United Airlines is projecting a first quarter loss in 2024, which it blames on the grounding of the Boeing 737 MAX 9. Even so, compensation from Boeing might impact final numbers.
United Airlines: Boeing 737 MAX 9 Will Result In Q1 Loss
After the Alaska Airlines Flight 1282 incident on January 5, 2024 the US Federal Aviation Administration grounded the Boeing 737 MAX 9. United has 79 of these aircraft in its fleet, which is more than any other carrier, and had to adjust schedules and cancel hundreds of flights as a result.
Citing this grounding in an SEC filing, United expects to lose between 35 and 85 cents per share for the first three months of 2024.
For the first quarter 2024, the Company estimates that the Boeing 737 MAX 9 grounding will have an impact of approximately 3 percentage points of incremental CASM-ex based on the fleet being grounded January 6, 2024 through January 31, 2024.
CASM refers to the cost, per mile, for an airline to fly one seat. CASM-ex is calculated as cost or operating expense per available seat mile (“CASM”) excluding fuel expense, profit sharing, third-party business expenses, and special charges.
But will United actually absorb all this loss? To this point, United has not publicly addressed any possible compensation with Boeing over the latest MAX debacle. Potential compensation may not erase the loss, but could ease it.
Despite the rough first quarter, United has revised its profit estimates for all of 2024 and now predicts profit of $9-11 per share. That rosier-than-expected estimate has pushed its stock up more than 6% in pre-market trading.
United also revised its Q4 2023 earnings upward. Despite net income down almost 30% from a year ago ($600 million), its $13.63 billion in revenue was up 10%. Revised earnings of $2.00 share were better than the $1.69/share expected.
Later today, United Airlines will hold an earnings call and we will be listening and providing analysis tomorrow of any noteworthy remarks from CEO Scott Kirby or the C-Suite.
Summary of domestic flights : Uncivil passengers and ground staff … Overcrowding of dog-breath people and heavy carry-ons … Overpricing … A descent from the past . And , of course , management’s most urgent priorities are profit reports for Wall Street .
I wonder how it’s determined how much compensation Boeing will pay to the affected airlines.
Is it a formula looking at how many flights were canceled. Is consideration given to how much pax inconvenience and extra work is created to adjust to the grounding?
Is there extra given just as general compensation?
I wonder if it’s all arranged in advance in the purchase contract or negotiated as it happens.