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Westlake Legal Group > Boeing Company

The Roots of Boeing’s 737 Max Crisis: A Regulator Relaxes Its Oversight

SEATTLE — In the days after the first crash of Boeing’s 737 Max, engineers at the Federal Aviation Administration came to a troubling realization: They didn’t fully understand the automated system that helped send the plane into a nose-dive, killing everyone on board.

Engineers at the agency scoured their files for information about the system designed to help avoid stalls. They didn’t find much. Regulators had never independently assessed the risks of the dangerous software known as MCAS when they approved the plane in 2017.

More than a dozen current and former employees at the F.A.A. and Boeing who spoke with The New York Times described a broken regulatory process that effectively neutered the oversight authority of the agency.

The regulator had been passing off routine tasks to manufacturers for years, with the goal of freeing up specialists to focus on the most important safety concerns. But on the Max, the regulator handed nearly complete control to Boeing, leaving some key agency officials in the dark about important systems like MCAS, according to the current and former employees.

While the agency’s flawed oversight of the Boeing 737 Max has attracted much scrutiny since the first crash in October and a second one in March, a Times investigation revealed previously unreported details about weaknesses in the regulatory process that compromised the safety of the plane.

The company performed its own assessments of the system, which were not stress-tested by the regulator. Turnover at the agency left two relatively inexperienced engineers overseeing Boeing’s early work on the system.

The F.A.A. eventually handed over responsibility for approval of MCAS to the manufacturer. After that, Boeing didn’t have to share the details of the system with the two agency engineers. They weren’t aware of its intricacies, according to two people with knowledge of the matter.

Late in the development of the Max, Boeing decided to expand the use of MCAS, to ensure the plane flew smoothly. The new, riskier version relied on a single sensor and could push down the nose of the plane by a much larger amount.

Boeing did not submit a formal review of MCAS after the overhaul. It wasn’t required by F.A.A. rules. An engineering test pilot at the regulator knew about the changes, according to an agency official. But his job was to evaluate the way the plane flew, not to determine the safety of the system.

The agency ultimately certified the jet as safe, required little training for pilots and allowed the plane to keep flying until a second deadly Max crash, less than five months after the first.

The plane remains grounded as regulators await a fix from Boeing. If the ban persists much longer, Boeing said this past week that it could be forced to halt production.

The F.A.A. and Boeing have defended the plane’s certification, saying they followed proper procedures and adhered to the highest standards.

“The agency’s certification processes are well-established and have consistently produced safe aircraft designs,” the regulator said in a statement Friday. “The 737 Max certification program involved 110,000 hours of work on the part of F.A.A. personnel, including flying or supporting 297 test flights.”

Boeing said “the F.A.A.’s rigor and regulatory leadership has driven ever-increasing levels of safety over the decades,” adding that “the 737 Max met the F.A.A.’s stringent standards and requirements as it was certified through the F.A.A.’s processes.”

[If you have worked at Boeing or the F.A.A. and want to discuss your experience, contact The Times confidentially here.]

ImageWestlake Legal Group merlin_152643222_fdb4e1c8-150f-4d36-863b-94c35dfff0bd-articleLarge The Roots of Boeing’s 737 Max Crisis: A Regulator Relaxes Its Oversight Regulation and Deregulation of Industry Pilots Lion Air Federal Aviation Administration Ethiopian Airlines Engineering and Engineers Conflicts of Interest Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

While Ali Bahrami was the Federal Aviation Administration’s top official in Seattle, some engineers believed that he had installed managers who would be deferential to Boeing.CreditJonathan Ernst/Bloomberg

Federal prosecutors and lawmakers are now investigating whether the regulatory process is fundamentally flawed. As planes become more technologically advanced, the rules, even when they are followed, may not be enough to ensure safety. The new software played a role in both disasters, involving Lion Air and Ethiopian Airlines, which together killed 346 people.

“Did MCAS get the attention it needed? That’s one of the things we’re looking at,” said Chris Hart, the former chairman of the National Transportation Safety Board, who is now leading a multiagency task force investigating how the Max was approved. “As it evolved from a less robust system to a more powerful system, were the certifiers aware of the changes?”

Boeing needed the approval process on the Max to go swiftly. Months behind its rival Airbus, the company was racing to finish the plane, a more fuel-efficient version of its best-selling 737.

The regulator’s hands-off approach was pivotal. At crucial moments in the Max’s development, the agency operated in the background, mainly monitoring Boeing’s progress and checking paperwork. The nation’s largest aerospace manufacturer, Boeing was treated as a client, with F.A.A. officials making decisions based on the company’s deadlines and budget.

It has long been a cozy relationship. Top agency officials have shuffled between the government and the industry.

During the Max certification, senior leaders at the F.A.A. sometimes overruled their own staff members’ recommendations after Boeing pushed back. For safety reasons, many agency engineers wanted Boeing to redesign a pair of cables, part of a major system unrelated to MCAS. The company resisted, and F.A.A. managers took Boeing’s side, according to internal agency documents.

After the crash of the Lion Air plane last October, F.A.A. engineers were shocked to discover they didn’t have a complete analysis of MCAS. The safety review in their files didn’t mention that the system could aggressively push down the nose of the plane and trigger repeatedly, making it difficult to regain control of the aircraft, as it did on the doomed Lion Air flight.

Despite their hazy understanding of the system, F.A.A. officials decided against grounding the 737 Max. Instead, they published a notice reminding pilots of existing emergency procedures.

The notice didn’t describe how MCAS worked. At the last minute, an F.A.A. manager told agency engineers to remove the only mention of the system, according to internal agency documents and two people with knowledge of the matter. Instead, airlines learned about it from Boeing.

The F.A.A. department that oversaw the Max development had such a singular focus that it was named after the company: The Boeing Aviation Safety Oversight Office.

Many F.A.A. veterans came to see the department, created in 2009, as a symbol of the agency’s close relationship with the manufacturer. The top official in Seattle at the time, Ali Bahrami, had a tough time persuading employees to join, according to three current and former employees.

