By Hemal Gosai
Boeing to Pay $2.5 Billion to Settle Criminal Conspiracy Charges
It’s pretty obvious Boeing has had it rough for quite some time now. It first started with their first Boeing 737 MAX aircraft crashed and in October 2018. No plane crash is good for an aircraft manufacturer but for the time being, it was thought that there wasn’t a systemic issue with the aircraft. Then March 2019 rolled around and another Boeing 737 MAX crashed.
The world came to the realization that there indeed was a flaw with the aircraft design and all MAX aircraft were grounded for just about a year and a half during which Boeing worked to fix the design flaw in their aircraft.
This really shook the confidence of aircraft buyers. Investigation after investigation turned up negligence across the board from Boeing to the Federal Aviation Administration.
Boeing’s losses were astronomical. It estimated that it lost $18.4 billion in 2019 and over 180 MAX aircraft orders were canceled. It’s share price tumbled from all-time highs. It’s estimated that the total direct costs of the MAX groundings were $20 billion and indirectly over $60 billion. All in all, Boeing has lost more than 1,000 orders for the MAX
Then rolled around the COVID-19 which suppressed passenger aviation. The aircraft manufacturer was dealt another blow as demand for aircraft dropped. The aviation giant was hopeful for what 2021 had to bring. Many analysts expect some sort of return to traveling as more and more people get a vaccination.
However, the beginning of 2021 has not been too kind to Boeing.
Boeing has agreed to pay more than $2.5 billion to settle a criminal probe initiated by the United States Justice Department which accused the company of concealing information about its MAX aircraft. Prosecutors said Boeing “knowingly and willfully” conspired to defraud the United States by undermining the Federal Aviation Administration’s ability to evaluate the safety of the plane.
Boeing has admitted that two of its MAX technical pilots “deceived” the FAA about the capabilities of the Maneuvering Characteristics Augmentation System (MCAS). This was the system ultimately responsible for the two 737 MAX crashes.
This settlement is a deferred prosecution agreement in which the government will drop the criminal charge of conspiracy to defraud the U.S. after three years if Boeing follows the terms of the settlement and no additional violations are found.
The $2.5 billion settlement is not all going to the government. Only $243.6 million is a fine paid to the U.S. government. The rest includes an additional $500 million that Boeing commits to pay in compensation to the families of the 346 people who died in the MAX aircraft crashes.
This has drawn a lot of fire since $1.7 billion was the amount Boeing had already agreed to pay to the families prior to this settlement. Many are calling it just a slap on the wrist and an insult to the victims considering how small $2.5 billion is compared to the size of the company.
Many family members of the victims have filed other lawsuits against Boeing which are still moving forward so it’s unlikely Boeing will be able to move past the disaster they have created for themselves anytime soon.
Hemal took his first flight at four years old and has been an avgeek since then. When he isn’t working as an analyst he’s frequently found outside watching planes fly overhead or flying in them. His favorite plane is the 747-8i which Lufthansa thankfully flies to EWR allowing for some great spotting. He firmly believes that the best way to fly between JFK and BOS is via DFW and is always willing to go for that extra elite qualifying mile.