By Kyle Arnold / The Dallas Morning News
DALLAS — The grounding of Boeing’s 737 Max cost American and Southwest airlines nearly $1.4 billion in lost operating profits in 2019 and the pain isn’t over yet.
Boeing is now estimating the plane’s return no earlier than the middle of 2020, a timeline airline executives aren’t exactly confident in. While outlining their fourth-quarter earnings Thursday, leaders at American and Southwest talked about how the continued shortage of planes is disrupting the airline industry.
• Dallas-based Southwest lost “6 to 7 million passengers” in 2019, CEO Gary Kelly said. Even with a settlement from Boeing, Kelly was clear the airline is losing opportunities because of its smaller fleet. “What’s more concerning to me is that we were not able to grow,” he said.
• Fort Worth-based American canceled 10,000 flights in the fourth quarter: Expect that to continue on, especially as summer travel season approaches.
• Planes are more full than ever. American pushed its load factor to 84.7% last year. At Southwest, it was up to 83.5%. Load factor is the industry term for what percentage of seats on a plane are occupied. “It was the highest load factor the company has ever had in its history,” said American senior vice president of revenue management Don Casey.
• Boeing’s 737 Max delay announcements are still a surprise: After saying just last week that Southwest and American would take the 737 Max off schedules until June, Boeing announced Tuesday that the Max probably won’t be certified to fly again until the summer. Both airlines say they’ll need a few weeks or months after the certification to get the plane ready for commercial flying. “Boeing surprised us all with their June/July predictions about the ungrounding,” Kelly said. “That would make ours, and other airlines’, ungrounding dates undoable.”
• The airline industry is a bigger polluter without the Max. “It’s important to get that airplane back in service because it consumes 15% less gas,” Kelly said.
• It’s causing a cash crunch. At the end of December, American got a revolving line of credit for an additional $400 million, attributing the need to uncertainty around the Max.
• Southwest still took a profit hit. Kelly told CNBC Thursday that if Southwest had the Max during the fourth quarter, its net earnings would have been about 28% higher.
• Southwest is changing the way it flies. The airline is pulling back on long-haul flying, such as transcontinental routes, and resorting to its historical short-hop strength. “We’ve cut some of our long-haul flying,” said Southwest president Tom Nealon. “In no way do we desire to walk away from long-haul flying, but with the strength of our point-to-point network, we have the ability to do that when we need.”
When the Max was grounded in March 2019, Southwest had 34 of the aircraft in its fleet and American had 24. Both were expecting to receive additional planes last year.