Boeing will pay $2.5 billion to settle a criminal conspiracy charge for misleading regulators about the safety of its 737 Max aircraft, which suffered two deadly crashes shortly after entering airline service.
The Justice Department said Thursday that Boeing agreed to the settlement that includes money for the crash victims’ families, airline customers and a criminal fine.
Prosecutors said Boeing employees concealed important information about the plane from the Federal Aviation Administration, then covered up their actions.
“The misleading statements, half-truths, and omissions communicated by Boeing employees to the FAA impeded the government’s ability to ensure the safety of the flying public,” said Erin Nealy Cox, the U.S. Attorney in Dallas.
"Boeing’s employees chose the path of profit over candor," said David Burns, acting assistant attorney general for the Justice Department’s criminal division.
Boeing CEO David Calhoun said settling the charge “is the right thing for us to do -- a step that appropriately acknowledges how we fell short of our values and expectations.” He said it would remind Boeing employees to be transparent with regulators.
The government will drop the criminal charge after three years if Boeing follows the terms of the settlement.
Boeing began working on the Max in 2011 as answer to a new, more fuel-efficient model from European rival Airbus. Boeing admitted in court filings that two of its technical pilot experts deceived the FAA about a flight-control system called the Maneuvering Characteristics Augmentation System, or MCAS, that could point a plane's nose down if sensors indicated the plane might be in danger of an aerodynamic stall — that it might fall from the sky.
Boeing downplayed the significance of MCAS and didn't mention it in airplane manuals. Most pilots didn't know about it.
The first airlines began flying the 737 Max in mid-2017. On Oct. 29, 2018, a Max operated by Indonesia’s Lion Air plunged into the Java Sea. The FAA let the Max keep flying, and on March 10, 2019, another Max operated by Ethiopian Airlines crashed nearly straight down into a field. In all, 346 people were killed.
On both flights, MCAS was activated by a faulty reading from a single sensor. The system repeatedly pushed the planes' noses down, and pilots were unable to regain control.
After the planes were grounded worldwide, Boeing changed MCAS so that it always uses two sensors, along with other changes to make the automated system less powerful and easier for pilots to override. The FAA ordered other changes, including the rerouting of some wiring to avoid potential dangerous short-circuiting.
In November, the FAA approved Boeing's changes, and several carriers including American Airlines have resumed using the planes.
Under the settlement announced Thursday, Boeing will pay a $243.6 million fine, $1.77 billion in compensation to airlines that were unable to use their Max jets while they were grounded, and $500 million into a fund for the families of passengers who were killed in the crashes.
Boeing said in a regulatory filing that it will take a $743.6 million charge against earnings because of the settlement.
The crashes and grounding of the Max, Boeing’s best-selling plane, has plunged the Chicago-based company into its deepest crisis. It has led to billions in losses and resulted in the ouster of former CEO Dennis Muilenburg in December 2019.
David Koenig can be reached at www.twitter.com/airlinewriter