Some engineers believed that Mr. Bahrami had installed managers in the office who would defer to Boeing. “He didn’t put enough checks and balances in the system,” Mike McRae, a former F.A.A. engineer, said of Mr. Bahrami. “He really wanted abdication. He didn’t want delegation.”

Before the certification of the Max began, Mr. Bahrami called a group of F.A.A. engineers into his office, the current and former employees said, and asked some of them to join the group. Many didn’t want to change jobs, according to a complaint filed by the National Air Traffic Controllers Association, the union representing F.A.A. engineers.

“I got dragged kicking and screaming,” said Richard Reed, a former systems engineer at the F.A.A. Mr. Reed said he had just left surgery when agency officials called to ask whether he would work in the office. “I always claimed that I was on drugs when I said ‘yes.’”

The F.A.A. said in a statement that Mr. Bahrami “dedicated his career to the advancement of aviation safety in both the private and public sectors.”

F.A.A. offices in Des Moines, Wash. The way the agency dealt with Boeing left engineers at the agency demoralized, two employees said.CreditRuth Fremson/The New York Times

For decades, the F.A.A. relied on engineers inside Boeing to help certify aircraft. But after intense lobbying by industry, the agency adopted rules in 2005 that would give manufacturers like Boeing even more control. Previously, the agency selected the company engineers to work on its behalf; under the new regulations, Boeing could choose them.

Many of the agency’s top leaders embraced the approach. It would allow the F.A.A. to certify planes more efficiently and stretch its limited resources. The regulator had also been finding it harder to compete for talented engineers, their government salaries unable to keep up with the going rates in the industry.

For Boeing, the changes meant shedding a layer of bureaucracy. “The process was working well,” said Tom Heineman, a retired Boeing engineer who worked on the Max. “The F.A.A. was delegating more of the work and the review and the oversight to the manufacturers than it used to.”

But some F.A.A. engineers were concerned that they were no longer able to effectively monitor what was happening inside Boeing. In a PowerPoint presentation to agency managers in 2016, union representatives raised concerns about a “brain drain” and the “inability to hire and retain qualified personnel.”

By 2018, the F.A.A. was letting the company certify 96 percent of its own work, according to an agency official.

Nicole Potter, an F.A.A. propulsion and fuel systems engineer who worked on the Max, said supervisors repeatedly asked her to give up the right to approve safety documents. She often had to fight to keep the work.

“Leadership was targeting a high level of delegation,” Ms. Potter said. When F.A.A. employees didn’t have time to approve a critical document, she said, “managers could delegate it back to Boeing.”

It was a process Mr. Bahrami championed to lawmakers. After spending more than two decades at the F.A.A., he left the agency in 2013 and took a job at the Aerospace Industries Association, a trade group that represents Boeing and other manufacturers.

“We urge the F.A.A. to allow maximum use of delegation,” Mr. Bahrami told Congress in his new lobbying role, arguing it would help American manufacturers compete.

In 2017, Mr. Bahrami returned to the F.A.A. as the head of safety.

With Boeing taking more control, F.A.A. engineers found they had little power, even when they did raise concerns.

Early on, engineers at the F.A.A. discovered a problem with one of the most important new features of the Max: its engines. The Max, the latest version of the 50-year-old 737, featured more fuel-efficient engines, with a larger fan and a high-pressure turbine. But the bigger, more complex engines could do more damage if they broke apart midair.

The F.A.A. engineers were particularly concerned about pieces hitting the cables that control the rudder, according to five people with knowledge of the matter and internal agency documents. A cable severed during takeoff would make it difficult for pilots to regain control, potentially bringing down the jet.

The F.A.A. engineers suggested a couple solutions, three of the people said. The company could add a second set of cables or install a computerized system for controlling the rudder.

Boeing did not want to make a change, according to internal F.A.A. documents reviewed by The Times. A redesign could have caused delays. Company engineers argued that it was unlikely that an engine would break apart and shrapnel would hit the rudder cable.

Most of the F.A.A. engineers working on the issue insisted the change was necessary for safety reasons, according to internal agency emails and documents. But their supervisors balked. In a July 2015 meeting, Jeff Duven, who replaced Mr. Bahrami as the head of the F.A.A.’s Seattle operation, sided with Boeing, said two current employees at the agency.

Boeing Max planes in Renton, Wash. The company downplayed the risks of the software, MCAS, to federal officials.CreditRuth Fremson/The New York Times

F.A.A. managers conceded that the Max “does not meet” agency guidelines “for protecting flight controls,” according to an agency document. But in another document, they added that they had to consider whether any requested changes would interfere with Boeing’s timeline. The managers wrote that it would be “impractical at this late point in the program,” for the company to resolve the issue. Mr. Duven at the F.A.A. also said the decision was based on the safety record of the plane.

Engineers at the agency were demoralized, the two agency employees said. One engineer submitted an anonymous complaint to an internal F.A.A. safety board, which was reviewed by The Times.

“During meetings regarding this issue the cost to Boeing to upgrade the design was discussed,” the engineer wrote. “The comment was made that there may be better places for Boeing to spend their safety dollars.”

An F.A.A. panel investigated the complaint. It found managers siding with Boeing had created “an environment of mistrust that hampers the ability of the agency to work effectively,” the panel said in a 2017 report, which was reviewed by The Times. The panel cautioned against allowing Boeing to handle this kind of approval, saying “the company has a vested interest in minimizing costs and schedule impact.”

By then, the panel’s findings were moot. Managers at the agency had already given Boeing the right to approve the cables, and they were installed on the Max.

In the middle of the Max’s development, two of the most seasoned engineers in the F.A.A.’s Boeing office left.

The engineers, who had a combined 50 years of experience, had joined the office at its creation, taking on responsibility for flight control systems, including MCAS. But they both grew frustrated with the work, which they saw as mostly paper pushing, according to two people with knowledge of the staff changes.

In their place, the F.A.A. appointed an engineer who had little experience in flight controls, and a new hire who had gotten his master’s degree three years earlier. People who worked with the two engineers said they seemed ill-equipped to identify any problems in a complex system like MCAS.

And Boeing played down the importance of MCAS from the outset.

