Alaska Airlines and United Airlines are facing financial difficulties in the first quarter of 2024 following the door-plug blow-out on Alaska Airlines flight 1282 and the grounding of all Boeing 737 Max 9 jets for several weeks, leading to substantial disruptions. During Alaska’s first-quarter earnings call on April 18, CEO Ben Minicucci addressed the impact of this event, describing how it affected the company’s otherwise strong performance.
The grounding caused Alaska Airlines a $162 million loss after a rapid depressurization event on a 737 Max 9, tearing a hole in the aircraft’s fuselage during takeoff from Portland. This loss forced the airline to cancel between 110 and 150 daily flights, resulting in a $132 million loss during the first quarter. The Federal Aviation Administration (FAA) grounded most of the global 737 Max 9 fleet for about a month following the incident.
Boeing compensated Alaska Airlines with $160 million in the first quarter, covering most of the financial losses due to the grounding. Despite this, Alaska would have made a “small profit” if not for the grounding-related losses. CFO Shane Tackett noted that with the grounding behind them, Alaska expects an improved outlook for the rest of the year. The grounding’s ripple effect also caused Boeing to face heightened scrutiny over safety and production quality.
United Airlines’ Struggle with the 737 Max 9 Grounding
Similarly, United Airlines experienced setbacks due to the grounding of its 79-strong fleet of 737 Max 9s, which resulted in a $200 million hit to its quarterly profits. United’s Chief Commercial Officer, Andrew Nocella, stated that without the grounding, the airline would have likely reported a profit in the first quarter.
Due to Boeing’s certification delays and FAA-mandated capacity restraints, United had to alter its fleet plan, converting 110 orders for Max 10s to Max 9s. The airline also signed deals to lease 35 new Airbus A321neos to offset the expected delay in Max 10 deliveries. United’s cost per available seat mile will be affected throughout 2024 due to the reduced capacity.
Alaska Airlines’ capacity growth will be limited to under 3% for the full year of 2024 because it no longer expects 23 previously planned 737 Max deliveries due to Boeing’s capacity restraints. The airline’s leadership team emphasizes the importance of quality control in Boeing’s manufacturing processes to ensure reliability and safety.
Expanding Into New Markets
Alaska Airlines continues to eye expansion, especially with its proposed $1.9 billion acquisition of Hawaiian Airlines. Although the US Department of Justice has requested more information on this merger, Alaska remains optimistic, calling the deal “pro-competitive” and “pro-consumer.” The acquisition would give Alaska Airlines a more substantial foothold in the Asia-Pacific region and the Hawaii-to-mainland-USA market.
Alaska and United Airlines faced challenging first quarters due to the grounding of their Boeing 737 Max 9 fleets. Despite these setbacks, both airlines remain hopeful about their long-term prospects, with adjustments to fleet plans and potential acquisitions indicating a focus on future growth.
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