SEATTLE (Reuters) – Boeing Co asked a Delaware court to throw out a shareholders’ lawsuit over the safety of its 737 MAX, saying the board engaged in “robust and well-established” oversight of the design and certification of the plane.
In an amended complaint unsealed in February, New York State Comptroller Thomas DiNapoli, who heads the state pension fund, and other investors argued that Boeing’s board breached its fiduciary duties and acted with gross negligence by failing “to monitor the safety of Boeing’s 737 MAX airplanes.”
The lawsuit, filed in Delaware Chancery Court, also alleges that the board did not develop any tools to evaluate and monitor airplane safety until after both 737 MAX crashes and the fleet was grounded.
In its motion to dismiss the complaint, made public on Monday, Boeing said the plaintiffs ignore “the robust systems that had long been in place” to keep the board informed about significant risk issues.
“Boeing’s Directors maintained this high scrutiny, moreover, during a period in which commercial aircraft, and Boeing’s in particular, achieved ever higher levels of safety,” Boeing said, “a trend that cannot be squared with Plaintiffs’ simplistic narrative about a ‘safety-engineering culture’ that had been ‘intentionally dismantled.’”
Boeing had management briefings at the board and an internal corporate audit group to evaluate risks, as well as a mechanism to receive reports on employee ethics and compliance complaints, Boeing said.
A Boeing representative did not immediately respond to a request for comment.
A lawyer representing the plaintiffs declined to comment.
SEATTLE (Reuters) – Boeing Co has named veteran engineer Ed Clark to be the head of its 737 MAX jetliner program, according to internal memo sent to employees on Friday.
Replacing Walt Odisho, who is retiring after being plucked from the auto industry to help Boeing boost productivity, Clark steps into the role as the U.S. planemaker works to clear an inventory of hundreds of 737 MAX aircraft and rebuild its image with passengers after the nearly two-year MAX grounding following fatal crashes.
This week marked the second anniversary of the second accident, in Ethiopia, with a final investigative report expected any day.
Clark, who was chief mechanic and engineer for Boeing’s cash cow narrowbody program, will run the sprawling manufacturing hub at Renton, Washington.
Clark is the fifth person in four years to take the helm of the program, which has over the years grappled with quality shortfalls, parts shortages and then the safety ban following the crashes.
Mark Jenks, vice president in charge of airplane programs, announced the change in a Friday memo to employees.
The move was reported earlier by Bloomberg Business
Airbus is canvassing airline support for a potential freighter version of its A350 passenger jet, targeting a key stronghold of U.S. rival Boeing as e-commerce lifts demand for transported goods, people familiar with the matter told Reuters.
The jet would be the first freighter spin-off of the latest generation of carbon-fibre jets and help stabilise output of wide-body jets that have been badly hit by the COVID-19 crisis.
But a launch depends on identifying enough buyers willing to take a punt on fickle cargo demand in the midst of the aviation industry’s worst downturn, which has trampled airline finances.
“We are always looking at product developments but do not comment on specific programmes,” an Airbus spokesman said.
Air freight demand, which was weak before the COVID-19 crisis, has soared as home-bound shoppers turn to e-commerce, but analysts warn it is volatile and prone to extended downturns.
Normally about half the world’s air cargo is carried in the bellies of passenger jets, but a hit to travel from the pandemic has left the world more reliant on dedicated freighters and conversions of passenger planes.
Although it has vaulted past Boeing as the world’s largest producer of passenger jets, Airbus has had limited success in penetrating the freighter fortress of its arch-rival.
It pulled the plug on a freighter version of its A380 superjumbo almost 15 years ago and has had no freighters in its order pipeline since December, when Turkey’s MNG Airlines cancelled three A330 freighter.
Boeing has delivered 202 of the rival 777 freighter, compared with 38 of the A330 cargo version. Dominating the trade lanes is Boeing’s 747 freighter with more than 260 delivered.
It is not the first time a possible new freighter has been mooted. The latest design on the drawing board at Airbus’s Toulouse headquarters in France involves a slightly longer aircraft than the best-selling Airbus A350-900 jetliner.
Its development poses technical challenges since it would involve placing a cargo door in the composite shell chosen by Airbus to compete with Boeing’s lightweight composite 787.
Experts say cutting composite is more challenging than traditional aluminium, though Airbus could reap benefits from a decision – seen as costly at the time – to build the A350 from composite panels rather than barrel sections used on the 787.
Industry sources estimate Airbus would need commitments for some 50 aircraft to go ahead with a launch, with Chief Executive Guillaume Faury focusing on carrying out a major restructuring while directing resources towards an A321XLR passenger plane.
A development would cost an estimated $2-3 billion.
Temptingly, the booming freight market offers respite from a slump in demand for big jets that has forced Airbus and Boeing to slash production, with A350 output halving to five a month.