An early review by the company didn’t consider the system risky, and it didn’t prompt additional scrutiny from the F.A.A. engineers, according to two agency officials. The review described a system that would activate only in rare situations, when a plane was making a sharp turn at high speeds.

The F.A.A. engineers who had been overseeing MCAS never received another safety assessment. As Boeing raced to finish the Max in 2016, agency managers gave the company the power to approve a batch of safety assessments — some of the most important documents in any certification. They believed the issues were low risk.

One of the managers, Julie Alger, delegated the review of MCAS. Previously, the F.A.A. had the final say over the system.

The F.A.A. said that decision reflected the consensus of the team.

Boeing was in the middle of overhauling MCAS. To help pilots control the plane and avoid a stall, the company allowed MCAS to trigger at low speeds, rather than just at high speeds. The overhauled version would move the stabilizer by as much as 2.5 degrees each time it triggered, significantly pushing down the nose of the plane. The earlier version moved the stabilizer by 0.6 degrees.

When company engineers analyzed the change, they figured that the system had not become any riskier, according to two people familiar with Boeing’s discussions on the matter. They assumed that pilots would respond to a malfunction in three seconds, quickly bringing the nose of the plane back up. In their view, any problems would be less dangerous at low speeds.

So the company never submitted an updated safety assessment of those changes to the agency. In several briefings in 2016, an F.A.A. test pilot learned the details of the system from Boeing. But the two F.A.A. engineers didn’t understand that MCAS could move the tail as much as 2.5 degrees, according to two people familiar with their thinking.

Under the impression the system was insignificant, officials didn’t require Boeing to tell pilots about MCAS. When the company asked to remove mention of MCAS from the pilot’s manual, the agency agreed. The F.A.A. also did not mention the software in 30 pages of detailed descriptions noting differences between the Max and the previous iteration of the 737.

Days after the Lion Air crash, the agency invited Boeing executives to the F.A.A.’s Seattle headquarters, according to two people with knowledge of the matter. The officials sat incredulous as Boeing executives explained details about the system that they didn’t know.

In the middle of the conversation, an F.A.A. employee, one of the people said, interrupted to ask a question on the minds of several agency engineers: Why hadn’t Boeing updated the safety analysis of a system that had become so dangerous?

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Southwest Airlines to Leave Newark Airport as Toll of Boeing’s 737 Max Grounding Grows

Southwest Airlines said on Thursday that it would shut down its operations at Newark Liberty International Airport, as the grounding of Boeing’s 737 Max continued to take a toll on carriers in the United States.

Southwest, reporting second-quarter earnings, said that as a result of the troubled jet’s grounding, its passenger numbers had declined, its costs had increased and it had lost an estimated $175 million in profit. Operating income for the second quarter was $968 million, $4 million less than the same period the year before.

Southwest is particularly reliant on the 737 Max, and the airline had expected to take delivery of 44 of the planes this year. That was before Boeing stopped delivering the plane until it is deemed safe to fly again.

The 737 Max was grounded on March 13 shortly after the crash of an Ethiopian Airlines flight killed all 157 people on board. About five months earlier, a 737 Max plane crashed in Indonesia, killing 189 passengers.

Gary C. Kelly, Southwest’s chief executive, said that the company was “taking necessary steps to mitigate damages” by pulling out of Newark, where the airline began service in 2011, and consolidating its operations in the New York area at La Guardia Airport as of Nov. 3.

“The financial results at Newark have been below expectations, despite the efforts of our excellent team at Newark,” Mr. Kelly said in a statement.

Southwest currently has 20 daily departures from Newark to 10 cities. It served 1.5 million passengers there in the 12 months that ended in April, making it the airport’s fifth-busiest passenger airline, according to the Port Authority of New York and New Jersey.

Southwest customers with flights booked through Newark will have the option to travel via other airports, and the roughly 125 people that Southwest employs at Newark will be given the opportunity to relocate, the airline said.

Southwest’s move is the latest example of the widening impact the grounding of the 737 Max has had on the airline industry in the United States, where carriers have canceled thousands of flights into November. The jet’s inability to fly has also forced Ryanair, the Irish budget airline, to scale back its expansion plans.

The economic fallout could get worse. Boeing said on Wednesday that it might halt production of the 737 Max if the grounding persists. Such a move would hurt a constellation of companies, including the makers and suppliers of parts for the aircraft, and could even spill into the broader economy given Boeing’s outsize role in it. The aerospace giant has already announced more than $8 billion in costs related to the two fatal crashes.

Southwest said in its earnings statement that it was in preliminary discussions with Boeing about compensation for damages related to the grounding. The airline also it said was removing the 737 Max from its schedule through Jan. 5.

Southwest’s pilots have also expressed concerns about the impact of the grounding. In an update outlining their safety concerns in June, Jon Weaks, the president of the Southwest Airlines Pilots Association, said the union’s pilots were cooperating with the Justice Department, which has issued a subpoena for records and information.

“This and other S.W.A.P.A. expenses relating to the Max, as well as the loss of flying to our members is very expensive,” Mr. Weaks wrote. “S.W.A.P.A. will be seeking compensation and reimbursement from Boeing for every dollar legally available to be challenged when the Max issues are resolved.”

The Economic Fallout from the Grounding of Max Planes
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Boeing May Halt 737 Max Production as Economic Fallout Spreads

Westlake Legal Group merlin_158285283_8f7b2857-e2c5-417a-afe4-2573b52e4558-facebookJumbo Boeing May Halt 737 Max Production as Economic Fallout Spreads Company Reports Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters

Boeing said on Wednesday that it was considering halting production of the 737 Max if the grounding of its most popular plane persists, a move that could damage airlines, suppliers and even the United States economy.

The company is struggling to contain the fallout from two deadly crashes of the Max. It has already announced more than $8 billion in costs related to the accidents, and is producing the planes at a slower rate.

The damage is spreading through the constellation of companies connected to Boeing, the nation’s largest aerospace manufacturer. Airlines around the world have canceled thousands of flights, costing them billions of dollars, and some carriers have reined-in expansion plans. Suppliers like General Electric, which makes engines for the Max, are expecting lower revenue in the quarter.

