Boeing agrees to pay $2.5bn to settle 737 Max crashes probe

By Rahul Vaimal, Associate Editor
  • Follow author on
Boeing Image
Representational Image

Boeing, the American aerospace company, will pay more than $2.5 billion in fines and compensation after reaching a settlement with the US Department of Justice over two plane crashes that killed a total of 346 people and led to the grounding of its 737 MAX jetliner.

The settlement, which allows Boeing to avoid legal actions, includes a fine of $243.6 million, compensation to airlines of $1.77 billion and a $500 million crash-victim fund. Boeing had put aside reserves of $1.77 billion in prior quarters to provide for compensation to airlines.

Fatal crashes and investigation

The Justice Department deal is the result of a 21-month investigation into the design and development of the 737 MAX following the two crashes, in Indonesia and Ethiopia in 2018 and 2019, respectively.

The crashes “exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,” acting Assistant Attorney General David Burns said in a statement accompanying the agreement. “Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 MAX airplane and engaging in an effort to cover up their deception,” Mr. Burns said, referring to the Federal Aviation Administration.

The crashes triggered a hailstorm of investigations, affecting US leadership in global aviation and have cost Boeing some $20 billion.

Plaintiffs lawyers representing families of victims of the Ethiopian Airlines crash said the settlement strengthens civil litigation against Boeing in Chicago, where the company is headquartered. Boeing has already settled most lawsuits related to the Lion Air disaster in Indonesia.

Because of the crashes, the US Congress in December passed legislation reforming how the FAA certifies new airplanes. The 737 MAX was grounded in March 2019, and the grounding was not lifted until November 2020, after Boeing made significant safety upgrades and improvements in pilot training.

Deceiving FAA

Boeing admitted in court documents that two of its 737 MAX technical pilots deceived the FAA about a safety system called MCAS, which caused both fatal crashes. The documents also say Boeing belatedly cooperated with the probe but only after it initially “frustrated” the investigation.

In a note to employees, Boeing Chief Executive David Calhoun said the agreement “appropriately acknowledges how we fell short of our values and expectations.” The $243 million fine, which the Justice Department said was at “low end” of the sentencing guidelines, represents the amount of money Boeing saved by not implementing full-flight simulator training for the 737 MAX, the agreement stated.

Remedial measures

The airline payment fund will include payments already made by Boeing to airlines, which had to cancel flights due to a shortage of aircraft. The agreement also cited remedial steps Boeing had taken since the crashes, such as firing its previous chief executive in late 2019 and adding a permanent safety committee at the board level.

Under the latest agreement, Boeing agreed to adopt a new compliance program, or to modify its existing one, to ensure it maintains an effective compliance program and system of internal controls to root out fraud.