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Boeing has agreed to plead guilty to one count of conspiring to mislead the United States about the company’s role in the two deadly 737 Max crashes, the Justice Department announced in a court filing Sunday evening.
It was another black mark for the company after a series of embarrassing safety blunders, but the agreement averted potentially more serious consequences.
The company will pay up to $487 million in fines, just a fraction of the $24.8 billion that families of the crash victims are seeking from the company. Family members of the victims of the two fatal 737 Max crashes oppose the deal, the department said.
The guilty plea is a major blow to Boeing’s reputation, a company once known for the quality and safety of its commercial aircraft. Beyond the fatal crashes of its 737 Max jets, the company has faced a series of questions about the safety and quality of its planes. In January, a door plug on an Alaska Airlines-operated 737 Max blew up early in the flight, ripping a large hole in the side of the plane, further damaging Boeing’s reputation.
The agreement stipulates that Boeing must operate under the supervision of an independent monitor selected by the government for three years, but the victims’ families were not satisfied with the oversight and fines, one of their lawyers said.
“This special agreement fails to recognize that Boeing’s conspiracy resulted in the deaths of 346 people,” Paul Cassell, a University of Utah law professor who represents many of the families of the victims of the 2018 Lion Air crash and the 2019 Ethiopian Airlines crash, said in a statement.
“This deceptive and generous deal is clearly not in the public interest,” he added. The families are calling for a public trial on the charges.
The Justice Department argues that the penalties Boeing agreed to were among the most severe, and that it also won other improvements, including monitor oversight and requirements that Boeing invest more money in safety and compliance when building planes.
“This resolution protects the American people,” the Justice Department statement said. “Boeing must make historic investments to strengthen and integrate its compliance and safety programs. This guilty verdict demonstrates the Department of Justice’s commitment to holding Boeing accountable for its wrongdoing.”
The statement also noted that Boeing and its executives may face further legal challenges in the future. While no individuals will be criminally charged as a result of the settlement, it said, “the Department of Justice is working only with the company and does not provide immunity to individual employees, including company executives, for any actions.”
“The Department of Justice has settled with Boeing only for misconduct that occurred before the 737 MAX crashes, and has not provided immunity for other corporate conduct, including that involved Alaska Airlines Flight 1282,” the department added. No one was seriously injured on that flight, but CNN has confirmed that passengers and crew on the flight have been notified that they may be considered crime victims.
But families of victims in the two deadly plane crashes slammed the plea deal early Monday.
“To describe this case as a false accusation is an understatement,” Zipporah Kuria, a British woman whose father, Joseph, was killed in the Ethiopian Airlines crash, said in a statement. “This is a cruel and abhorrent act, and if this happens again I hope the Department of Justice will remember that they had the opportunity to do something meaningful and didn’t.”
“Without full transparency and accountability, nothing will change,” said Ike Riffel, a California resident who lost his sons Melvin and Bennett in the crash, in a statement. “This agreement will mean there will be no investigation, no expert testimony and no criminals facing charges in court.”
“The penalties and conditions imposed on Boeing as a result of this plea deal are virtually identical to those that failed to change Boeing’s safety culture and caused the doors to burst at Alaska Airlines,” said Javier de Luis, an aerospace engineer who lost his sister, Graziella, in the second crash. “If another crash occurs, all of the Department of Justice officials who signed this deal will be held just as accountable as Boeing executives who refused to put safety above profits.”
Boeing released a short statement saying only that it “can confirm that we have reached an agreement in principle with the Department of Justice on the terms of a settlement, subject to approval of certain conditions.”
Boeing investors seemed pleased with the terms of the deal: Shares of Boeing (BA), a component of the Dow Jones Industrial Average, rose 3% in morning trading.
According to the indictment, Boeing misled the Federal Aviation Administration during the certification process for the 737 MAX’s first flight. The plane entered service in 2017 but was grounded for 20 months after two fatal crashes. An investigation found that the autopilot system had a design flaw. Boeing accepted responsibility for the fatal crashes and acknowledged that employees concealed information about the design flaw from the FAA during the certification process.
In January 2021, federal prosecutors and Boeing agreed to settle criminal charges and defer prosecution in the case. During the three-year probation period that followed, Boeing agreed to improve its quality issues and transparency with the government. But the Alaska Airlines incident occurred just days before the end of the probation period, which led to a series of federal investigations into the company’s practices.
The Justice Department announced in May that it was again considering filing criminal charges against Boeing for possible violations of the January 2021 agreement. Boeing had argued in court filings that it had not violated the agreement and should be spared prosecution. The guilty plea Sunday night, just before a midnight deadline set by the Justice Department, resolved that issue.
Under the original 2021 settlement, Boeing agreed to pay $2.5 billion. But about 70% of that amount was money Boeing had already agreed to pay airline customers as compensation for the 20-month grounding of the planes. Another $500 million was for compensation to victims of the crashes. The criminal penalty to the government was just $243.6 million, and the new guilty plea would double that amount.
Boeing also agreed to spend $455 million over the next three years on compliance and safety programs, which the government said represents a 75% increase in what the company has been spending annually on those programs.
The company has suffered severe financial losses due to a variety of issues since the second crash of a 737 Max aircraft, with core operating losses of $31.9 billion since the 20-month grounding began, and is at risk of losing its investment grade rating for the first time in its history.
The company currently has nearly $47 billion in long-term debt, and a downgrade to junk status would mean its borrowing costs would soar.
But an additional fine of hundreds of millions of dollars, rather than billions, would still be an amount the company could afford, despite its financial difficulties.
The company avoided another significant penalty: the loss of its government trading rights.
Such fines would be devastating for the plane maker, which gets about 37% of its 2023 revenue from federal contracts.
Such penalties are highly unlikely because Boeing and the federal government are so dependent on each other, said Richard Aboulafia, managing director of Aerodynamic Advisory, an aerospace and defense management consultancy.
Despite the challenges of the past five years, Boeing remains a vital component of the U.S. economy. The company remains America’s largest exporter and employs approximately 150,000 people in the U.S. The company estimates its economic impact at $79 billion and supports 1.6 million direct and indirect jobs across more than 9,900 suppliers across all 50 states.
Boeing’s only significant rival in commercial aircraft, European manufacturer Airbus, has a backlog of more than 8,000 jets, meaning Boeing customers who order an Airbus plane today will have to wait nearly a decade for delivery.
The fraud charges contained in Sunday’s guilty plea and the investigation into the Alaska Airlines crash are not the only safety issues currently being raised about Boeing. The Alaska Airlines crash has drawn new attention to a series of events, big and small, that have raised concerns about the safety of Boeing planes.
More than a dozen whistleblowers who work or have worked for Boeing or its subcontractors have come forward in recent months to tell congressional investigators and the media about concerns about the company’s procedures and practices, including the company’s deliberate use of defective parts in its planes and assembly procedures that did not meet Boeing’s own standards.
In both cases, Boeing said it investigated the allegations and responded appropriately.
These allegations and the Alaska Airlines accident have drawn attention to a growing number of safety issues and accidents that previously went unnoticed. For example, the FAA is scheduled to notify airlines on Monday that there is a problem with oxygen masks on 2,600 U.S. planes, including 737 Max and older 737s, that could cause the masks to fall on passengers if needed. The issue can be addressed through inspections, the notice said.
Boeing said it would not comment on the language of the FAA’s airworthiness directive, which was issued after the company had issued a service bulletin to airlines that already own the plane.
This story has been updated with additional reporting and background information.
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