The economic toll is also rising. Orders of durable goods in the United States, which include commercial airplanes, were down 1.3 percent in May, the third drop in four months, according to the Census Bureau.

By one estimate, a production halt would shave about six-tenths of a percent off the gross domestic product growth rate, the financial equivalent of a prolonged government shutdown or a significant natural disaster.

“The fact that they talked about it for the first time is significant,” said Scott Hamilton, managing director of the Leeham Company, an aviation consultancy. “When Boeing starts talking about a topic and repeating it, especially in the same event, they’re signaling that something is going on.”

Boeing’s chief executive, Dennis Muilenburg, and its chief financial officer, Greg Smith, both raised the prospect of halting production of the 737 Max on a conference call discussing the company’s second-quarter earnings on Wednesday.

“We might need to consider possible further rate reductions or other options including a temporary shutdown of the Max production,” Mr. Muilenburg said.

After the crashes, Boeing slowed production of the 737 family to 42 planes per month in April, down from 52. It cannot deliver any Max jets until regulators clear the plane to fly, and has stockpiled more than $30 billion worth of planes in Seattle.

Boeing has said it expected the Max to return to service late this year. But Boeing and regulators keep finding new problems with the model, leading to a cascading series of delays.

“If that timeline changes significantly, we will have to evaluate these other scenarios,” Mr. Muilenburg said. “There’s no one specific trigger.”

Mr. Muilenburg said the decision to halt production would depend on various issues, including the date the Max is likely to return to service, as well as its ability to store and maintain the hundreds of completed planes not yet delivered.

He added that temporarily halting Max production might make more sense than reducing production levels. Given what it costs to operate and staff the production line, the Max program could become unprofitable if Boeing does not make enough planes each month.

“It is significant that not only Muilenburg talked about, but that Greg Smith talked about it, too,” said Mr. Hamilton. “For those of us that have followed Boeing for decades, this is them raising the caution flag.”

The longer the Max stays grounded, the bigger the financial fallout.

The three United States carriers that fly the Max — Southwest Airlines, American Airlines and United Airlines — have canceled thousands of flights into November, depressing their revenue. Ryanair, the Irish budget airline, said this month that it would scale back expansion plans because the Max planes it ordered were delayed.

SpiritAerosystems, the largest supplier for the Max, has already cut hours and pay for 4,000 workers, and is especially vulnerable to a production halt. And General Electric, which makes the Max engines through a partnership with Safran of France, is also expected to record a dip in revenue as a result of the grounding when it reports earnings next week.

“If Boeing has to halt production, which we do not expect but which is a possibility, it would have a big ripple effect on suppliers throughout the supply chain,” said Jim Corridore, an analyst at CFRA Research.

A production shutdown would be particularly painful in the Seattle area, where Boeing makes the 737 Max and most of its other commercial airplanes.

“For every direct Boeing job, there are three to four indirect Boeing jobs,” Mr. Hamilton said.

The Max was grounded after the crash of Ethiopian Airlines Flight 302 in March, which killed all 157 people aboard. In October, Lion Air Flight 610 crashed just minutes after taking off, killing 189. In both accidents, a new automated system malfunctioned, pushing the planes into nose dives.

Boeing has developed a software update for the plane, and is working with the Federal Aviation Administration and other global regulators to get the Max flying again. The delays have persisted, and at this point it could be 2020 before the Max flies again.

[The Senate confirmed Stephen Dickson as the new F.A.A. administrator.]

“This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do, as we work to safely return the 737 Max to service,” Mr. Muilenburg said in a statement.

Boeing reported a $2.9 billion loss for the most recent quarter, sending the company’s stock down more than 3 percent on Wednesday The company said it recorded $15.8 billion in sales in the quarter, down 35 percent from the same time a year earlier, in large part because it has stopped delivering the Max.

The loss included a $5.6 billion charge, which Boeing announced last week, related to the cost of compensating airlines that fly the Max. The company said that it was anticipating a further $1.7 billion in costs linked to production slowdowns. Additionally, it has set up a $100 million fund for families and communities affected by those killed in the crashes.

Boeing also said it had taken orders for $474 billion worth of goods and services, including more than 5,500 commercial airplanes. Though most airlines have stopped ordering the Max since the second crash, and some have considered canceling their orders, Boeing scored a win last month when IAG, the parent company of British Airways, said it would order 200 new Max planes.

“Boeing is so influential on the U.S. economy and the supply chain,” Mr. Hamilton said. “But at some point, it makes sense for them to stop making airplanes.”

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Boeing Says It May Halt 737 Max Production

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Boeing said on Wednesday it could shut down production of the 737 Max if the grounding of its most popular plane persists much longer.

On a conference call discussing the company’s second-quarter earnings, Boeing’s chief executive, Dennis Muilenburg, and the chief financial officer, Greg Smith, raised the prospect of halting production of the 737 Max, which has been grounded by regulators since March after two crashes.

Shutting down 737 Max production would have profound consequences for Boeing as well as its customers and suppliers around the world. Airlines have ordered thousands of the planes.

Boeing already slowed production of the Max to 42 planes per month in April. It is stockpiling those planes, and won’t be able to deliver any Max jets until regulators clear the plane to fly.

“If Boeing has to halt production, which we do not expect but which is a possibility, it would have a big ripple effect on suppliers throughout the supply chain,” said Jim Corridore, an analyst at CFRA Research.

Boeing has said it expected the Max to return to service late this year. But Boeing and regulators keep finding new problems with the model, leading to a cascading series of delays.

“If that timeline changes significantly, we will have to evaluate these other scenarios,” Mr. Muilenburg said. “There’s no one specific trigger.”

As it determines whether to further reduce the Max production rate or halt it entirely, Boeing is considering the date the Max is likely to return to service, as well as its ability to store and maintain the hundreds of completed planes it has not yet delivered, Mr. Smith said. “No one item is going to drive the schedule,” he said.

Mr. Muilenburg added that temporarily halting Max production might make more sense than reducing production levels to fewer than the current 42 planes per month, for reasons having to do with suppliers, staffing and training.

Boeing reported a $2.9 billion net loss for the most recent quarter on Wednesday as costs related to its grounded 737 Max continue to rise. The company’s stock was down more than 2 percent in midday trading.

