Boeing agrees to pay $2.5 billion over crashes of badly designed 737 jet

Aircraft manufacturer reaches a settlement with U.S. authorities over fraud that led to aviation disasters that killed 346 people and threw global airline schedules into disarray

Boeing agrees to pay $2.5 billion over crashes of badly designed 737 jet
Grounded Boeing 737 MAX 8 aircraft, including those from China's Shandong Airlines and Xiamen Air and India's SpiceJet, are parked at Grant County International Airport in Moses Lake, Washington state. Photo: Reuters 

(ATF) Boeing Co will pay more than $2.5 billion in fines and compensation after reaching a settlement with the U.S. Department of Justice over two 737 MAX 8 plane crashes that killed a total of 346 people and caused disarray to global airline schedules.

The settlement, which allows Boeing to avoid prosecution, includes a fine of $243.6 million, compensation to airlines of $1.77 billion and a $500 million crash-victim fund.

Boeing's deal with the justice department deal ends a near two-year investigation into the plane's design and development.

The crashes "exposed fraudulent and deceptive conduct by [Boeing] employees " acting assistant attorney general David Burns said in a statement.

The U.S. plane maker said it would take a $743.6 million charge against its fourth-quarter 2020 earnings to reflect the deferred prosecution agreement over fraud conspiracy charges related to the plane's flawed design.

Boeing had put aside reserves of $1.77 billion in prior quarters to provide for compensation to airlines. Asian airlines were crippled by the grounding of the planes and were forced to cut routes, revise schedules and lease extra aircraft.

Faulty software

Two Boeing 737 MAX 8s crashed separately in Indonesia and Ethiopia after faulty flight-control software pushed the planes’ noses down. Nearly 400 Max jets were subsequently grounded worldwide in mid-March 2019.

Chinese airlines operated 96 MAX 8 jets but managed to avoid massive cancellations by swapping in other models, according to Kelvin Lau, analyst at Daiwa Capital Markets in Hong Kong.

China Southern Airlines, which flew 25 MAX 8 jets, was forced to revise its targeted growth for passenger capacity, while India’s SpiceJet hurriedly leased 22 Boeing 737-800NG aircraft and deployed five Bombardier Q400 aircraft on shorter flights.

When Singapore Airlines-owned SilkAir grounded its MAX 8 fleet, it replaced them with Airbus A320s normally flown by budget subsidiary Scoot, which had to cancel four international routes.

The most affected Asian carrier was Indonesia's Lion Air, which had leased 10 MAX 8 aircraft. Its Flight 610 from Jakarta to Pangkal Pinang on October 29 2018 crashed into the Java Sea 13 minutes after takeoff, killing all 189 passengers and crew.

Boeing has placed its future in its fourth-generation 737 redesign, the MAX-8200. Last month, Ryanair, Europe’s largest airline, signed a purchase agreement with Boeing for 75 of the new planes. The Irish budget carrier has now ordered 210 of the aircraft, worth $22 billion. Hanoi-based low-cost carrier VietJet has also signed up for this version. 

With reporting by Reuters

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