LUV stock is in the green today after Southwest Airlines (NYSE:LUV) announced that it will give $125 million USD in compensation from Boeing (NYSE:BA) to its employees.
Boeing will be paying its customers billions of dollars in compensation in the coming months as a result of the worldwide grounding of its 737 MAX aircraft following two fatal crashes in five months, which killed 346 people. Southwest has more 737 MAX aircraft in its fleet than any other airline in the world, with 34 total, and the grounding has cost the airline approximately $435 million USD as a result of canceled flights and higher fuel costs from using less-efficient aircraft. LUV stock has gained about 1% today.
Because of a profit-sharing plan with employees at Southwest, they would lose out on pay as a result of the grounding even if the airline received compensation. However, Southwest has said that it will add $125 million USD to its profit-sharing pool with money it gets from Boeing. The grounding has also been a contributing factor in a pretty up-and-down year for LUV stock, which has gained nearly 20% since the beginning of the year but is also down from a November peak of $58.07.
“Our people have done an incredible job managing through the Max groundings, while providing the highest levels of customer service and one of the best operational performances in our history,” said Southwest CEO Gary Kelly. “On behalf of the Southwest board of directors, we are grateful to our employees for their extraordinary efforts throughout the year and are pleased to share proceeds from our recent agreement with Boeing.” LUV stock is currently trading for $54.49 following the news.
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Yesterday, it was reported that the 737 MAX grounding will “extend into 2020” after FAA chief Steve Dickinson said that certain processes and milestones in the recertification process were yet to be reached.
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