Boeing Stock price – The Day – FAA fines Boeing $5.4 million for not fulfilling terms of long-running safety agreement

WASHINGTON — The Federal Aviation Administration announced a $5.4 million fine Thursday against Boeing, saying the jet maker did not live up to the terms of a legal agreement designed to force the company to change its safety culture.

The agency said Boeing also agreed to pay $1.2 million to resolve a pair of cases in which the FAA said managers had put improper pressure on employees assigned to conduct safety work on behalf of the government.

“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,” FAA Administrator Steve Dickson said in a statement.

Boeing said in a statement the fine was a fair resolution to the legal agreement, which expired in December.

“Boeing is committed to designing and building the safest products and to fostering an environment where teammates can perform work fully consistent with our values of collaborating with humility, inclusion and transparency,” the company said.

Boeing and the FAA agreed to the five-year settlement in 2015, and the company paid an initial penalty of $12 million. The agreement was an unprecedented effort to try to resolve numerous safety concerns regulators had about Boeing. The financial penalty was modest, but the agreement required the company to change its corporate culture and exceed federal safety requirements.

The FAA said Thursday that it was imposing additional penalties because Boeing missed targets set out in the settlement agreement and because some of the company’s managers did not do enough to prioritize complying with federal rules.

In a letter to Boeing, FAA lawyer Mark Bury said the company had not met its obligations in half of the 10 pending terms of the settlement. In some cases, Bury wrote, “Boeing‘s performance regressed, despite planned and implemented corrective actions and cure plans.”

The letter does not detail the shortcomings.

The fines were announced a day after the Department of Transportation’s internal watchdog released a report concluding the FAA still needed to do more to hold Boeing accountable after two deadly crashes of 737 Max airliners. The jets were grounded worldwide for almost two years while Boeing worked on safety fixes.

While the 2015 agreement represented a previous effort to hold Boeing accountable, the relationship between the company and the FAA came under fresh scrutiny after the crashes. The Justice Department concluded that two Boeing employees defrauded the government by withholding details from regulators about a software system involved in the crashes. That probe ended in a criminal charge and a $2.5 billion settlement, which included a $244 million fine.

Other investigators have found that the FAA’s oversight of the company was fragmented, allowing potential safety risks to escape proper scrutiny.

While the Justice Department laid a heavier financial penalty against Boeing, it is the FAA’s job to ensure that the company prioritizes safety and complies with federal rules. The agency said in a statement that it planned to continue that mission, implementing a new law Congress passed in December designed to toughen oversight of aviation manufacturers.

Wednesday’s watchdog report set out 14 recommendations for how the FAA could improve its review of modifications to existing aircraft designs and oversee a vast team of Boeing engineers who work for the government under a system called Organization Designation Authorization.

That system was the subject of the two enforcement cases for which Boeing will pay the $1.2 million. The cases involved the 787 Dreamliner.

The FAA accused at least four Boeing managers of subjecting safety engineers to “undue pressure.”

In one instance, regulators said senior Boeing managers retaliated against a manager in the safety unit by refusing to interview him for a promotion. Another incident involved Boeing managers pressuring employees to approve a plane that was nearing an inspection deadline.

In December 2019 and January 2020, the FAA proposed $9.3 million in fines against Boeing, saying it had said defective wing parts on 737s were safe to use. The company was allowed to review the fines and contest them and the current status of the cases was not clear. An FAA spokesman declined to comment.