Boeing fined US$6.6 million for failing to comply on safety accord

Boeing last month separately agreed to pay US$2.5 billion to settle a criminal case against it by the US Justice Department. PHOTO: REUTERS

WASHINGTON (BLOOMBERG) - Boeing Co. has agreed to pay US$6.6 million (S$8.76 million) in penalties to US regulators after failing to comply with a 2015 agreement to improve its safety processes.

The Federal Aviation Administration (FAA) on Thursday (Feb 25) announced the penalties in a press release. The company agreed to pay US$5.4 million to settle earlier cases brought against the company and another US$1.21 million for two more recent cases, the agency said.

"Boeing failed to meet all of its obligations under the settlement agreement, and the FAA is holding Boeing accountable by imposing additional penalties," FAA Administrator Steve Dickson said in a press release.

"I have reiterated to Boeing's leadership time and again that the company must prioritize safety and regulatory compliance, and that the FAA will always put safety first in all its decisions."

Boeing fell 5.6 per cent to US$216.45 at the close in New York, the biggest drop on the Dow Jones Industrial Average amid a broad rout in US stocks.

The agreement comes only months after Boeing's best-selling plane, the 737 Max, was ungrounded after a 20-month span that prompted lawmakers and others to denounce the company's safety culture and led to billions of dollars in lost sales and other costs. During that time, the FAA withheld what had been routine authority for the company to perform such things as approvals of planes coming off the assembly line.

Boeing last month separately agreed to pay US$2.5 billion to settle a criminal case against it by the US Justice Department. The company was accused of defrauding the government by concealing information about the 737 Max. Some on Wall Street and in Congress said the penalty was light because most of it was money the company had already agreed to pay to airlines and accident victims' families.

Among the issues cited on Tuesday by FAA was "undue pressure" placed on Boeing employees who were deputised by the government to sign off on whether design changes met federal regulations. Those employees are supposed to act independently under FAA rules.

Boeing previously paid US$12 million in civil penalties as an initial condition of the 2015 agreement.

The company at that time settled 13 separate investigations underway by FAA. They ranged from issues that arose during the certification of new planes to alleged sloppiness in the company's production facilities.

As part of that agreement, the company agreed to improve its safety processes and prioritise complying with FAA regulations, the agency said. It agreed to additional penalties if it failed to do so.

Boeing failed to meet some of its "improvement targets" and "some company managers did not sufficiently prioritise compliance with FAA regulations," the FAA said in the release.

Designated employees

One of the core allegations related to how Boeing operated what is known as its Organisation Designation Authorisation, in which hundreds of employees review designs and perform other functions in behalf of the government.

Such programs have been highly controversial since the two 737 Max crashes because critical decisions were made by the designated employees to approve what was later determined to be a flawed design. A total of 346 people died in the crashes, which were triggered in part by a flight system that repeatedly tried to dive after a malfunction.

Congress passed a law in December beefing up how FAA oversees Boeing's designated employee program.

"We are strengthening our work processes and operations to ensure we hold ourselves accountable to the highest standards of safety and quality," Boeing said in a statement.

The company added that it "believes that the announcement today fairly resolves previously-announced civil penalty actions while accounting for ongoing safety, quality and compliance process improvements."

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