Last week, commercial aircraft manufacturer Boeing agreed to a $2.5 billion settlement with the United States Justice Department to resolve a criminal investigation related to the two deadly crashes involving the Boeing 737 MAX aircraft.
Federal investigators have been probing the specific role of two Boeing employees who had interacted with the U.S. Federal Aviation Administration (FAA) concerning both the design and the need for additional pilot simulation-based training.
According to multiple reports, the settlement involves a $244 million fine along with $2.3 billion in compensation to customer airlines and families of the victims involved in the two crashes. The aircraft manufacturer was charged with one count of conspiracy to defraud the United States but reportedly will avoid prosecution on this charge, with the provision that the company avoids further legal issues for a period of three years. Boeing reportedly must comply with any further ongoing investigations, including those beyond the U.S., and must supplement compliance programs.
The FAA is further conducting an ongoing civil investigation of the aircraft manufacturer’s activities related to this aircraft.
According to reporting by The Wall street Journal: “The agreement does not require the appointment of an outside compliance or ethics monitor; a move sometimes imposed by prosecutors in major cases of corporate wrongdoing.”
Boeing CEO David Calhoun indicated in an internal communication:
“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.”
The fact that this announcement comes in the final days of the outgoing Trump Administration may have some further significance since new Justice Department leadership takes hold under the Biden Administration on January 20th.
In a September 2020 commentary related to the release of a U.S. Congressional report that faulted both Boeing and the FAA, Supply Chain Matters provided its perspectives on this tragic saga of events. We indicated:
From our lens, this report should not fault all of Boeing and FAA employees and efforts. Rather it serves as an indictment of Wall Street greed, placing companies such as Boeing as stock buyback and dividend generators with every passing quarter.
That in itself does not dismiss the actions of culpable executives and/or employees who were placed in the position of having to meet certain demands in order to meet bonus or promotional objectives.
The Executive Summary of the of the U.S. Congressional report released in September 2020 had indicated, in-part:
“The story of the Boeing 737 MAX was never expected to be associated with catastrophe. It was supposed to be a story of American ingenuity and technological success—a modern, more fuel-efficient airplane that had already become the manufacturing giant’s best-selling jet in its storied history prior to the first MAX crash of Lion Air flight 610 in Indonesia on October 28, 2018. Ethiopian Airlines flight 302 crashed on March 10, 2019, just two years and two days after the Federal Aviation Administration (FAA) had certified the new 737 derivative aircraft as safe to fly.”
Our September commentary pointed to a litany of published reports of senior Boeing management in product design, manufacturing and services claiming no knowledge of what was occurring, while on the ground design managers and production workers indicated appeals and concerns were being ignored. The ill-fated original design of this aircraft’s MCAS flight control system begged the question of adequate design and realistic expectations of pilot response.
Boeing has thus far paid a significant financial and brand reputation price regarding the history of the MAX. Upwards of $23 billion of added costs are now associated with the aircraft’s design and certification efforts. Thus far, no executives or specific employees deemed to be directly involved have been indicted.
The combination of the continued COVID-19 coronavirus negative impacts on international and domestic air travel along with the near 20-month global grounding of the 737 MAX has taken a discernable toll on Boeing’s internal manufacturing and external supplier networks.
Upwards of 400 grounded aircraft will be in the process of returning to operational service, as will a similar amount of finished aircraft that were parked during this grounding. Boeing has declared that the overall changes mandated will make this aircraft one of the safest in operational service.
Indeed, the saga of the 737 MAX enters another chapter and a subsequent set of new challenges. For the sake of all of Boeing and supplier ecosystem employees and contractors, we certainly hope that the next chapter will be more uplifting, and that the company’s corporate culture undergoes a required change toward engineering excellence with no compromises in aircraft safety.
Bob Ferrari
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