Boeing to pay over $2.5 billion to settle 737 Max charges
The settlement includes a criminal penalty and compensation for Boeing's customers and the families of more than 300 people killed in two crashes
Boeing will pay the federal government more than $2.5 billion to resolve a criminal charge that it lied to Federal Aviation Administration officials during the certification process of the 737 Max, the Department of Justice announced Thursday.
The 737 Max, once Boeing’s great hope, had two crashes in 2018 and 2019 that killed a total of 346 people. The aircraft was grounded in March 2019 pending investigations and an overhaul of design features blamed for the crashes. The FAA lifted the grounding order in November.
Under the terms of the agreement to settle the charge of conspiracy to defraud the United States, Boeing will pay a criminal penalty of $243.6 million, provide $1.77 billion in compensation payments to Boeing’s 737 Max airline customers and establish a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives and legal beneficiaries of the passengers killed in the crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.
“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,” said acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division. “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.”
Burns said the 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.”
Lawyers for victims of the Ethiopian Airlines crash said the compensation fund "has no bearing on the pending civil litigation against Boeing, which we plan to prosecute fully to ensure the families receive the justice they deserve."
According to the Department of Justice, Boeing admitted in court documents that it “deceived” the FAA about an automated software system called the Maneuvering Characteristics Augmentation System, or MCAS, that impacted the flight control system of the aircraft.
The system was installed into the Max as part of an upgrade to the original 737 to help win customers who had recently been wooed by Airbus. A key part of the new aircraft's marketing was that it would not require additional simulator training, which would've put the company at a competitive disadvantage.
But the upgraded 737 MAX, rigged with larger and more fuel-efficient engines, had some aerodynamic complications.
As a result, the plane could pitch up too high on ascent, creating an increased risk of engine failure. To rectify this, the company added the so-called Maneuvering Characteristics Augmentation System to help prevent the plane from ascending at a risky angle.
The automated system was designed to push the plane’s nose downward if the plane ascended at too steep an angle. But in both the Lion Air and the Ethiopian Air accidents, the sensor tasked with detecting that angle failed and the MCAS system repeatedly pushed the nose of the aircraft down, causing dives from which the pilots were ultimately unable to recover.
Multiple investigations have noted Boeing’s lack of candor about the new steering system, and an extensive report about the crashes by the House Transportation and Infrastructure Committee released in September revealed that pilots for the company failed to share information about the new system with the FAA during the certification process to prevent the agency from imposing new pilot-training requirements.
The steering system was also omitted from airplane manuals and pilot training materials, meaning pilots were unaware of the system.
Texts released by the committee in October 2019 between Boeing employees Mark Forkner and Patrik Gustavsson, dated Nov. 16, 2016, were particularly damning, with Forkner complaining the MCAS system was “running rampant” in simulator tests and fretting that he had "basically lied to regulators (unknowingly)."
Other texts released by the committee reveal Forkner urging the FAA to keep references to the system out of Flight Crew Operating Manuals.
“Are you ok with us removing all reference to MCAS from the FCOM (Flight Crew Operating Manual) and the training as we discussed, as it’s completely transparent to the flight crew and only operates WAY outside of the normal operating envelope?” he asks in one of a series of emails urging FAA to remove references to the system.
The MCAS system was believed to play a role in the October 2018 crash of Lion Air Flight 610 in Indonesia and the March 2019 crash of Ethiopian Airlines Flight 302. After the first crash, the DOJ said, the two 737 Max Flight Technical Pilots continued misleading others — including at Boeing and the FAA — about their prior knowledge of the change to MCAS.