Southwest pulls Boeing Max jets until March, nearly a year after grounding

By Tracy Rucinski and David Shepardson

CHICAGO/WASHINGTON (Reuters) - Southwest Airlines <LUV.N> said on Friday it is extending Boeing 737 MAX cancellations until March 6, 2020, just shy of the one-year anniversary of an Ethiopian Airlines crash of the jet that led to a worldwide grounding.

Southwest, the world's largest 737 MAX operator and which has bet its entire growth strategy on Boeing's newest single-aisle aircraft, had previously canceled all its 737 MAX flights until Feb. 8. But Boeing Co <BA.N> is facing increasing hurdles in winning approval to return the plane to service before the end of this year as it has targeted.

Southwest cited "continued uncertainty around the timing of MAX return to service" in its decision to extend cancellations by another month, the longest delay for any U.S. carrier.

United Airlines <UAL.O> and American Airlines <AAL.O>, the other two U.S. operators of the jet, have cancelled their 737 MAX flights into January.

Reuters reported this week that U.S. and European regulators will need to return to a Rockwell Collins facility in Iowa to complete an audit of Boeing's software documentation after regulators found gaps and substandard documents. Boeing has confirmed it must submit revised documentation.

That has thrown into question when Boeing can complete a certification test flight. The Federal Aviation Administration has said it would not unground the planes until 30 days after that flight occurs. Two U.S. officials told Reuters it is extremely unlikely -- if not impossible -- that Boeing will be able to win approval to return flights to service before the end of December.

Southwest said that any changes to current estimates of when 737 jets will be allowed to return to service could lead to flight cancellations beyond March 6, as well as further delays in aircraft deliveries and additional financial damages.

As of now, the company is cancelling about 175 daily flights as it operates a slimmer fleet. Southwest had 34 MAX jets at the time of the March 13 grounding and was expecting delivery of another 41 jets this year.

The company has had discussions with Boeing regarding compensation for damages due to the MAX groundings, but said on Friday that no conclusions have been reached. Southwest's chief executive, Gary Kelly, has repeatedly said he is "not happy" with the MAX situation.

As a result of the extended cancellations, Southwest said it was unable to provide an update on first-quarter capacity guidance at this time.

The 737 MAX, Boeing's best-selling plane, has been grounded since March after crashes in Indonesia and Ethiopia killed 346 people.

(Reporting by Tracy Rucinski in Chicago and David Shepardson in Washington; Editing by Leslie Adler)