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The depths of the 737 MAX crisis wears on Southwest Airlines

Premium Analysis

The unprecedented grounding of the Boeing 737 MAX will reach its one year anniversary in Mar-2020 and with no clear certainty for the aircraft’s re-entry date, the MAX’s largest operator, Southwest Airlines, has removed the jets from its schedule through mid Apr-2020. Boeing's 17-Dec-2019 announcement it will cease production of the MAX in the new year has done nothing to reduce the uncertainty.

Publicly, Southwest has displayed a level of patience with Boeing, but the challenges it has faced with the aircraft’s grounding are formidable, including a reduction in its operating income through 3Q2019 of more than USD400 million. 

The deficit of MAX aircraft at Southwest is now at 68 aircraft, including the 34 aircraft that have been grounded since Mar-2019. And while the airline has recently reached a deal with Boeing on partial compensation for financial damages stemming from the MAX’s grounding, the overhang from the forced removal of the aircraft from service will remain firmly in place well into 2020, including cost headwinds and network and scheduling headaches prolonged by the aircraft continuing to remain idle. 

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