Boeing intends to plead guilty to criminal charges that it defrauded the Federal Aviation Administration under a deal that would see it invest nearly half a billion dollars in quality improvements and be subject to three years of compliance monitoring.

Notably, however, the plea deal reached with the US Department of Justice (DOJ) imposes on Boeing what observers describe as an insignificant fine. It also fails to mandate that the airframer undertake the type of broad leadership shake-up viewed by some experts as necessary to fix its problems.

“I think this actually worked out better for the travelling public than people realise,” says aviation safety consultant and former National Transportation Safety Board (NTSB) member John Goglia. “Now, they have a dollar value that they have to invest in the operation, and they have a panel of overseers to make sure they follow through.”

Boeing's 737 Renton site 25 June 2024

Source: Jennifer Buchanan/Seattle Times

Investigators have focused on repeated quality problems arising at Boeing’s 737 production facility in Renton, Washington

What would have made the plea deal more effective? “Replacement of the whole senior management,” Goglia adds.

Others agree. “It… represents a bit of a lost opportunity,” says AeroDynamic Advisory aerospace consultant Richard Aboulafia. He wishes the DOJ had required Boeing “make meaningful changes to [its] senior leadership team”.

The DOJ revealed on 7 July that it and Boeing reached an agreement under which the company would plead guilty to the fraud charges. Boeing and the DOJ plan to file the plea agreement, which requires court approval, with the US District Court for the Northern District of Texas by 19 July, the government says.

“We can confirm that we have reached an agreement in principle on terms of a resolution with the Justice Department, subject to the memorialisation and approval of specific terms,” Boeing says.

The DOJ had indicted Boeing on fraud charges in 2021. The company initially sidestepped prosecution by signing a deferred prosecution agreement (DPA). That deal set a total possible fine for Boeing at $487.2 million but required the company pay only half – $243.6 million. It also required the company make internal changes to ensure future compliance with fraud laws.

In May, following the January in-flight failure of a 737 Max 9’s mid-cabin door-plug, the DOJ said Boeing had violated the DPA’s compliance requirements and was therefore again subject to prosecution.

The proposed guilty plea deal would require Boeing pay another $243.6 million – the other half of the total fine. It would also subject Boeing to a three-year probation period during which the manufacturer would be supervised by an “independent compliance monitor” and be required invest $455 million in “compliance and safety programmes”. That investment would amount on an annual basis to 75% more than the company’s compliance expenses this year, the DOJ’s filing says.

Additionally, the deal would require Boeing pay restitution, in an amount determined by the court, to families of people killed when two 737 Max jets crashed in 2018 and 2019.

Ethiopian 737 Max crash scene

Source: Mulugeta Ayene/AP/Shutterstock

Debris from the Ethiopian Airlines 737 Max 8 that crashed after take-off from Addis Ababa in March 2019, killing all 157 people aboard

Financial analyst Ken Herbert with RBC Capital Markets says the $243.6 million fine will have “a limited financial impact” on Boeing, which generated $78 billion in 2023 revenue.

“The fine is insignificant,” adds Aboulafia.

Goglia says the $455 million in required compliance investments could prompt Boeing to hire more quality inspectors at its facilities and those of its top supplier Spirit AeroSystems, which produces 737 fuselages.

While the two 737 Max crashes resulted partly from engineering and certification issues, Boeing’s current problems involve quality and safety inspections, says Goglia. Boeing needs “more quality people… to make sure what comes in the door meets specifications” and that all components are installed according to procedures.

Boeing had trimmed its number of inspectors in recent years, as had some suppliers due to intense financial pressure from the airframer, Goglia says. He notes that inspectors are prime targets for cost cutting because they do not actually produce anything.

To the frustration of some, the plea agreement does not require Boeing to implement a senior leadership overhaul. Some industry and safety analysts view the company’s current leaders, starting with chief executive David Calhoun, as a big part of the problems. They say Boeing’s management for years pursued a strategy that prioritised profits and shareholder returns above all else.

David Calhoun

Source: Aaron Schwartz/NurPhoto/Shutterstock

Some view Boeing chief executive David Calhoun as part of the problem

“The people that have been there for the last 10 years took their eye off the ball, and it’s probably unreasonable to expect them to put their eye on the ball again,” says Goglia. “Over time, that tone and attitude – that the only thing that counts is money – has filtered down… [and] has had such a dramatic affect on the shop floor.”

Aboulafia thinks the DOJ and US government should have pushed for leadership changes under the plea deal.

“This country does not do industrial policy very well,” he says. “This would have been one of the few levers the government could have used to produce change.”

While Boeing could theoretically be barred from government work due to a felony conviction, analysts do not anticipate the company will lose those valuable contracts.

“We expect the government to grant Boeing a waiver, given the company’s size and importance to the defence industry,” Herbert writes.

Families of the 346 people killed by the two 737 crashes oppose the proposed plea deal and intend to urge the judge to reject the plan, according to a 7 July court filing from Paul Cassell, an attorney representing them.

The plea “unfairly makes concessions to Boeing that other criminal defendants would never receive and fails to hold Boeing accountable for the deaths of 346 persons”, the filing says. “Boeing’s crime may properly be considered the deadliest corporate crime in US history.”

The DOJ’s 2021 indictment said Boeing defrauded the US government by misleading the FAA’s aircraft evaluation group about the 737 Max’s Maneuvering Characteristics Augmentation System (MCAS).

Boeing added MCAS to the 737 Max to counter its tendency, due to having larger engines than the 737NG, to pitch up in certain conditions. MCAS pushes the nose down.

While the FAA knew about the existence of MCAS, Boeing did not inform the agency’s flight-training division that it had expanded the system to work at speeds between Mach 0.2-0.8, up from an initial range of M0.6-0.8.

Due to not having full information, the FAA determined that pilots transitioning from the 737NG to the Max needed only “Level B” differences training – they needed only complete computer-based courses.

Investigators say MCAS contributed to the 2018 crash of a Lion Air 737 Max 8 and the 2019 crash of an Ethiopian Airlines Max 8. In each case, MCAS put the jets into dives from which the pilots were unable to recover.