What next for Boeing? Aviation law experts weigh in

Boeing has operated within a virtual duopoly along with Airbus in the jet airliner market since the 1990s when both companies merged with former rival companies. Due to their size and ability to harness the most up-to-the-minute technology, increasing fuel efficiency and cost, there is little desire by governments or the travel industry to see legal action that has dire consequences for aviation workers, including manufacturers, and travellers.

John Ribbands is the President of the Aviation Law Association of Australia & New Zealand. He has been involved in aviation law for more than 35 years, and has a Masters in Aviation in addition to personal experience flying and skydiving.

“Boeing had a first-class reputation for engineering excellence until they merged with [smaller competitor] McDonnell Douglas in 1997. Bringing a new team of executives in, they were driven by trying to escalate the share price at the expense of the quality of the product they were building. It resulted in a series of engineering defects and less than ideal manufacturing,” he tells LSJ.

On January 5, the Boeing 737 MAX 9 aircraft was departing Portland, Oregon for Ontario, California when the door plug came off about 20 minutes into the Alaska Airlines flight. The door plug is used to seal a part of the plane that could be used as a door, ensuring it remains closed if a door hasn’t been installed.

The event was filmed by passengers, showing mobile phones, a child’s shirt and a pilot’s headset being sucked out of the plane as the pressure altered, triggering oxygen masks to descend. Pilots undertook an emergency landing in Portland, and no major injuries were reported, but the event has resulted in investigations by both the Federal Aviation Authority (FAA) and the National Transportation Safety Board (NTSB).

The latest incident is another blow to Boeing’s public repute, which hasn’t prevented the company from selling 1,576 jet airliners in 2023, an increase of 70 percent on annual sales according to Reuters. However, its sales were outpaced by the record-breaking sales of Airbus in 2023.

“I’m not certain that Boeing has managed to maintain its reputation,” says Ribbands. “It has been tarnished. It’s a global behemoth with only one major competitor in Airbus. It’s the struggle between Airbus and Boeing for primacy that has seen the desire for profits outweigh the desire to ensure the efficacy of aircraft being produced.”

He adds, “Part of the 737 MAX problems resulted from Boeing being taken by surprise by the advances in Airbus and its European rival’s escalation to a preeminent aircraft supplier. The creation of the 737 MAX came about to try to ensure sustainable fuel usage, cut operation costs, and to improve the environmental impact.

“Their idea was to use an older aircraft with newer engines and the engineering adjustments resulted in the engines having to be moved further forward, affecting the centre of gravity, and that’s what led to the software which overrode the pilot control, which ultimately caused those crashes we’ve heard so much about.”

The recent incident not only grounded hundreds of Boeing planes globally, but it also happened right as Boeing seemed to be on the other side of a deferred prosecution agreement (DPA) with the US Justice Department (DOJ). That DPA agreement in 2021 related to crashes between 2018 and 2019. The criminal charge against Boeing was deferred on the basis that Boeing prove its diligent compliance.

Former federal judge Paul Cassell represents the families of victims of those crashes. He is requesting that the DOJ avoid dismissing the criminal charge against Boeing in light of the door incident this month. It could result in an extended deferral period, or the prosecution of the criminal charge.

As reported in Fortune, Cassell said, “The public was promised in this DPA that Boeing would have a renewed commitment to safety and new procedures put in place and new oversight. The reality is, and people on that Alaska Airlines flight know, that it doesn’t look like the renewed commitment or enhanced commitment to safety that the DPA promised is being delivered on.”

Fortune reports that “almost all corporate deferred prosecution cases result in charges being dismissed”.

However, if the Justice Department determines Boeing has not met the terms of the deal, the agreement could be extended for one or more years. On the other hand, if prosecutors find that Boeing breached the agreement, they can charge the company with the conduct that it admitted to as part of the DPA deal reached on January 6, 2021.

