Boeing's $2.5BILLION payout for 737 MAX crashes: Aviation firm is ordered to pay $1.4million to EACH family of the 346 people killed in two airline disasters and $1.7billion to airlines who purchased the planes
Boeing Co will pay over $2.5 billion to resolve the investigation into two deadly 737 MAX crashes that killed 346 people, the U.S. Justice Department announced Thursday.
The settlement includes the establishment of a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of the passengers killed in the 2018 and 2019 crashes.
The fund will be equal to $1.4million for the family of each of the 346 people killed.
The Justice Department said the settlement also includes a compensation payment of $1.77 billion to airlines that were unable to use their Max jets while they were grounded after the crashes and a criminal monetary penalty of $243.6 million.
However, the company will not be forced to plead guilty to criminal charges for misleading regulators about the safety of its 737 Max aircraft, which suffered the two deadly crashes shortly after entering airline service.
Investigators with the U.S. National Transportation and Safety Board look over debris at the crash site of Ethiopian Airlines Flight ET 302 on March 12, 2019 in Bishoftu, Ethiopia
A relative of a passanger of Lion Air flight JT-610 cries shortly after a meeting with authorities and Lion Air management in Jakarta, Indonesia, in November 2018
Pictured from left: Diana Sotomayor, Hayley Freedman and Deveney Williams hold a sign depicting those who died in the crash of Ethiopian Airlines flight 302, during the US House Transportation and Infrastructure Committee subcommittee hearing, 'Status of the Boeing 737 MAX - Stakeholder Perspectives', on Capitol Hill in Washington, DC in July 2019
Despite the settlement, families of victims in the Ethiopian Airlines crash are moving forward with civil litigation against the planemaker in Chicago, plaintiffs' lawyers said on Thursday.
Lawyers said that the DoJ announcement only strengthens the families' lawsuits against the planemaker.
Prosecutors described Boeing's failings in withering terms, accusing the company of putting 'profit over candor' and of engaging in a 'half-truths' and a 'cover up.'
The Seattle-based company began working on the Max in 2011 as answer to a new, more fuel-efficient model from European rival Airbus.
Boeing will pay $2.5 billion to settle a criminal charge related to its troubled 737 Max jetliner. The Justice Department announced the settlement Thursday nearly two years after the second of two crashes that killed 346 people in all. Pictured, a Boeing 737 MAX jet
The DOJ charged Boeing with concealing information about the aircraft's Maneuvering Characteristics Augmentation System , an anti-stall system that was a prime factor in crashes of Lion Air and Ethiopian Airlines flights, before it was approved to fly.
Boeing, through two MAX pilots, concealed key information about MCAS to the Federal Aviation Administration, DOJ said.
This omission meant the FAA did not mention MCAS in its final report certifying the MAX, so there was no reference to the system in manuals and pilot training materials.
The system could point a plane's nose down if sensors indicated the plane might be in danger of an aerodynamic stall - that it might fall from the sky - yet the omission from manuals meant many pilots weren't aware of it.
The first airlines began flying the 737 Max in mid-2017.
On October 29, 2018, a Max operated by Indonesia's Lion Air plunged into the Java Sea.
After the Lion Air crash in October 2018, FAA 'learned for the first time' key details about the MCAS 'that Boeing concealed from FAA,' DOJ said.
And two pilots at Boeing 'continued misleading others - including at Boeing and the FAA - about their prior knowledge of the change to MCAS,' they added.
However, the FAA let the Max keep flying, and on March 10, 2019, another Max operated by Ethiopian Airlines crashed nearly straight down into a field.
In all, 346 people were killed.
On both flights, MCAS was activated by a faulty reading from a single sensor.
The system repeatedly pushed the planes' noses down, and pilots were unable to regain control.
The crashes led to the MAX's grounding for 20 months in March 2019 that was only lifted in November after Boeing made significant safety upgrades.
Boeing was charged with one count of conspiracy to defraud the United States after the actions of its employees were revealed.
Pictured, grounded Boeing 737 MAX aircraft are seen parked in an aerial photo at Boeing Field in Seattle. Boeing changed MCAS so that it always uses two sensors, along with other changes to make the automated system less powerful and easier for pilots to override
The largest U.S. airplane manufacturer faces a three-year deferred prosecution agreement after which the charge will be dismissed if the company complies with the agreement.
'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.
'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.'
'The misleading statements, half-truths, and omissions communicated by Boeing employees to the FAA impeded the government's ability to ensure the safety of the flying public,' added Erin Nealy Cox, the U.S. Attorney in Dallas.
Boeing CEO David Calhoun, pictured, said in a statement on Thursday that the agreement 'appropriately acknowledges how we fell short of our values and expectations'
Both Boeing and FAA have come under intense scrutiny for not grounding the plane after the first calamity and for what critics called the lax oversight when the plane was rolled out.
The DOJ said the size of the penalty reflected Boeing's conduct, including the company's initial reluctance to cooperate in the probe.
The fine of $243 million represents the amount of money Boeing saved by not implementing full-flight simulator training for the 737 MAX, the agreement stated.
Boeing's cooperation 'was delayed and only began after the first six months of the Fraud Section's investigation, during which time Boeing's response frustrated the Fraud Section's investigation,' the DOJ said.
Boeing admitted in court documents that two of its 737 MAX Flight Technical Pilots deceived the Federal Aviation Administration about MCAS.
Boeing Chief Executive David Calhoun said in a statement the agreement 'appropriately acknowledges how we fell short of our values and expectations.'
The airline payment fund will include prior payments already made by Boeing to airlines who could not use the aircraft after the crashes.
After the planes were grounded worldwide, Boeing changed MCAS so that it always uses two sensors, along with other changes to make the automated system less powerful and easier for pilots to override.
The FAA ordered other changes, including the rerouting of some wiring to avoid potential dangerous short-circuiting.
In November, the FAA approved Boeing's changes, and several carriers including American Airlines have resumed using the planes.
Because of the crashes, the U.S. Congress in December passed legislation reforming how the FAA certifies new airplanes.
Boeing's stock dropped further as the settlement announcement was made Thursday
Boeing's stock has struggled to recover from the grounding due to the pandemic
The Justice Department said it was not requiring an independent compliance monitor at Boeing because 'the misconduct was neither pervasive across the organization, nor undertaken by a large number of employees, nor facilitated by senior management.'
Boeing's board in late 2019 removed its prior chief executive and has created a permanent aerospace safety committee.
Boeing has adopted new policies and procedures and conducted training to clarify expectations and requirements governing communications between its flight technical pilots and regulatory authorities.
The planemaker said it expects to incur additional charges of $743.6 million in the fourth quarter as part of the settlement.