Boeing said it recorded $15.8 billion in sales in the quarter, down 35 percent from the same time a year earlier, in large part because it has stopped delivering the Max.

Boeing also said it had taken orders for $474 billion worth of goods and services, including more than 5,500 commercial airplanes.

The figures reflected Boeing’s surprise announcement last week that it was taking a $5.6 billion charge related to the cost of compensating airlines that fly the Max, and that it was anticipating a further $1.7 billion in costs linked to production slowdowns.

The economic fallout from the continued grounding of the Max is already being felt more broadly.

Airlines have canceled thousands of flights, losing billions of dollars. Companies that make parts for the Max are suffering as Boeing has slowed production. And American durable goods orders and the export of commercial aircraft are down, contributing to a small but detectable dent to the American economy.

The three United States airlines that fly the Max — Southwest Airlines, American Airlines and United Airlines — have canceled thousands of flights into November, depressing their revenues.

General Electric, which makes the Max engines through a partnership with Safran, is also expected to record a dip in revenues as a result of the grounding when it reports earnings next week.

And last month the Census Bureau said that orders of durable goods, which include commercial airplanes, were down 1.3 percent in May. It was the third time in four months that orders had dropped.

In a recent report, the chief United States economist for JPMorgan Chase, Michael Feroli, said the effects of the Max grounding could shave about one-tenth of a percentage point of gross domestic product in the quarter.

“The issues affecting Boeing’s 737 Max could begin impacting the economic dataflow,” he said.

Boeing’s announcement last week was the clearest indication to date of just how much the crashes and grounding will cost the company. The company had already announced an expected $1 billion in costs from production delays, and a $100 million fund for families and communities affected by those killed in the crashes.

“This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do, as we work to safely return the 737 MAX to service,” Mr. Muilenburg said in a statement. “During these challenging times, teams across our enterprise continue to perform at a high level while delivering on commitments and capturing new opportunities driven by strong, long-term fundamentals.”

The Max was grounded after the crash of Ethiopian Airlines Flight 302 in March, which killed all 157 people aboard. In October, Lion Air Flight 610 crashed just minutes after taking off, killing 189. In both accidents, a new automated system malfunctioned, pushing the planes into nose dives.

Boeing has developed a software update for the plane, and is working with the Federal Aviation Administration and other global regulators to get the Max flying again.

“Boeing is a $100 billion revenue company who just saw a 35 percent decline in revenues, so there will be some impact on the economy,” Mr. Corridore said. “But even at its size, we don’t think Boeing’s troubles are likely to significantly hurt overall U.S. GDP.”

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Boeing Says Charges Tied to 737 Max Grounding to Reach $8 Billion

The financial fallout from the troubled 737 Max jetliner continues to swell for Boeing, which on Thursday announced $7.3 billion in costs that will hit its bottom line.

The price tag could still climb. The Max has been grounded for months after two deadly crashes, and it may not fly again this year. Airlines that flew the Max have been pushing for compensation, and Boeing has had to slow production and halt deliveries of the jets, the company’s most popular model.

Already, the tally is substantial. Boeing will take a pretax charge of $5.6 billion in the second quarter, its current estimate of what it will take to compensate its Max-flying customers. On top of that, Boeing said it expected the production slowdown to cost a further $1.7 billion. Those costs will be spread out over years, and will depress the overall profitability of the Max program.

“This is not inconsequential, even for a company the size of Boeing,” said Scott Hamilton, managing director of the Leeham Company, an aviation consultancy. “This is going to be a real mess for Boeing for another year or even two.”

The new costs, which Boeing disclosed the week before it is due to report earnings, do not include the potential price of litigation associated with the Max, or the $100 million fund that it recently announced for families and communities affected by the two crashes. Boeing already announced $1 billion in costs associated with the Max’s grounding last quarter, and has said more charges could be coming.

“This is a defining moment for Boeing,” the chief executive, Dennis A. Muilenburg, said in a statement. “The Max grounding presents significant headwinds, and the financial impact recognized this quarter reflects the current challenges and helps to address future financial risks.”

Boeing did not specify which airlines would receive what compensation, or how it might make airlines whole. Besides offering cash payments, Boeing could lower the costs of future orders, or provide additional free features or services.

Three airlines in the United States — Southwest Airlines, American Airlines and United Airlines — fly the Max and have canceled thousands of flights in recent months.

Foreign carriers, including Air Canada and Norwegian Air, have also been squeezed by the grounding, and pressure has been building for Boeing to reimburse airlines around the world.

“It is quite obvious that we will not take the cost,” Bjorn Kjos, who stepped down this month as the chief executive of Norwegian Air, which operates 18 Max jets, said in March. “We will send this bill to those who produced this aircraft.”

Westlake Legal Group merlin_152397885_5588305c-8e58-47f0-9b4a-3ac83d14e790-articleLarge Boeing Says Charges Tied to 737 Max Grounding to Reach $8 Billion United Airlines Southwest Airlines Company Muilenburg, Dennis A Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters American Airlines

Boeing 737 Max: The Latest on the Deadly Crashes and the Fallout

Boeing is under intense scrutiny after its best-selling 737 Max jet was involved in two deadly crashes in five months.

Other airlines are curtailing growth plans as a result of the grounding. Ryanair, the Irish budget airline, said Tuesday that it was scaling back its expansion plans because the Max jets it had ordered wouldn’t be delivered on time. Ryanair had expected to have 58 in service by next summer, but it has reduced that estimate to 30. As a result, Ryanair said, it is cutting the number of passengers it expects to carry this year by five million, to 157 million.

Like all big companies, Boeing has insurance policies that may cover some of these costs. It is also in relatively strong financial shape, even after recording the new costs. It has substantial cash on hand, and could suspend its dividend or raise debt if it needed additional resources.

“We are taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges,” Boeing’s chief financial officer, Greg Smith, said in a statement. “Our multiyear efforts on disciplined cash management and maintaining a strong balance sheet, in addition to our strong and broad portfolio offerings, are helping us navigate the current environment.”

