Shares of Boeing Co (NYSE: BAC) lowered after agreeing to pay just over $200 million in fines for the two fatal crashes of its 737 MAX aircraft. The settlement was reached after the planemaker, and its former chief executive officer Dennis Muilenburg admitted to deceiving investors.
Boeing Co History
The SEC has stated that Muilenburg, who resigned from Boeing in 2019, will pay a $1 million penalty, while Boeing will pay a total of $200 million. Neither party has admitted or denied the SEC’s accusation that they each made “materially false public statements following crashes of Boeing Co (NYSE: BAC) airplanes in 2018 and 2019.” Instead, both parties said they would not comment further on the matter.
Following a criminal investigation conducted by the United States Department of Justice, Boeing has already agreed to $2.5 billion in fines and compensation. This comes after the company publicly admitted that its software system was responsible for two fatal crashes involving the 737 MAX 8 in April of this year.
The aircraft manufacturer has stated that the Maneuvering Characteristics Augmentation System, or MCAS, was activated in both the fatal crash of Ethiopian Airlines Flight 302 in March of 2019. This resulted in 157 deaths and the Lion Air 610 disaster in Indonesia in early October of 2018, which resulted in the deaths of 189 people. Both tragedies were caused by the activation of the MCAS in response to “erroneous angle of attack information.”
The Securities and Exchange Commission (SEC) stated that after the first tragedy involving Lion Air, “Boeing and Muilenburg knew that MCAS constituted an ongoing aviation safety risk, but they nonetheless told the public that the 737 MAX airplane was ‘as safe as any that has ever flown the skies.’”
According to Gary Gensler, Chairman of the Securities and Exchange Commission (SEC), “it is especially critical that in times of crisis and tragedy, public firms and leaders deliver complete, fair, and transparent disclosures to the markets.” “Both the Boeing Company and its previous chief executive officer, Dennis Muilenburg, could not fulfill this fundamental responsibility.”
In early afternoon trading on Friday, Boeing Co (NYSE: BAC) shares were marked 5.6% down to change hands at $130.72 per, extending the stock’s year-to-date drop to almost 35% if it continued.
Although the Boeing 737 MAX has been cleared for takeoff and landing in the United States and a significant number of other markets around the world, it is still not allowed to fly in China.
The Civil Aviation Authority published an “airworthiness directive” on December 2 last year, which provided instructions to airline operators regarding what changes are required from the 737 MAX for the planes to be included in fleet operations. Even though months of negotiations have taken place, the CAA has not yet issued final approval.
Last week, Boeing CEO Dave Calhoun stated that he believed there was “a chance” that regulators would clear the 737 MAX 10 before the end of the year. However, Boeing Co (NYSE: BAC) CFO Brian West indicated that the company could remarket’ or sell some of the 140 planes destined for China to other customers worldwide if regulators continue to delay its approval. In other words, the company could sell some of the aircraft to different customers worldwide.
Featured Image: Megapixl © Flynt
Author Valerie Remorosa