KOCHI: In July 7, the US Department of Justice (DoJ) disclosed in a court filing that it had in principle agreed to a plea bargain by Boeing Company, which would help the firm avoid going to trial in the criminal case related to two fatal crashes of 737 Max jets. Boeing, a US-based multinational corporation that designs, manufactures, and sells commercial airplanes worldwide, was accused of hiding a serious design flaw in 737 Max from regulators responsible for certifying the aircraft as fit to carry passengers.
The deception came to light after two 737 Max jetliners crashed within a span of five months, killing 346 passengers and crew members. The first crash occurred in October 2018 when a 737 Max jetliner operated by Indonesia’s Lion Air plunged into the Java Sea and the second fatal accident came in March 2019 as an Ethiopian Airlines 737 Max jet crashed into a field six minutes after it took off from Addis Ababa.
The DoJ has since sought more time to finalise the plea deal. “The government expects that the earliest it could file the plea agreement is Wednesday, July 24, 2024,” it told the Texas court.
Flying blind
The two crashes led to a series of investigations, including a criminal probe by the DoJ. Boeing’s 737 Max jets were grounded worldwide, forcing the company to admit to its mistake. Since then, Boeing has been under the DoJ’s glare for defrauding the Federal Aviation Administration (FAA) to get 737 Max certified for commercial use. According to the DoJ, the company deceived the FAA’s Aircraft Evaluation Division (AEG) about the speed range in which a part of the 737 MAX’s flight controls could operate.
FAA AEG works with aircraft manufacturers to determine the airworthiness of planes and recommend pilot training requirements. Boeing’s technical pilots allegedly gave inaccurate and incomplete information about how the flight control feature called the Maneuvering Characteristics Augmentation System (MCAS) works. The MCAS in 737 Max was designed to take control of the flight at certain conditions, an action that can’t be manually overridden by pilots.
This crucial feature was not disclosed to anyone — regulators, airline operators or pilots. As a result, airplane manuals and pilot-training materials lacked any reference to this, which meant 737 Max pilots were flying blind.
Why hide software tweaks
The 737 Max was launched as a fuel-efficient version of Boeing’s 737 Next Generation (NG), the US aerospace firm’s best-selling airliner. Some aviation experts say it should ideally have been launched as a separate model instead of an upgrade because drastic changes were made in the new version.
For one, the Max was over 3,000 kg heavier than the NG because larger engines were used in the newer model. The 737 Max engines’ position was also moved further forward and much higher on the wings to accommodate the larger fan diameter. The repositioned engines shifted the centre of gravity of the plane slightly forward compared to the earlier version. Because of this, the jet’s nose could pitch up unexpectedly during certain manoeuvres.
However, Boeing did not want pilots to experience the handling differences because that would mean additional training costs. So, it tweaked the MCAS software to tune the differences; when a sensor detects the nose going up, the MCAS would push the nose down automatically.
The problem was, if the sensor was faulty and it fed wrong data into the MCAS, it would still push the plane down and there was nothing the pilot could do about it. According to investigators, this design flaw brought down the two 737 Max flights.
Deferred prosecution
In January 2021, Boeing entered into a deferred prosecution agreement (DPA) with DoJ in connection with criminal charges that held the company with one count of conspiracy to defraud the United States. Under the terms of DPA, Boeing agreed to pay a total of $2.5 billion, which included $500 million as compensation to family members of crash victims, $243.6 million criminal fine for defrauding the FAA, and a much higher amount - $1.77 billion - to its airline customers to compensate them for the losses due to grounding of the planes. The $243.6 million fine represented the amount Boeing saved by not implementing full-flight simulator training for MAX pilots.
As part of the DPA, Boeing was supposed to improve its quality issues and transparency with the government. But another incident involving the Alaska Airlines in January 2024, when a 737 Max jetliner door blew off mid-air, raised questions about the company’s safety standards. If the two crashed aircraft were of the 737 Max 8 model, the Alaska door plug blowout involved the next generation model, 737 Max 9.
The embarrassing incident was reportedly caused after technicians ‘forgot’ to screw the bolts of the door. Following this mid-air scare, the DoJ determined that Boeing had violated the terms of the DPA and that prosecution would now begin. To avoid further trouble, Boeing agreed to plead guilty to the charges in return for settlement without trial.
Guilty plea
Under the in-principle agreement of July 7, Boeing will pay another $243 million in fines, over and above the same amount it committed as part of the 2021 deal, taking the total fines to $486 million. However, the families of the victims of the two crashes are livid, saying Boeing should be hit with a maximum fine of $24.8 billion, based on the combined losses sustained by the families. The plea agreement is subject to approval by District Judge Reed O'Connor.
As part of the deal, the planemaker will spend $455 million over three years to improve safety. Also, an independent monitor will be appointed, who will oversee the firm's compliance with the terms of the deal. Critics say these payouts will not have any financial impact on Boeing, which was anyway planning to spend half a billion dollars on upgrading the safety systems.
Because of the nature of its business, Boeing’s clients can’t easily abandon the company. Commercial aircraft manufacturing is just one vertical of the company, which is also into defence, space and security, and global services.
Impact on business
Despite the legal tangles, Boeing’s order book has been growing. Early this month, it disclosed that it has received two new aircraft orders from Emirates SkyCargo and Aviation Capital Group. ACG has ordered 35 737 MAX jets, consisting of 16 737-8s and 19 of the larger 737-10 model. Emirates SkyCargo’s order is for five 777 Freighters.
The US company has active orders from India as well. In January, Akasa Air placed an order for 150 737 Max 10 and 737 Max 8-200 aircraft to be delivered through 2032. Earlier, the Tata Group had ordered 190 Boeing 737 Max narrowbody planes, 20 Boeing 787 Dreamliners and 10 Boeing 777X. Boeing claims there won’t be any in delivery delay.
However, with regulators breathing down its neck, Boeing will be forced to put safety above speed. The company is also beset by new problems. It is currently negotiating with the workers union about the demand for a 40% pay hike when contracts will be up for renewal in September. On July 18, thousands of Boeing workers voted in favour of a labour strike if the ongoing negotiations fail. The union members include 30,000 people working at two Boeing plants where the 737 is assembled and put together.
If there are delivery delays, it will be costly for Boeing’s customers as well. Airlines need to plan months in advance before they can deploy a new aircraft. Pilots will have to be hired and trained, networks and schedules planned, and necessary infrastructure put in place. Boeing is expected to reach a settlement with the union because it can’t afford to have a labour strike at this juncture.
While the guilty plea agreement hasn’t weakened Boeing’s ability to secure orders, it needs to be seen if it will continue to bag lucrative government contracts with the likes of the US Defense Department and NASA. But for a company with deep pockets, Boeing is expected to find its way around this. And it will be business as usual.
Fear of Max
After the two fatal crashes and the door plug blowoff incident involving 737 Max series, the reputation of this popular jetliner took a hit. Flyers started preferring Airbus flights and there were reports of nervous passengers even trying to get off the plane when they realise their flight was a 737 Max. After the Alaska mid-air scare, most regulators worldwide ordered the safety audit of their respective 737 Max fleet. In January 2024, the DGCA asked Indian airlines to do an emergency inspection of the emergency exit doors of all operational fleet. No anomalies were detected in any of the three Indian airlines that fly 737 Max 8 jetliners. “These checks have been satisfactorily performed on the fleet of operational fleet of Boeing 737-8 Max aircraft by Air India Express (4), SpiceJet (8) and Akasa Air (20),” the DGCA said after the inspection.