The Justice Department is yet to comment, but it has six months to determine whether Boeing has fulfilled the compliance obligations imposed by prosecutors. If it deems that Boeing complied with its duties, the US government would file a motion to dismiss a criminal charge against Boeing, one count of conspiring to defraud the United States.

White-collar criminal lawyers were highly critical of the original deal in 2021, which resulted in a penalty that wouldn’t have hit Boeing’s coffers too hard. Prosecutors said the fine was at the low end of the applicable sentencing guidelines range.

The Columbia Law School expert John Coffee wrote a 2022 paper Nosedive: Boeing and the Corruption of the Deferred Prosecution Agreement, in which he was scathing of the DOJ’s predilection for DPAs.

Coffee wrote, “DPAs are manipulated so that both the prosecution and the defendant gain goals important to them—at the cost of denying transparency to the public. In the Boeing case, the prosecution won a symbolic victory with an illusory $2.5 billion settlement.”

He added, “The recurrent problem is that major corporations, using major well-connected law firms, can now flank the normal standards of the criminal justice system.”

Passengers launch lawsuit

On 11th January, Seattle-based law firm Stritmatter Kessler Koehler Moore filed a class-action lawsuit against The Boeing Company on behalf of the passengers on Alaska Airlines Flight 1282.

Representing the passengers, Stritmatter Kessler Koehler Moore attorney Daniel Laurence  said, the incident “is one more disturbing black mark on the troubled 737-MAX series aircraft.”

Between 2018 and 2019, two Boeing 737 MAX aircrafts crashed within a five month period, grounding the planes around the world. On October 29 2018, Lion Air flight JT610 departing Jakarta for Pangkal Pinang, Indonesia crashed just off the coast of Java, resulting in the deaths of all 189 people only 13 minutes into the flight. On March 10, flight 302 from Addis Ababa, Ethiopia to Nairobi, Kenya crashed soon after departure. All 157 people on board were killed.

The second crash resulted in Boeing MAX planes being grounded globally for 20 months.

Both planes were new models at the time, the Boeing 737 MAX 8 which has been on the market since 2017. Questions were raised about a potential manufacturing error relating to the plane’s Leap-1B engines, the rear elevators, and the planes’ control problems while operating at high speed.

On June 21 2019, more than 400 pilots launched a class action – managed by Chicago law firm PMJ PLLC and Australian firm International Aerospace Law and Policy Group (IALPG) against Boeing via a Statement of Claim in a Chicago court. The claim puts forward that Boeing engaged in an “unprecedented cover-up of the known design flaws of the MAX, which predictably resulted in the crashes of two MAX aircraft and subsequent grounding of all MAX aircraft worldwide.”

It was one of many class action lawsuits taken against Boeing by shareholders and the families of victims respectively. In November 2021, Boeing company directors present and former reached a $US237.5 million settlement with shareholders over shortfalls in safety compliance.

Boeing charged with conspiracy to defraud

In January 2021, Boeing entered an agreement with the Department of Justice in response to a criminal charge related to conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG) concerning the 737 MAX plane. Boeing was charged with one count of conspiracy to defraud the United States, however under a deferred prosecution agreement (DPA), Boeing paid a $US2.5 billion fine. That amount was divided between a monetary penalty ($US243.6 million), compensation to customers ($US1.77 billion), and a fund for the Ethiopian Airlines and Lion Air crash victims’ heirs, relatives and legal beneficiaries ($US500 million).

Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division said in part, “The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers. Boeing’s employees chose the path of profit over candour by concealing material information from the FAA concerning the operation of its 737 MAX airplane and engaging in an effort to cover up their deception. This resolution holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and hopefully provides some measure of compensation to the crash-victims’ families and beneficiaries.”

Boeing admitted in court documents that it had deceived the FAA AEG about a fundamental aircraft part called the Manoeuvring Characteristics Augmentation System (MCAS). The MCAS plays a vital role in the flight control system of the Boeing 737 MAX. Subsequently, airplane manuals and pilot-training materials for US airlines lacked information about MCAS. It is believed that MCAS played a role in the crashes of both the Ethiopian Airlines and Lion Air flights.

