Boeing pleads guilty in US fraud conspiracy case: what this means, what comes next

Boeing’s deadly deception

All models of the Boeing 737, the highest-selling commercial airliner in history, were grounded worldwide between March 2019 and December 2020. This was after two deadly crashes involving the Boeing 737 MAX aircraft which, put together, killed 346 people — the Lion Air Flight 610 crashed in Indonesia on October 29, 2018, and the Ethiopian Airlines Flight 302 crashed in Ethiopia on March 10, 2019.

On January 7, 2021, the DoJ announced that the American aircraft manufacturer had entered into a deferred prosecution agreement (DPA) after admitting to having conspired to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG).

The fraud in question was regarding the next-generation 737 MAX’s Maneuvering Characteristics Augmentation System (MCAS). The DoJ held that Boeing did not inform the FAA AEG about the impact of the MCAS. “Because of their deception, a key document published by the FAA AEG lacked information about MCAS, and in turn, airplane manuals and pilot-training materials for US-based airlines lacked information about MCAS,” the DOJ said in a statement.

This likely saved Boeing, and its customers a massive amount of money and time that should have ideally gone into pilot training. But it ultimately proved costly — both crashes were traced to MCAS-related errors.

The DoJ accused the company of putting profits ahead of passenger safety, and slapped a $2.5 billion fine, which included a criminal monetary penalty, compensation to Boeing’s 737 MAX airline customers, and the establishment of a $500 million crash-victim beneficiaries fund.

Boeing also agreed to cooperate with the DoJ on any related investigations, and report any alleged violations of fraud laws by employees in their dealings with foreign or domestic agencies, regulators, or airline customers.

Non-compliance with 2021 agreement

On January 5, 2024, the Alaska Airlines Flight AS-1282 heading to California suffered “explosive decompression” as a plugged door of the Boeing 737 MAX aircraft blew out. The DoJ reopened a criminal investigation of Boeing in March, since this incident occurred only two days before the expiry of its DPA deal.

On May 14, 2024, the DoJ ruled that Boeing did not comply with the terms of the 2021 agreement, and failed to implement and enforce a compliance and ethics programme “to prevent and detect violations of the US fraud laws throughout its operations”. Thus, the DoJ said that the company was liable to be prosecuted under the original criminal charge.

The prospect of a long-drawn trial that could further expose Boeing’s decisions in the run-up to the fatal 737 MAX plane crashes, however, was far from appealing. The plea deal will effectively prevent this from happening, with the company having to pay a financial penalty and being put on court-supervised probation for three years, during which it could face additional penalties.

That being said, a plea deal also comes with its cons. Most notably, Boeing would no longer be a frontrunner to secure lucrative contracts with US government agencies like the Department of Defense, and NASA. In 2023, these government contracts accounted for 37% of its annual revenue (roughly $29 billion).

Prosecutors have, however, requested for a hearing on the plea agreement at the earliest, and plan to challenge it in court.

Systemic issues remain

Regardless of the outcome of the latest Boeing saga, the company is plagued by systemic issues which are unlikely to be fixed in the very short term.

The decline of the company, many experts say, began in the late 1990s, after it acquired rival aircraft manufacturer McDonnell Douglas in 1997. This, industry experts say, resulted in the company shifting its focus from quality and safety — previously at the heart of its philosophy — to profits and stock prices.

Since the merger, cost-cutting and profit maximisation measures have defined the company’s operation, and ultimately led to the mess it finds itself in. For instance, Boeing eliminated quality inspectors from its production process, putting the onus of inspections on the mechanics and techies themselves. This led to underreporting errors due to blind spots, and heightened self-interest.

Multiple whistleblowers, formerly employees of Boeing or its lead supplier, Kansas-based Spirit AeroSystems, reported unsafe practices in their factories.

Boeing has denied these allegations.