The Impact of 737 Max 9 Grounding on Alaska Airlines

The Incident and its Aftermath

The aviation industry was rocked by a significant incident on January 5 when an Alaska Airlines plane experienced a catastrophic event, resulting in a gaping hole in the aircraft's fuselage. This incident led to the grounding of all 737 Max 9 jets by the Federal Aviation Administration, causing widespread concern and financial implications for airlines with these aircraft in their fleets.

A building owned by Boeing that was the Commercial Airplanes headquarters is seen in Renton, Washington, U.S., May 14, 2021. REUTERS/Karen Ducey

For Alaska Airlines, the grounding of its 737 Max 9 fleet is projected to cost the airline approximately $150 million. This financial impact is substantial for an airline of Alaska's size, especially considering the company's adjusted income of $38 million in the final quarter of the previous year and $583 million for the entire year. The unexpected nature of this incident and its aftermath has raised significant challenges for the airline, both financially and operationally.

Operational Challenges and Recovery Efforts

The aftermath of the 737 Max 9 grounding has presented Alaska Airlines with numerous operational challenges. The airline, which has the second-largest fleet of 737 Max 9 jets, has been working closely with regulatory authorities to ensure comprehensive inspections and reviews of its grounded aircraft. Alaska Air has announced that the first of its grounded jets will be returning to service, with a planned gradual reintroduction as each aircraft is deemed airworthy.

In an interview, Alaska Airlines CEO Ben Minicucci revealed that the airline's inspections uncovered issues with loose bolts on many Boeing 737 Max 9 aircraft. This discovery emphasizes the importance of thorough inspections and highlights the complexity of the recovery process for the airline.

Industry-wide Ramifications and Future Outlook

The impact of the 737 Max 9 grounding extends beyond Alaska Airlines and United, the only US airlines with this jet in their fleets. Southwest Airlines has also experienced repercussions, with a reduced expectation of 737 Max deliveries due to certification delays. American Airlines CEO Robert Isom expressed concerns about Boeing's product quality and emphasized the need for the aircraft manufacturer to address the challenges effectively.

Despite the financial setback caused by the grounding, Alaska Airlines remains optimistic about its future profitability. The airline anticipates a full-year profit but acknowledges the potential impact on its 2024 earnings. Analysts' projections indicate a challenging first quarter, with expectations of a loss. The broader implications of the 737 Max 9 grounding underscore the need for sustained industry collaboration and vigilance in addressing aviation safety concerns.