Boeing, initially projected to bring in total revenue in 2019 of $110 billion, has now cut its 737 Max production line by 20% in response to dropping sales for its deadly aircraft. Airlines are holding off on orders for Boeing’s 737 Max – the latest sign of how deeply the company’s best-selling jet has been thrown into crisis. Boeing has released data showing that only 10 of the planes were ordered in the first two months of 2019. There were no orders in March, the month that a 737 Max jet flown by Ethiopian Airlines pilots crashed in that country, killing everyone aboard.
For comparison, there were 112 orders for the plane in the first quarter of 2018. At that time, Southwest Airlines had ordered 40 of the jets, while Ryanair ordered 25. Although 737 sales have tanked, Boeing is doing just fine; orders for Boeing’s other commercial jets actually increased slightly. The company sold 85 other commercial jets last quarter, compared to 68 a year earlier.
In a significant development, Boeing’s own shareholders are now accusing the company of fraud in connection with the 737 defects. A new lawsuit accuses the company of defrauding shareholders by concealing safety deficiencies in its 737 MAX planes before the two fatal crashes that led to their worldwide grounding. The proposed class action filed in Chicago federal court seeks damages for alleged securities fraud violations. Lead plaintiff Richard Seeks filed the lawsuit. According to the complaint, Boeing “effectively put profitability and growth ahead of airplane safety and honesty” by rushing the 737 MAX to market to compete with Airbus SE, while leaving out “extra” or “optional” features designed to prevent the Ethiopian Airlines and Lion Air crashes. The lawsuit claims Boeing concealed the risks of the 737-Max design, including “the danger of the increased pitchup tendency of the aircraft.”
Although Boeing has promised a software patch or fix for its defective MCAS flight system, recent testing revealed that more work is necessary before the update can be released. Further, many experts in the industry are now questioning whether the 737 Max can be saved through a software patch or if the plane is simply too plagued with defects.
Ethiopian Airlines crash findings
Ethiopian Transport Minister Dagmawit Moges revealed findings on April 4 from the preliminary report regarding the deadly crash of Ethiopian Airlines Flight 302 last month. This was the second deadly crash involving a Boeing 737 MAX 8 in five months. Beasley Allen’s Mike Andrews, who focuses his practice on aviation litigation, says:
Given the information made available since the second crash of the aircraft, the findings are not surprising. The similarities of the Ethiopian Airlines crash and the Lion Air crash last October are more than just striking. They both point to the malfunctioning Maneuvering Characteristics Augmentation System (MCAS) or the automated flight control system. Boeing knew the new system could cause problems and failed to provide adequate information about or training on handling the new system to pilots. The company could have prevented the 346 deaths that occurred as a result of the two crashes.
Initial findings include:
- No evidence of foreign object damage, which conflicts with reports that a foreign object damaged the angle of attack sensor and engaged the MCAS anti-stall system.
- No indication of a “structural design problem.”
- The MCAS flight control system was malfunctioning just before the aircraft crashed. Similar to the pattern experienced by the aircraft involved in the Lion Air Flight 610 crash last October, the Ethiopian Airlines aircraft also experienced repetitive uncommanded aircraft nose-down events.
Investigators also discovered that Ethiopian Airline pilots initially followed Boeing’s protocol for handling the MCAS during an uncommanded aircraft nose-down scenario. The pilots turned off the flight control system that was automatically forcing the plane’s nose down shortly after takeoff. The crew couldn’t get the aircraft to climb, so they were forced to turn the system back on and to rely on other steps but were unable to regain control of the plane before it crashed.
Concerns over the aircraft’s safety, specifically the malfunctioning MCAS automated flight control system, led to the worldwide grounding of the planes until Boeing can finalize a software fix. A fix was promised by the end of last month, but earlier this week Boeing officials reported the fix would take longer to finalize than it expected.
Scrutiny of the MCAS has also raised questions about the process used by the Federal Aviation Administration (FAA) in approving the system. Daniel Elwell, the FAA’s Acting Administrator, defended the process during a Congressional hearing last month.
Can 737 Max software update overcome plane’s defects?
