Southwest will cancel thousands of flights as Boeing 737 Max’s fate remains uncertain

Southwest Airlines will extend cancellations of Boeing 737 Max flights until mid-April, the company said Tuesday, amid ongoing uncertainty about when the aircraft will be allowed to return to service.

Southwest, which is the nation's largest 737 Max customer, will be pulling approximately 300 flights a day from a peak-day schedule in excess of 4,000 flights, the airline said in a news release. Customers who have booked these flights will be notified and reassigned to other planes. Last week, American Airlines extended its 737 Max cancellations until early April, after the Federal Aviation Administration said it wouldn't approve the aircraft's return for the remainder of 2019.

"Taking planes out through April means you'll miss the spring break hump, which is a peak period of flying," said David Vernon, a senior analyst with Sanford C. Bernstein. "When you think about the revenue implications of missing spring break and flying a lower schedule, that's not great."

The 737 Max has been grounded worldwide since March, under scrutiny after two crashes within five months that killed 346 people. Since the grounding, Boeing has continued producing the jets at a cost of $1.5 billion each month, in hopes the FAA would sign off on their return to use. But Boeing announced Wednesday that it was halting production on the 737 Max indefinitely starting in January, a stoppage that could ripple throughout the economy and jeopardize tens of thousands of manufacturing jobs.

A Southwest spokesperson said the decision to extend the Max cancellation was unrelated to Boeing’s halting production of the jetliner, as the airline has been evaluating the situation on a rolling 30-day basis.

Southwest's success has been tethered to the 737 Max for decades: the aircraft's large size and fuel efficiency helped Southwest evolve from a local Texas airline to the nation's largest domestic air carrier.

“While other airlines turned toward the hub-and-spoke model, Southwest went down the path of trying to build a higher-capacity bus service between major cities, and the range and fuel efficiency of the 737 allowed them to do that in a way they probably wouldn’t have been able to with prior aircrafts,” Vernon said. “Their business was kind of invented by the 737 family of aircraft.”

Last week, Southwest reached a confidential settlement with Boeing for some of the financial losses tied to the 737 Max grounding. In October, Southwest reported that the aircraft’s grounding had cost the company $435 million through the end of September. The airline has 34 Max jets in its fleet. Gary Kelly, Southwest’s chief executive, said the carrier would share a portion of the settlement -- roughly $125 million -- with employees through the airline’s profit-sharing plan.

Southwest's pilots union filed a lawsuit against Boeing in October for $115 million in damages, claiming that Boeing "deliberately" misled the group and its members about the safety of the 737 Max. The suit says the grounding resulted in the cancellation of more than 30,000 scheduled flights and financial losses of more than $100 million for the airline's more than 9,700 pilots.

Boeing is the single biggest component of the Dow Jones industrial average. Commerce Secretary Wilbur Ross in August told CNBC that problems with the 737 Max had been big enough to shave 0.4 percent off the entire U.S. gross domestic product for a period this year.

Ross said he expected an uptick when the problems were fixed, but it’s unclear what the impact might be now that Boeing has announced it will halt the jet’s production.

Boeing’s shares closed Tuesday at $327, down from a 52-week high of $446.01.