The Max has been grounded since March, after the crash of Ethiopian Airlines Flight 302 killed all 157 people aboard. Five months earlier, Lion Air Flight 610 crashed just minutes after taking off from Jakarta, Indonesia, killing 189. In both accidents, erroneous data caused a new automated system on the Max to push down the nose of the planes.

Boeing developed a software update for the system, and has been working with the Federal Aviation Administration and other global regulators to get the Max flying again. But the process is taking substantially longer than Boeing first expected, as both Boeing and regulators uncover new problems with the software and the Max.

Boeing said Thursday that it now expected the Max to be approved for a return to service in the United States and some other countries early in the last quarter of this year.

That may still be optimistic. Regulators have yet to take a test flight on a Max equipped with the new software — a critical step before reapproval — and airlines keep canceling flights. Southwest, American and United all recently extended their Max-related cancellations into early November.

Even when the Max is cleared to fly again, it will take months before airlines and Boeing are back to normal. Planes that have been in long-term storage can require a month to be ready to fly again. Airlines will have to work the new planes into their fleets gradually. And Boeing will need months to deliver the hundreds of Max jets it is holding in storage.

After the Max was grounded, Boeing said it would reduce its 737 production rate to 42 a month, down from 52. On Thursday, it said it expected to increase production to 57 planes a month next year.

Yet for all the disruption and the rising costs, Boeing is still in a relatively strong position. It has recorded orders for several thousand more Max jets, which will take nearly a decade to produce. And airlines, eager for fuel-efficient single-aisle jets like the Max, have few other options. Airbus, Boeing’s only real competitor for commercial aircraft, also has an enormous backlog.

For these reasons, Mr. Hamilton does not see any existential risk for now. “Boeing is a $100 billion company,” he said. “And it’s very difficult and very costly to cancel aircraft orders like this.”

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Boeing 737 Max Troubles Add Up: $8 Billion and Counting

The financial fallout from the troubled 737 Max jetliner continues to swell for Boeing, which on Thursday announced $7.3 billion in costs that will hit its bottom line.

The price tag could still climb. The Max has been grounded for months after two deadly crashes, and it may not fly again this year. Airlines that flew the Max have been pushing for compensation, and Boeing has had to slow production and halt deliveries of the jets, the company’s most popular model.

Already, the tally is substantial. Boeing will take a pretax charge of $5.6 billion in the second quarter, its current estimate of what it will take to compensate its Max-flying customers. On top of that, Boeing said it expected the production slowdown to cost a further $1.7 billion. Those costs will be spread out over years, and will depress the overall profitability of the Max program.

“This is not inconsequential, even for a company the size of Boeing,” said Scott Hamilton, managing director of the Leeham Company, an aviation consultancy. “This is going to be a real mess for Boeing for another year or even two.”

The new costs, which Boeing disclosed the week before it is due to report earnings, do not include the potential price of litigation associated with the Max, or the $100 million fund that it recently announced for families and communities affected by the two crashes. Boeing already announced $1 billion in costs associated with the Max’s grounding last quarter, and has said more charges could be coming.

“This is a defining moment for Boeing,” the chief executive, Dennis A. Muilenburg, said in a statement. “The Max grounding presents significant headwinds, and the financial impact recognized this quarter reflects the current challenges and helps to address future financial risks.”

Boeing did not specify which airlines would receive what compensation, or how it might make airlines whole. Besides offering cash payments, Boeing could lower the costs of future orders, or provide additional free features or services.

Three airlines in the United States — Southwest Airlines, American Airlines and United Airlines — fly the Max and have canceled thousands of flights in recent months.

Foreign carriers, including Air Canada and Norwegian Air, have also been squeezed by the grounding, and pressure has been building for Boeing to reimburse airlines around the world.

“It is quite obvious that we will not take the cost,” Bjorn Kjos, who stepped down this month as the chief executive of Norwegian Air, which operates 18 Max jets, said in March. “We will send this bill to those who produced this aircraft.”

Westlake Legal Group merlin_152397885_5588305c-8e58-47f0-9b4a-3ac83d14e790-articleLarge Boeing 737 Max Troubles Add Up: $8 Billion and Counting United Airlines Southwest Airlines Company Muilenburg, Dennis A Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters American Airlines

Boeing 737 Max: The Latest on the Deadly Crashes and the Fallout

Boeing is under intense scrutiny after its best-selling 737 Max jet was involved in two deadly crashes in five months.

Other airlines are curtailing growth plans as a result of the grounding. Ryanair, the Irish budget airline, said Tuesday that it was scaling back its expansion plans because the Max jets it had ordered wouldn’t be delivered on time. Ryanair had expected to have 58 in service by next summer, but it has reduced that estimate to 30. As a result, Ryanair said, it is cutting the number of passengers it expects to carry this year by five million, to 157 million.

Like all big companies, Boeing has insurance policies that may cover some of these costs. It is also in relatively strong financial shape, even after recording the new costs. It has substantial cash on hand, and could suspend its dividend or raise debt if it needed additional resources.

“We are taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges,” Boeing’s chief financial officer, Greg Smith, said in a statement. “Our multiyear efforts on disciplined cash management and maintaining a strong balance sheet, in addition to our strong and broad portfolio offerings, are helping us navigate the current environment.”

The Max has been grounded since March, after the crash of Ethiopian Airlines Flight 302 killed all 157 people aboard. Five months earlier, Lion Air Flight 610 crashed just minutes after taking off from Jakarta, Indonesia, killing 189. In both accidents, erroneous data caused a new automated system on the Max to push down the nose of the planes.

Boeing developed a software update for the system, and has been working with the Federal Aviation Administration and other global regulators to get the Max flying again. But the process is taking substantially longer than Boeing first expected, as both Boeing and regulators uncover new problems with the software and the Max.

Boeing said Thursday that it now expected the Max to be approved for a return to service in the United States and some other countries early in the last quarter of this year.

That may still be optimistic. Regulators have yet to take a test flight on a Max equipped with the new software — a critical step before reapproval — and airlines keep canceling flights. Southwest, American and United all recently extended their Max-related cancellations into early November.

