Southwest Airlines (LUV) announced that it recently reached a confidential agreement with Boeing (BA) to compensate Southwest for a portion of projected financial damages related to the grounding of the airline’s Boeing 737 MAX aircraft. In light of this agreement, the Southwest board has authorized a discretionary, incremental profitsharing accrual for employees, which is tied to the projected reduction in operating income for annual 2019 due to the MAX groundings. The company currently estimates this incremental profitsharing accrual to be approximately $125M. This incremental profitsharing award will be funded as part of the company’s annual 2019 profitsharing distribution in 2020, in accordance with normal ProfitSharing Plan policies and board approval. The company plans to provide 2019 profitsharing details early next year, including the percentage each eligible Southwest employee will receive. The company continues to engage in ongoing discussions with Boeing regarding compensation for damages related to the MAX groundings. The details of these discussions and the settlement with Boeing are confidential. While still evaluating the applicable accounting principles, the company currently expects to account for substantially all of the compensation as a reduction in cost basis of both existing and future firm aircraft orders, which will reduce depreciation expense in future years. The Boeing 737 MAX fleet has been grounded since the FAA’s order was issued on March 13. Southwest Airlines continues to monitor information from Boeing and the FAA on the impending 737 MAX software enhancements and training requirements. “The airline remains confident that, once certified by the FAA, the enhancements will support a safe return of the 737 MAX aircraft,” Southwest stated.