More than a third of wide-body jets sold by Boeing in the past year have been freighters.
But the same crisis that crippled passenger travel has also created a glut of unused passenger planes that can be converted more cheaply into freighters than buying new. That means the business case for developing a new aircraft must be watertight.
“Given the A350 production rate has been cut … and the cargo market is the one bright spot in the wide-body market, one would have to say the likelihood of an A350F has increased compared to a year ago,” said Richard Evans, senior consultant at UK-based Ascend by Cirium.
While not imminent, a launch could jog Boeing into reacting with a freighter version of its larger 777X, he added, though Boeing must also grapple with delays in its certification.
Families of victims of the deadly 2019 Ethiopian Airlines jet crash may obtain as soon as Thursday Boeing’s reports to U.S. regulators that helped keep its 737 MAX flying after a prior disaster with the same jet in Indonesia five months earlier.
The National Transportation Safety Board (NTSB), an independent U.S. government investigative agency, told Boeing Co in a letter on Monday it should turn over nearly 2,000 documents to lawyers representing families who want to determine what the company knew about its flight systems after the Indonesian crash on Lion Air.
The agency said international rules mandate the release of the documents after two years from the crash date, even though Ethiopia has yet to produce a final crash report which the agency cited in blocking the documents until now, according to the letter reviewed by Reuters.
Boeing said it plans to produce the investigation-related information to the plaintiffs beginning today following the NTSB guidance that, at the second anniversary of the Ethiopian accident, the restrictions would be lifted.
The plaintiffs lawyers said they expect the papers to show what Boeing executives knew of defects in the flight system of the newly designed aircraft following the Indonesian crash. An automated flight-control system called MCAS has been implicated in both crashes, which together killed 346 people.
The plane continued to fly until the Ethiopian crash prompted a global grounding.
“What we want to see are the documents upon which Boeing resisted the grounding of the airplane and based its assertion to its customers that the airplane was safe,” plaintiffs’ attorney Justin Green told Reuters.
Any evidence showing that Boeing executives were aware of the 737 MAX problems could expose Boeing to huge punitive damages, which are unusual in air transportation accidents because planes rarely fly with a known deadly defect.
Boeing has already provided plaintiffs 112,587 documents encompassing millions of pages, Greene said, but the records under pursuit are believed to be an important part of the case.
BUILDING A CASE
Boeing has said it has implemented changes that ensure accidents like the ones in Indonesia and Ethiopia never happen again, and numerous aviation regulators have re-approved the plane for flight.
The company resolved a 737 MAX criminal probe in January with a $2.5 billion Department of Justice settlement and has mostly settled the Lion Air crash litigation.
It still faces an investor lawsuit in Delaware against its board and around 140 lawsuits by families of the Ethiopian crash.
In the DOJ settlement Boeing admitted that two of its 737 MAX technical pilots, who are still under criminal investigation, had deceived the U.S. Federal Aviation Administration (FAA) about MCAS.
While the settlement exonerated Boeing’s senior managers, legal experts said it bolsters one part of the plaintiffs’ punitive claim that Boeing intended to defraud the FAA and succeeded.
However, the experts said punitive damages are rarely awarded in aircraft crash cases, in part because they are difficult to prove.
Boeing could argue, for example, that the Ethiopian Airlines’ pilots were informed after the Lion Air crash about the steps to follow in the event of an MCAS failure, said Kenneth Quinn of International Aviation Law.
Still, Boeing will likely work hard to settle the cases and avoid a jury trial, a path followed by most companies involved in crash lawsuits, according to Gary Kennedy, former general counsel for American Airlines.
“From the company’s perspective, the worst thing is a headline that relives the final moments of someone’s life onboard that aircraft,” said Kennedy, who was with American during litigation stemming from the Sept. 11, 2001 attacks and a separate deadly crash in New York two months later.
British engine-maker Rolls-Royce plunged to a worse than expected 4 billion pound ($5.58 billion) loss in 2020 as the pandemic stopped airlines flying, but stuck to its outlook for cash outflow to improve in 2021.
Rolls-Royce’s model of charging airlines for the number of hours its engines fly meant its income dried up last year when travel stopped. It was forced to raise 5 billion pounds from shareholders and in loans to buffer against the uncertainty.
Rolls-Royce posted group underlying pre-tax loss of 4 billion pounds for last year compared to the 3.1 billion pound loss forecast by analysts.
Its cash outflow, the measure most watched by analysts, of 4.2 billion pounds was in line with consensus, and Rolls guided that it would improve this year to an outflow of 2 billion pounds, with the figure turning positive during the second half.
That improvement depends on airlines flying 55% of 2019 levels during 2021. Rolls-Royce said its assumption is for travel to gradually improve this year, accelerating in the second-half as vaccine programmes progress.
Blaming tightening travel restrictions in the early part of this year, the company had already warned that its 2021 cash outflow would be worse than previously expected.