Even when the Max is cleared to fly again, it will take months before airlines and Boeing are back to normal. Planes that have been in long-term storage can require a month to be ready to fly again. Airlines will have to work the new planes into their fleets gradually. And Boeing will need months to deliver the hundreds of Max jets it is holding in storage.

After the Max was grounded, Boeing said it would reduce its 737 production rate to 42 a month, down from 52. On Thursday, it said it expected to increase production to 57 planes a month next year.

Yet for all the disruption and the rising costs, Boeing is still in a relatively strong position. It has recorded orders for several thousand more Max jets, which will take nearly a decade to produce. And airlines, eager for fuel-efficient single-aisle jets like the Max, have few other options. Airbus, Boeing’s only real competitor for commercial aircraft, also has an enormous backlog.

For these reasons, Mr. Hamilton does not see any existential risk for now. “Boeing is a $100 billion company,” he said. “And it’s very difficult and very costly to cancel aircraft orders like this.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Boeing Pledges $100 Million to Those Affected by 737 Max Crashes

Westlake Legal Group 03boeing1-facebookJumbo Boeing Pledges $100 Million to Those Affected by 737 Max Crashes Suits and Litigation (Civil) Muilenburg, Dennis A Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

Boeing said on Wednesday that it would allocate $100 million to help the families and communities affected by the recent crashes of two of its 737 Max jets.

The move was among the most overt acknowledgments of Boeing’s responsibility in the crashes, which were caused in part by a malfunctioning anti-stall system on the new jets. It will also add to Boeing’s mounting costs, as the company faces lawsuits from victims’ families, investigations by federal authorities and calls for compensation from airlines.

“We at Boeing are sorry for the tragic loss of lives in both of these accidents, and these lives lost will continue to weigh heavily on our hearts and on our minds for years to come,” the chief executive of Boeing, Dennis A. Muilenburg, said in a statement. “The families and loved ones of those on board have our deepest sympathies, and we hope this initial outreach can help bring them comfort.”

The families of some victims of the crashes have filed numerous lawsuits against the company, and are requesting millions of dollars in damages.

Among those killed in the crash of Ethiopian Airlines Flight 302 in March was Samya Rose Stumo, a grandniece of Ralph Nader, the consumer rights advocate and past presidential candidate. Her family sued Boeing in April.

Some families of the victims of Lion Air Flight 610, which crashed after taking off from Indonesia in October, were pressured to sign settlement agreements that barred them from suing Lion Air or Boeing.

Boeing declined to comment on the lawsuits.

[Read more: Boeing’s Dreamliner Plant Is Said to Face Federal Inquiry]

Boeing said that the $100 million investment would be made over multiple years, and that its employees would be able to contribute funds as well, which the company would match through this year.

The money will be used to “support education, hardship and living expenses for impacted families, community programs, and economic development in impacted communities,” the company said. Boeing said it would work with local governments and nonprofit organizations to distribute the funds.

The Max remains grounded four months after the crash in Ethiopia. Boeing is working to develop a software update and gain approval from aviation regulators, but has faced numerous delays. Last week, the timetable was pushed back yet again after the Federal Aviation Administration discovered a new problem with Boeing’s emergency procedures.

The delays have caused the three carriers in the United States that fly the Max — American Airlines, United Airlines and Southwest Airlines — to cancel flights into September and October. The airlines have already canceled thousands of flights and incurred significant costs related to storing and maintaining their grounded jets. They are expecting compensation from Boeing.

The grounding is creating other financial challenges. Boeing continues to produce the Max at a reduced rate. The finished planes cannot be delivered, however, and are being stockpiled in Seattle, taking a toll on Boeing’s revenues.

“We know every person who steps aboard one of our airplanes places their trust in us,” Mr. Muilenburg said. “We are focused on re-earning that trust and confidence from our customers and the flying public in the months ahead.”

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U.S. Proposes New Tariffs on $4 Billion of E.U. Goods as Trade Dispute Grows

The Trump administration has proposed placing tariffs on an additional $4 billion of imports from the European Union, including cherries, whiskey and coiled copper, in a further escalation of a 14-year fight over government aid for aviation companies.

The United States had previously identified European imports worth $21 billion a year for potential tariffs in retaliation for Europe’s subsidies for Airbus. On Monday, the administration added dozens of products to the list “in response to public comments and additional analysis,” according to the United States trade representative’s office.

The United States is awaiting the World Trade Organization’s approval before imposing tariffs on the initial list of products. The items added Monday would be subject to a public hearing.

The European Commission declined to comment on what it described as an internal United States procedure, but it said in an emailed statement that “the figures quoted by the U.S.T.R. are based on U.S. estimates that have not been awarded by the W.T.O.”

“The E.U. remains open for discussions with the U.S., provided these are without preconditions and aim at a fair outcome,” the statement said.

Other European products identified on Monday for potential tariffs included Edam and Gouda cheese, roasted coffee, olives and cast iron pipes. The earlier list included airplanes, seafood, wine, clothing and clocks.

Trade relations between the United States and Europe became strained last year after President Trump decided to target European steel and aluminum with tariffs. Mr. Trump has also threatened to impose import levies on European cars and car parts.

The tariff battle has intensified a fight between the two sides over government aid to Airbus and Boeing that began in 2004.

ImageWestlake Legal Group merlin_135803787_50ff186b-28ce-4c9f-808b-df89797968b1-articleLarge U.S. Proposes New Tariffs on $4 Billion of E.U. Goods as Trade Dispute Grows Office of the United States Trade Representative International Trade and World Market European Union European Commission Customs (Tariff) Boeing Company Airbus Industrie

The Airbus headquarters in Blagnac, France.CreditRegis Duvignau/Reuters

The World Trade Organization found in May 2018 that Airbus had received illegal financing for several of its aircraft models. The United States has long argued that the so-called launch aid provided to Airbus gave it an unfair advantage over Boeing. In response to the ruling, American officials submitted plans to impose tariffs on European products.

“The proposed additional tariffs only add to the trade tensions and in reality do not change anything,” Justin Dubon, an Airbus spokesman, said in an email Tuesday. He added that it was up to the trade organization to define how each side could retaliate. The move, he said, risked putting companies on both sides of the Atlantic in a “lose-lose situation.”

