Boeing makes $135 million pledge for 737 Max crash-related support

VIDEO: REUTERS
Boeing 737 Max planes are pictured in storage in Seattle, Washington.
Boeing 737 Max planes are pictured in storage in Seattle, Washington.PHOTO: AFP

NEW YORK (BLOOMBERG, REUTERS) - Boeing Co said on Wednesday (July 3) it would give US$100 million (S$135 million) over multiple years to local governments and non-profit organizations to help families and communities affected by the deadly crashes of its 737 MAX planes in Indonesia and Ethiopia.

The move appears to be a step toward repairing the image of the world’s largest planemaker, which has been severely dented by the crash of an Ethiopian Airlines plane in March just five months after a similar crash of a Lion Air flight in Indonesia. 

The money will go toward "education, hardship and living expenses for impacted families, community programs and economic development in impacted communities," Boeing said in a statement.

The pledge - described in the statement as an "initial outreach" - underscores the high stakes for Boeing as it navigates one of the worst crises in its 103-year history.

The Chicago-based planemaker has come under scrutiny from wary passengers, investors, customers and regulators after a pair of fatal crashes prompted the grounding of its marquee Max jet.

The offer comes as Boeing faces at least 80 lawsuits on behalf of victims of the accidents.

Many of the passengers on board the Ethiopian Airlines flight were aid workers or involved with health, food, or environmental programs. 

“If the money is spent on furthering the work of the people on that airplane it would be money well spent,” said Justin Green, a New York-based attorney representing several of the Ethiopia crash victims. 

But he said the fund would not affect his clients’ courtroom strategy: “What families really want to know is why this happened. Could this have been avoided?” 

Anton Sahadi, a representative of relatives of the Lion Air crash victims, said the families appreciated the US$100 million fund but it did not mean they would stop lawsuits.

“We will continue to fight for our rights in the courts,” he said. “Boeing is doing this to build their image back.”

Consumer advocate Ralph Nader, whose grand-niece was among those who died, also has lobbied to permanently remove the plane from service.

 
 
 
 

Settling the litigation could cost Boeing about US$1 billion, according to an estimate by Bloomberg Intelligence, although legal experts have said the payouts could be higher if evidence shows Boeing knew about flaws in the planes before the tragedies.

Settlement talks related to the first crash had been set to begin this month.

Boeing's shares have fallen about 16 per cent since March 10, when an Ethiopian Airlines crash marked the second Max accident in five months.

CONTROL SYSTEM

Boeing has struggled to contain the fallout over the accidents, which began in October when a Max jet operated by Lion Air plunged into the Java Sea. After the Ethiopian flight crashed under similar circumstances, regulators worldwide moved to ground the plane.

In both incidents, Boeing's design of a system designed to prevent aerodynamic stalls has been implicated.

Investigations into the causes for each accident have not been concluded.

At least 46 claims have been filed by families of victims in the Indonesia crash, with almost as many for the Ethiopian fatalities, court records show. The cases are all in the early stages.

Some family members of victims have been highly critical of Boeing in the aftermath of the crashes, and have attended congressional hearings and met with officials at the Federal Aviation Administration and the National Transportation Safety Board.

"We wanted to be assured that everything within the power of these agencies that can be done is being done to ensure the future safety of these planes," said Nadia Milleron, mother of victim Samya Stumo, in a June 11 press release after meeting aviation officials in Washington.

Milleron is Nader's niece.

CHARM OFFENSIVE

Boeing chief executive officer Dennis Muilenburg, who was criticised for a subdued initial response to the tragedies, has taken pains recently to express sympathy for the victims.

In Wednesday's statement, he apologised again for "the tragic loss of lives in both of these accidents" and said the situation "will continue to weigh heavily on our hearts and on our minds for years to come".

Boeing said it would work with local governments and non-profit organisations to deploy the funds.

After the Lion Air crash on Oct 29, Boeing started developing a software fix on a stall-prevention system called MCAS believed to have played a role in that disaster, as well as in the Ethiopian crash.

 The 737 MAX was grounded worldwide after the second crash and regulators must approve the fix and new pilot training before the jets can fly again.  But just last month, regulators identified a new problem that will delay commercial flight for the jets until October at the earliest. 

Boeing is in settlement talks over the Lion Air litigation and has separately offered to negotiate with families of Ethiopian Airlines victims, but some families have said they are not ready to settle, exposing the planemaker to a lengthy court battle.

“The Boeing brand is worth far more than US$100 million and the board and executive leadership understand that is what is at stake,” said William Klepper, a Columbia Business School professor.

Following an initial response that public relations experts criticised as stilted and lawyer-driven, Boeing has been on a charm offensive, with executives at the Paris Airshow last month repeatedly apologising for the loss of life.

CEO Muilenburg posts regular Twitter updates on efforts to safely return the 737 MAX to service and win back public confidence.

Robert Clifford, a Chicago-based attorney with several of the Ethiopian crash cases, suggested some of Boeing’s US$100 million pledge could be spent assisting efforts to return the remains of victims to their families. 

“These families are distraught about the effort to get back their loved ones,” Clifford said. “They want closure.” Boeing has also offered to match any employee donations in support of the families and communities impacted by the accidents through December.