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Southwest revenue rises despite $ 210 million hit from Boeing 737 Max grounding – CNBC, CNBC

Southwest revenue rises despite $ 210 million hit from Boeing 737 Max grounding – CNBC, CNBC


Southwest Airlines Boeing 737 MAX aircraft are parked on the tarmac after being grounded, at the Southern California Logistics Airport in Victorville, California on March 28, 2019.

Mark Ralston | AFP | Getty Images

Strong travel demand helped liftSouthwest Airlinesrevenue and profit in the third quarter, but the low-cost carrier warned the financial hit from the (Boeing) Max grounding would “grow” into 2020.

The airline is the largest operator of the 737 Max and it had 34 of them in its fleet at the time of the worldwide grounding in mid-March, in the wake of two fatal crashes.

Southwest said the flight ban, the largest ever, cost it $ 210 million in revenue in the quarter, but sales still rose just over 1% to $ 5. 64 billion, in line with analyst estimates. Net income rose 7% to $ 659 million, a third-quarter record. On an adjusted per-share basis, third-quarter earnings came in at $ 1. 23, above analysts’ expectations of $ 1. 08 a share.

The airline’s stock was up close to 2% in premarket trading.

Southwest said the grounding cost it $ 435 million in revenue in the first nine months of the year. The airline added that it expects “the damages to grow into 2020.”

The airline removed the plane from its schedules through Feb. 8, later than any U.S. airline.

The grounding has forced airlines, like Southwest, to curb their growth plans, but the limited capacity has helped boost fares.

Boeing on Wednesday reiterated its forecast for regulators to remove the ban on the planesbefore the end of the year. The manufacturer has developed software changes for the planes after a flight-control system was implicated in the two crashes, but regulators haven’t yet signed off on the fixes.

Southwest’s CEO Gary Kelly warned that even if the FAA lifts the ban before the fourth quarter, the carrier would need one to two months to complete pilot training and other steps to get planes ready for passengers.

“The FAA will determine the timing of MAX return to service, and we offer no assurances that current estimations and timelines are correct,” Kelly said in a release.

Boeing in the second quarter took a $ 4.9 billion after-tax charge to compensate airlines but final amounts are unknown because regulators haven’t yet lifted the grounding.

“We have not reached a settlement with Boeing, and no estimated settlement amounts have been included in our third quarter 2019 results, “Kelly said.

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