Southwest Airlines says it won't fly 737 MAX before January 2020

(AP)

Southwest Airlines it will keep its fleet of 737 MAX planes on the ground until January, and has begun talks with Boeing over compensation to cover the hit from flight cancelations, the airline said Thursday.

Southwest, with its fleet of 34 MAX planes, is the first major US carrier to give up on resuming MAX flights this year, since the plane was grounded worldwide in March following two deadly crashes.

The domestic-oriented US carrier said it could take up to two months to return the MAX to the flight rotation even once the plane is cleared by regulators, in order to comply with Federal Aviation Administration requirements, including additional pilot training.

Boeing said Wednesday it expects to win approval to resume flights around October, but warned it might have to temporarily reduce or halt production of the MAX if the grounding drags on much longer.

The manufacturer has set aside $4.9 billion to compensate its customers.

Southwest said it has taken a $175-million hit to the bottom line in the second quarter due to the MAX crisis, and the airline has had "preliminary discussions" with Boeing on compensation for damages.

"We have not reached any conclusions regarding these matters, and no amounts from Boeing have been included in our second quarter results," Southwest said.

Pulling the MAX from Southwest's fleet delayed plans to expand service to Hawaii, which was one reason the airline to slashed its target for seat capacity. It now expects to see that key benchmark fall by one to two percent this year, rather than growing by five percent as previously expected.

The MAX grounding "put significant pressure" on second quarter costs, and those "penalties" are likely to continue the rest of the year, Southwest said.

The airline will cease operations at Newark International Airport to save money and shift all New York travel to New York LaGuardia Airport.

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