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Huge penalty for Boeing after 737 debacle: $ 2.5 billion fine

The disaster surrounding the 737 Max crash plane is costing the US aviation giants dearly. The US judicial authorities accuse Boeing of “fraudulent and misleading behavior”. Investors reacted calmly.

The US Department of Justice announced on Thursday (local time) in Washington that the aircraft manufacturer agreed to fines of more than 2.5 billion dollars (2.0 billion euros) to settle criminal proceedings for fraud and conspiracy allegations in connection with the scandal.

After two crashes with a total of 346 deaths, Boeing was suspected of having brought its best-selling model series 737 Max onto the market in a rush and neglecting safety.

The US judicial authorities are now accusing Boeing, among other things, of having used misleading information to prevent the government from ensuring the safety of public air travel.

Accusation: Boeing put profit over sincerity

“The tragic crashes of Lion Air Flight 610 and Ethiopian Air Flight 302 exposed fraudulent and misleading behavior by employees of one of the world’s leading aircraft manufacturers,” said David P. Burns of the Department of Justice’s criminal justice department. Boeing’s employees put profit above honesty and withheld information from the US aviation authority FAA.

Boeing said in a statement that the Justice Department’s penalties involve the behavior of two ex-employees. This would have deliberately misled an FAA committee responsible for pilot training about changes to the control system of the 737 Max called MCAS. The now closed settlement shows how important Boeing’s obligations to the supervisory authorities are, wrote CEO Dave Calhoun in a memo to the workforce.

Boeing shares are only slightly in the red

Both Boeing and the FAA came under heavy criticism in the wake of the accidents in October 2018 and March 2019. The main cause of the accident is considered to be defective Boeing control software that was supposed to be repaired quickly. Instead, it took over a year and a half for the FAA to re-authorize the unfortunate pilot, who was banned from taking off because of the crashes, in November.

The high penalty is likely to hurt the Boeing Group, which has been badly hit by the 737 Max scandal and the Corona crisis, but compared to the immense costs that the debacle over the most important aircraft type of the Airbus rival has already caused, the amount is still relatively manageable. Investors reacted calmly, Boeing’s shares initially only fell slightly after the trading hours.

Reduction of 30,000 jobs planned by the end of 2021

The 737-Max crisis has already put Boeing under massive financial pressure. Numerous orders were canceled and Boeing incurred billions in extra costs. The fourth quarterly loss in a row was incurred in the three months to the end of September.

The group is reacting to the tight financial situation with drastic cost-cutting measures and wants to reduce its number of employees to around 130,000 by the end of 2021. For comparison: at the beginning of 2020 Boeing still had around 160,000 employees.

Terrible climax of a “culture of hiding”

Before the punishment by the Justice Department, a committee of inquiry of the US Congress had already expressed severe criticism of Boeing. “The Max crashes weren’t the result of a single failure, technical glitch, or poorly handled event,” the final report said.

“It was the terrible culmination of a series of false technical assumptions by Boeing engineers, a lack of management transparency and grossly inadequate oversight by the FAA.” Boeing was also accused of a “culture of concealment” in the report.

Money should go to victims

Most of the fines are said to flow to airlines with $ 1.77 billion that were damaged as Boeing customers. According to the Justice Department, $ 500 million will go to a compensation fund for relatives of crash victims.

On top of that, there was $ 234.6 million imposed on the company by law enforcement agencies as an additional fine. It remains to be seen whether Boeing is off the hook. There are also a number of lawsuits against the company because of the 737 Max crashes.

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