Boeing will plead guilty to a criminal fraud conspiracy charge related to two fatal 737 Max jet crashes that killed 346 passengers and crew.
In a damning admission by one of the world’s largest aerospace companies, the maker of almost half of the world’s commercial airliner fleet also has agreed to pay a criminal fine of $243.6 million in connection with the disasters in Indonesia and Ethiopia in 2018 and 2019.
The guilty plea means Boeing can avoid a trial that could have drawn further public scrutiny of its decisions and processes before the crashes. However, it would brand the company a convicted felon and potentially could threaten its ability to secure government contracts with the US defence department and Nasa, two pillars of its business.
The US justice department discovered in May that Boeing had violated an earlier 2021 settlement resulting from the fatal crashes, which exposed the company to criminal prosecution. Boeing did not implement a compliance programme to prevent and detect violations of American fraud laws in the company’s operations, which had been a requirement of the settlement, the department found.
The settlement is still being finalised and will be subject to approval from a judge.
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Families of the victims killed in the crashes had demanded that Boeing face prosecution for violating the deal. Lawyers for some of the families said they intended to exercise their right to oppose the deal.
“The families intend to argue that the plea deal with Boeing unfairly makes concessions to Boeing that other criminal defendants would never receive and fails to hold Boeing accountable for the deaths of 346 persons,” they said in a separate court filing.
The deal was a “slap on the wrist”, according to Erin Applebaum, a lawyer at Kreindler & Kreindler, the law firm, who represents some of the victims’ relatives.
Boeing is set to admit making knowingly false representations to the Federal Aviation Administration about having expanded a key software feature used on the Max to operate at low speeds. The new software saved Boeing money by requiring less intensive training for pilots.
The manoeuvring characteristics augmentation system is a software feature designed to automatically push the aircraft’s nose down in certain conditions. It was tied to the two crashes that led to the FAA grounding the Max aircraft for 20 months, an action that cost Boeing $20 billion and was lifted by the government in November 2020.
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As part of the proposed deal, Boeing will invest at least $455 million over the next three years to strengthen its safety and compliance programmes. The justice department will appoint a third-party monitor to oversee the company’s compliance.
The monitor will have to publicly file annual reports with the court charting the company’s progress. Boeing also will serve a “probation”, during which it commits itself not to violate any laws, until the end of the monitor’s three-year term.
It comes as Boeing tries to recover from another safety scandal after a door plug blew out in mid-flight on an Alaska Airlines 737 Max 9 jet on January 5, exposing new quality-control problems. This has led to a slowdown in production at Boeing, which could mean that it misses its financial targets.
Last week Boeing agreed to buy Spirit AeroSystems, a supplier, in a $4.7 billion all-share deal as it tries to move on from its production crisis. Spirit, which Boeing spun off in 2005, had made the door plug that blew out. The guilty plea could make it easier for the company, which is in the process of recruiting a new chief executive this year, to turn a corner as it seeks approval for its planned acquisition of Spirit.
The plea agreement covers only Boeing’s conduct before the fatal crashes and does not shield the business from other potential investigations or charges related to the incident in January or other conduct.
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A Boeing spokesman confirmed that it had “reached an agreement in principle on terms of a resolution with the justice department”.
On Monday the FAA said 2,600 Boeing 737 aircraft required inspections over fears that oxygen masks could fail to work in an emergency. Boeing said that, under certain circumstances, a new adhesive introduced on the straps of oxygen generators in August 2019 had been found to have allowed units to shift up to three quarters of an inch. It said it had gone back to the original adhesive for all new deliveries.
Boeing shares closed up by $1.02, or 0.6 per cent, at $185.85 on Wall Street.
