Boeing Reaches $2.5 Billion Settlement Agreement With U.S. Department of Justice Over 737 MAX
The settlement resolves the Department of Justice’s investigation related to the Boeing 737 MAX evaluation by the Federal Aviation Administration. The agreement includes a penalty of $243.6 million, $500 million in victim compensation and $1.77 billion for airline customers.
On Thursday (January 7, 2021), Boeing announced that they have reached an agreement with the U.S. Department of Justice (DOJ) related to the evaluation of the Boeing 737 MAX by the Federal Aviation Administration (FAA). The settlement resolves the DOJ’s investigation and defers prosecution of the company for three years at which time the charges will be dropped, providing Boeing abides by the agreement obligations. The terms of the settlement include a $243.6 million penalty, $500 million in additional compensation to the families of the Lion Air and Ethiopian Airlines accident victims, and $1.77 billion to airline customers related to losses resulting from the grounding of the 737 MAX.
In Thursday’s announcement, Boeing’s President and Chief Executive Officer, David L. Calhoun, said,
“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. 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.”
The approximately $2.5 billion settlement is based on the conduct of two former Boeing employees who intentionally failed to inform the FAA’s Aircraft Evaluation Group (AEG) about changes to the Maneuvering Characteristics Augmentation System (MCAS) on the 737 MAX. The AEG is the group within the FAA which is responsible for making pilot training determinations. The agreement states that as a result of the employee concealment, the FAA’s Aircraft Evaluation Group was unaware of the expanded operating range of the MCAS system when making training determinations for the MAX. Although the AEG was unaware of the expanded operating range of the MCAS system, the agreement recognizes that other Boeing employees informed different officials and organizations within the FAA about the MCAS’s expanded operating range during the 737 MAX certification process.
Thursday’s announcement was accompanied by an 8-K filing with the U.S. Securities and Exchange Commission (SEC), reflecting that the company had taken a $743.6 million charge to earnings in connection with the agreement.
Boeing (NYSE:BA) is the world’s largest aerospace company and leading supplier of commercial airplanes, defense, space and security systems, as well as global services. The aerospace giant tops the list of the largest U.S. exporters, providing a significant positive impact to America’s annual GDP. Boeing supports government and commercial customers in over 150 countries and employs more than 160,000 team members worldwide. As Boeing continues to deliver for customers, they are committed to their legacy of aerospace leadership in technology and innovation and will continue investing in their people for future growth.