As required by the DPA, Boeing agreed to continue to cooperate with the Fraud Section in any ongoing or future investigations and prosecutions, and to strengthen and extend its compliance program. Further, Boeing was required to submit yearly reports to the Fraud Section relating to its remediation efforts, the results of its testing of its compliance program, and to report on the design, implementation, and enforcement of its compliance program.

Boeing charged with violation of the False Claims Act

Boeing agreed to pay $US8.1 million to resolve allegations that it violated the False Claims Act by submitting false claims and making false statements in connection with contracts with the US Navy to manufacture the V-22 Osprey, a tiltrotor military aircraft between 2007 and 2018.

The US government contended that Boeing failed to perform required monthly testing and did not comply with additional requirements related to the testing.

The civil settlement resulted from claims brought by former Boeing employees under the whistleblower provisions of the False Claims Act. The whistleblowers receive $US1,539,000 in connection with the settlement under the qui tam provisions.

In April 2021, electrical problems caused Boeing to ground part of its Boeing 737 MAX fleet. In October 2022, the FAA informed Boeing that documents required as part of its 737 MAX 7 certification review were incomplete or lacked full assessment. By April 2023, Boeing had put a temporary pause on deliveries of 737 MAXs owing to noncompliant fittings and by June last year, Boeing announced MAX 7 deliveries would be delayed until 2024, with subsequent supplier quality problems emerging in the following months.

Boeing is ‘too big to allow to fail’

“Companies like Boeing operate in their own sort of world,” Ribbands says. “It is a significant enterprise in the American marketplace and I suspect that there will always be a recognition that Boeing is an essential enterprise and reflects the American identity. To some extent, it’s a signpost or indicator of the success of the American economy. It’s a company that can’t be penalised to such an extent that it gets shut down through impacts on its capacity to trade. If major fines or criminal sanctions were imposed against key executives and the like, it might destroy consumer confidence in Boeing in the aviation marketplace.”

The dilemma faced by the DOJ is that Boeing is “too big to allow to fail”, says Ribbands.

“I think the DOJ and American regulators need to strike a balance between being seen to provide punishment, but also provide the opportunity for Boeing to fly the flag for all things aviation.”

As for the justice element, he says, “You see instances of smaller companies that are fraudulent and deserve to be put out of business, but Boeing is so enormous that you can’t really blame one, two or three people. It’s a corporate culture question, and it starts at the top. The problems that Boeing has experienced over the years since the merger [in 1997] and a change in culture from one of primacy and pride in manufacturing to focusing on the share price, has led to a decline in quality. If the ethos of the company was returned to [the decades-old advertising slogan] ‘if it’s not Boeing, I’m not going’ and it upheld its priority on manufacturing excellence, then that would be a good thing for the company and for consumers generally. But it’s not going to happen overnight.”

Australia and Boeing 737

None of Australia’s airlines fly the MAX 9 model involved in the latest incident and, following a two year ban on the MAX 8, Australia’s regulator, the Civil Aviation Safety Authority (CASA), has deemed them safe. No international airlines fly the MAX 9 on Australian routes, but the MAX 8 is a highly fuel-efficient model and is favoured by local airlines for its environmental and cost efficiency. Bonza has six MAX 8 aircraft, Virgin has three with an order of 11 due to arrive throughout 2024 and Virgin is also expecting to receive an order of 25 MAX 10 models at the end of 2025.  The MAX 10 are yet to be approved by the regulator.

Ribbands says, “My own experience for what it’s worth is that by and large, travelling public aren’t that fazed. We see on the news all the time that airlines have put in orders for big sales. There has never been a safer time in the history of aviation than at the moment. When there’s an aircraft accident there are headlines all over the world, but in terms of the number of aircraft flying and the number of passengers travelling, the aviation industry record is currently at its historical best.”