The 737 MAX has been grounded worldwide since shortly after the Ethiopian Airlines crash. Boeing claims the problem rests in the new automated flight control system called the Maneuvering Characteristics Augmentation System or MCAS. Boeing surreptitiously incorporated the system into the new design and failed even to disclose its existence to pilots. The company began developing a “fix” for the MCAS software following the Lion Air crash last October. The FAA told Boeing the fix was to be implemented by the end of March; however, the final implementation is expected to take much longer and could require a more extensive overhaul of the 737 MAX design, CNN reported.
In mid-April, U.S. regulators moved the software update or the solution that Boeing promises will “fix” the problems with the aircraft one step closer to final approval. The FAA Flight Standardization Board determined the software package is “operationally suitable,” according to CNBC. However, critics question the FAA’s involvement in approving the software update and whether the update will be enough to fully address the aircraft’s defects.
The FAA’s credibility and reputation, especially regarding its certification process for aircraft, have taken a hit in the aftermath of the two deadly crashes. Experts, law and policymakers, and leaders worldwide have questioned the certification process and whether industry insiders such as the 737 MAX’s maker, Boeing, had too much influence over the process.
While aviation in the U.S. has enjoyed increasing power and authority over industry regulations and approval of its products for decades, deregulation under the Trump Administration has intensified. After years of delaying the FAA’s Reauthorization Bill, the law that establishes funding for the FAA, lawmakers finally passed the bill and President Trump signed it into law last October. It gave companies more influence over rules that determine the FAA’s role in approving aircraft designs, the Washington Post reported. The law also created an “advisory committee” that includes industry representation and gives the committee authority to create metrics the FAA must incorporate in its processes. Boeing claimed to spend $15 million on its federal lobbying efforts to push the provisions through the legislative process.
Last month, Senator Roger Wicker (R-MS), as head of the Senate Commerce, Science and Transportation Committee, informed FAA acting director Dan Elwell that the committee was opening an investigation regarding whistleblower allegations that the FAA did not handle the certification of the 737 MAX 8 properly. This investigation is in addition to an ongoing criminal probe that is being conducted jointly by the U.S. Department of Transportation’s Office of Inspector General and the U.S. Department of Justice’s Criminal Division also regarding the certification process.
As this Report previously explained, during what was essentially a self-certification process, Boeing hid the defects of the plane and the MCAS in the report the aircraft maker sent to the FAA signing off on the system. Problems with the MCAS is only part of the challenges facing Boeing. In the weeks following the Ethiopian crash, other problems surfaced.
The two major U.S. airlines that are the biggest operators of the 737 MAX, American Airlines and Southwest Airlines, have begun inspections of the 737 MAX engines. Possible carbon buildup around the fuel nozzles could damage some engine parts, Bloomberg reported. Engine manufacturer, CFM International, has recommended that operators inspect and possibly replace components of the Leap-1B models used on the 737 MAX to prevent damage to the engines.
Additionally, the FAA has ordered Boeing to fix yet another problem with software. This latest software problem affects the flaps and other flight control hardware that is critical to safety, the Washington Post reported.
In its analysis of the proposed software update, the FAA Flight Standardization Board also recommended that pilots receive additional computer-based training for the MCAS but stopped short of recommending additional costlier simulator training, according to the LA Times. Airlines and global regulators like Canada’s Transport Minister Marc Garneau disagree, Reuters reported. “Simulators are the very best way, from a training point of view, to go over what could happen in a real way and to react properly to it,” Garneau said.
It is this growing list of problems combined with Boeing’s insistence on putting profits ahead of safety that support critics questioning the efficacy and transparency of the “fix” being hailed by Boeing and the FAA.
For more information about aviation litigation, contact Mike Andrews. Mike has written a book for lawyers in which he discusses the complexities of aviation crash investigation and litigation. He is currently leading the firm’s efforts investigating the two crashes, and representing the family of a victim of the Ethiopian Airlines crash.
Sources: CNN, CNBC, Washington Post, U.S. Senate Committee on Commerce, Science, and Transportation, Seattle Times, Bloomberg, LA Times and Reuters