crashes that killed 346 people in five months. While an official figure is yet to be announced, a local Turkish Newspaper, Hurriyet, claims the deal to be valued at $225 million.

The amount is broken down into $150 million to compensate for the losses and an additional $75 million to pay for spare parts, training, development, etc.

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Two Fatal Crashes Cost The Boeing Company $9 Billion In Losses

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The Indonesian and Ethiopian crashes that killed 346 people have cost a total of $9 billion in losses to the Boeing Company. Manufacturer’s flagship 737 Max jetliners have been grounded since March 2019 following the second crash.

As per the analysts, it is hard to put the finger on the total loss that the Turkish Airlines will have to bear due to Boeing’s investigation and is largely dependent on when the aircraft returns for commercial flights.

Richard Aboulafia, the VP of Analysis and Aviation Consultation Teal Group said that the deal points at two possible scenarios: either Turkish Airlines is immensely hopeful of the ban on the Boeing 737 MAX to lift soon or it has found an alternative to handle capacity losses.

As per the deal, one-third of the compensation is also set aside for services in the future. Hence, the costs are spread out over a period of time for Boeing, reducing its burden.

Southwest Airlines Also Faced $830 Million In Losses

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Turkish Airlines had originally ordered seventy-five 737 MAX. Twelve of those aircraft were reportedly delivered before the crashes and twelve have been due since, but could not be delivered.

Reports in December suggested that Turkish Airlines was going to court against the Boeing Company to recover its losses. As per the sources, however, Turkish Airlines is not the only company seeking losses.

Apparently, Southwest Airlines Co. has also reached a confidential agreement with Boeing that covers for a part of its estimated $830 million loss in 2019 due to grounding of 737 Max jetliner. Moreover, the European TUI airline also announced ongoing negotiations with Boeing to recover its losses.

TUI claims losses that amount to $328.69 million for last year and a projected €400 million in 2020. The exact figure, however, is largely dependent on when the jetliner returns for commercial flights.  

Due to the rising complications and the CEO’s incapacity to contain the damage, Boeing fired its CEO Dennis Muilenberg towards the end of last year. 737 Max production has also been halted until the final word from the FAA is not received.

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