Boeing reaches multi-billion dollar settlement over 737 MAX crashes
Boeing Co (NYSE:BA) will need to pay over US$2.5bn in fines and compensation after the aircraft maker reached a settlement with the US Department of Justice (DOJ) over two crashes involving its 737 MAX planes.
The company will avoid prosecution on fraud conspiracy charges by paying a US$243.6mln fine alongside US$1.77bn in compensation to airlines and US$500mln to set up a crash victim fund.
READ: Boeing posts fourth straight quarterly loss as coronavirus pandemic and 737 MAX grounding take a toll
The settlement ends a 21-month long investigation by the DOJ into how the design and development of the MAX aircraft led to two fatal crashes in Indonesia and Ethiopia in 2018 and 2019 respectively.
In an announcement from the DOJ on Thursday, acting assistant attorney general David P. Burns of the department’s criminal division said the crashes “exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers” and that Boeing’s employees “chose the path of profit over candour by concealing material information from the [Federal Aviation Administration (FAA)] concerning the operation of its 737 MAX airplane and engaging in an effort to cover up their deception”.
The MAX aircraft were grounded around the world in March 2019 but were cleared to return to the skies in November last year after Boeing made safety and pilot training improvements to the aircraft.
The settlement with the DOJ will defer charges against the company for three years and these will be cleared if the deal is complied with for the whole period.
Boeing said it will take a charge of US$743.6mln to its earnings for the fourth quarter of 2020 as part of the costs relating to the agreement, adding that it has also put aside US$1.77bn to pay compensation to the airlines.
“I firmly believe that entering into this resolution is the right thing for us to do–a step that appropriately acknowledges how we fell short of our values and expectations”, Boeing’s president and chief executive David L. Calhoun said in a note to employees.
“This resolution is a serious reminder to all of us of how critical our obligation of transparency to regulators is, and the consequences that our company can face if any one of us falls short of those expectations”, he added.
Shares in Boeing fell 0.2% to US$212 in pre-market trading in New York on Friday.