Boeing ordered to pay out $2.5bn over 737 Max conspiracy

Boeing 737 Max airline customers will receive $1.77 billion as part of ongoing compensation efforts to cover financial losses from the grounding of the new generation aircraft.

The sum is part of a $2.5 billion agreement to settle a US criminal charge that the US manufacturer hid information from safety authorities about the design of the 737 Max.

The agreement with the US Department of Justice resolves an investigation into the Boeing relating to the evaluation of the 737 Max by the Federal Aviation Administration.

Boeing will pay a penalty of $243.6 million and provide $500 million in additional compensation to the families of those lost in the Lion Air and Ethiopian Airlines crashes which killed 346 people in 2018 and 2019.

The deal also includes a commitment to provide $1.77 billion to Boeing’s airline customers as part of the company’s efforts to compensate those customers for financial losses resulting from the grounding of the 737 Max.

The DoJ said in a ruling on the fraud conspiracy on Thursday that company employees “chose the path of profit over candor” by concealing information about the 373 Max from the FAA and “engaging in an effort to cover up their deception”.

Justice Department acting assistant attorney general David Burns said: “The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers.

“This resolution holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and hopefully provides some measure of compensation to the crash victims’ families and beneficiaries.”

US attorney Erin Nealy Cox for the northern district of Texas added: “The misleading statements, half-truths and omissions communicated by Boeing employees to the FAA impeded the government’s ability to ensure the safety of the flying public.”

As part of Boeing’s resolution, the DoJ has agreed to defer prosecution of the company, provided that Boeing abides by obligations in a three-year deferred prosecution agreement, after which time the charge will be dismissed.

Boeing admitted in court documents, that two of its 737 Max flight technical pilots deceived the FAA about Manoeuvring Characteristics Augmentation System (MCAS) that impacted the flight control system of the aircraft.

“Because of their deception, a key document published by the FAA  lacked information about MCAS, and in turn, airplane manuals and pilot-training materials for US-based airlines lacked information about MCAS,” the DoJ said.

The agreement is based on the conduct of the two former Boeing employees and their intentional failure to inform the FAA about changes to the (MCAS).

Boeing admitted that the FAA was not fully informed about MCAS’s expanded operating range when it made its training determinations for the Max.

“While focusing on the conduct of these two former employees, the agreement recognises that other Boeing employees did inform other officials and organisations within the FAA about MCAS’s expanded operating range in connection with the certification of the 737 Max,” Boeing said.

The company’s chief executive David Calhoun said in a note to employees: “I firmly believe that entering into this resolution is the right thing for us to do – a step that appropriately acknowledges how we fell short of our values and expectations.

“This resolution is a serious reminder to all of us of how critical our obligation of transparency to regulators is, and the consequences that our company can face if any one of us falls short of those expectations.”

Boeing has taken a $743.6 million charge to earnings in connection with its commitments under the agreement.

Share article

View Comments

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.