European criticism of the American aviation industry has centered on government research contracts and tax breaks that go to Boeing, which has been scrambling to return its 737 Max jet to service after two fatal crashes forced the company to make fixes.

After the W.T.O. found that Boeing had gotten tax breaks in Washington State and incentives in South Carolina that amounted to subsidies, the European Union asked for the authority to impose retaliatory tariffs on the United States. The European Commission is awaiting the trade organization’s decision before specifying which American products to hit with tariffs.

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Westlake Legal Group merlin_141680616_6c14ff26-7e73-4e4f-8798-741af39a078f-threeByTwoSmallAt2X U.S. Proposes New Tariffs on $4 Billion of E.U. Goods as Trade Dispute Grows Office of the United States Trade Representative International Trade and World Market European Union European Commission Customs (Tariff) Boeing Company Airbus Industrie
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Westlake Legal Group 28dc-trade-illo-threeByTwoSmallAt2X U.S. Proposes New Tariffs on $4 Billion of E.U. Goods as Trade Dispute Grows Office of the United States Trade Representative International Trade and World Market European Union European Commission Customs (Tariff) Boeing Company Airbus Industrie
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Westlake Legal Group merlin_156439305_7aaf0fcc-d7bc-401b-9da8-fb9c5a9ef708-threeByTwoSmallAt2X U.S. Proposes New Tariffs on $4 Billion of E.U. Goods as Trade Dispute Grows Office of the United States Trade Representative International Trade and World Market European Union European Commission Customs (Tariff) Boeing Company Airbus Industrie

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Boeing’s 737 Max Suffers Setback in Flight Simulator Test

Westlake Legal Group 26boeing-facebookJumbo Boeing’s 737 Max Suffers Setback in Flight Simulator Test Federal Aviation Administration Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Airlines and Airplanes

The Federal Aviation Administration said Wednesday that it had recently discovered a new problem with the 737 Max jet that Boeing must correct before the plane is returned to service.

In a flight simulator last week, F.A.A. pilots tested erroneous activations of anti-stall software that pushes down the nose of the Max, two people with knowledge of the matter said. The software, known as MCAS, was involved in two crashes that killed 346 people.

In at least one instance, an F.A.A. pilot was unable to quickly and easily follow Boeing’s emergency procedures to regain control of the plane. The pilot rated that failure as catastrophic, meaning it could lead to the loss of an aircraft midflight, the people said. The situation that was tested is highly unlikely to occur during a typical passenger flight, but the regulator is still requiring Boeing to make a fix, one of the people said.

The discovery may erode confidence in Boeing’s assertions, in conversations with regulators, airlines and aviation unions, that well-trained pilots can easily handle a software malfunction based on their understanding of standard emergency procedures.

It also adds to the roadblocks that have kept pushing back the Max’s return to flight. Nearly 500 Max jets have remained grounded across the globe since March, as the company faces a barrage of questions from the F.A.A. and international regulators.

In recent weeks, the F.A.A. has been testing a broad array of potential failures involving the anti-stall software, partly to ensure that the fix Boeing has developed does not introduce new problems.

In a statement on Wednesday, Gordon Johndroe, a Boeing spokesman, said the company had been working for eight months to provide a comprehensive update to the software. “The safety of our airplanes is Boeing’s highest priority,” Mr. Johndroe said.

He added, “Boeing will not offer the 737 Max for certification by the F.A.A. until we have satisfied all requirements for certification of the Max and its safe return to service.”

Boeing hopes to have the Max back in the air early in the fall. Several airlines have canceled flights on the plane into early September.

During a congressional hearing last week, aviation leaders criticized Boeing’s conduct after the two deadly accidents — a Lion Air flight in Indonesia in October and an Ethiopian Airlines flight in March. They also questioned the design, certification and production of the Max and discussed whether foreign pilots had sufficient training.

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Boeing’s 737 Max Suffers Setback in Flight Simulator Test

Westlake Legal Group 26boeing-facebookJumbo Boeing’s 737 Max Suffers Setback in Flight Simulator Test Federal Aviation Administration Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Airlines and Airplanes

The Federal Aviation Administration said Wednesday that it had recently discovered a new problem with the 737 Max jet that Boeing must correct before the plane is returned to service.

In a flight simulator last week, F.A.A. pilots tested erroneous activations of anti-stall software that pushes down the nose of the Max, two people with knowledge of the matter said. The software, known as MCAS, was involved in two crashes that killed 346 people.

In at least one instance, an F.A.A. pilot was unable to quickly and easily follow Boeing’s emergency procedures to regain control of the plane. The pilot rated that failure as catastrophic, meaning it could lead to the loss of an aircraft midflight, the people said. The situation that was tested is highly unlikely to occur during a typical passenger flight, but the regulator is still requiring Boeing to make a fix, one of the people said.

The discovery may erode confidence in Boeing’s assertions, in conversations with regulators, airlines and aviation unions, that well-trained pilots can easily handle a software malfunction based on their understanding of standard emergency procedures.

It also adds to the roadblocks that have kept pushing back the Max’s return to flight. Nearly 500 Max jets have remained grounded across the globe since March, as the company faces a barrage of questions from the F.A.A. and international regulators.

In recent weeks, the F.A.A. has been testing a broad array of potential failures involving the anti-stall software, partly to ensure that the fix Boeing has developed does not introduce new problems.

In a statement on Wednesday, Gordon Johndroe, a Boeing spokesman, said the company had been working for eight months to provide a comprehensive update to the software. “The safety of our airplanes is Boeing’s highest priority,” Mr. Johndroe said.

He added, “Boeing will not offer the 737 Max for certification by the F.A.A. until we have satisfied all requirements for certification of the Max and its safe return to service.”

Boeing hopes to have the Max back in the air early in the fall. Several airlines have canceled flights on the plane into early September.

During a congressional hearing last week, aviation leaders criticized Boeing’s conduct after the two deadly accidents — a Lion Air flight in Indonesia in October and an Ethiopian Airlines flight in March. They also questioned the design, certification and production of the Max and discussed whether foreign pilots had sufficient training.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com