May 18, 2024

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Boeing's financial problems continue, while families of accident victims urge the United States to sue the company

Boeing's financial problems continue, while families of accident victims urge the United States to sue the company

Boeing said on Wednesday it lost $355 million due to lower revenues in the first quarter, another sign of the crisis sweeping the plane maker as it faces… Increased scrutiny over the safety of its aircraft and accusations of shoddy work from a growing number of whistleblowers.

CEO David Calhoun He said the company is going through a “challenging moment,” and its focus is on fixing manufacturing problems, not financial results.

Company executives have had to talk more about safety and less about finances since the door closed Exploded from a Boeing 737 MAX plane During an Alaska Airlines flight in January, it left a large hole in the plane.

The accident halted the progress Boeing appeared to be making during its recovery Two fatal accidents of MAX aircraft in 2018 and 2019. These crashes in Indonesia and Ethiopia, which killed 346 people, are also back in the spotlight.

About a dozen Relatives of passengers Who died in the second incident met with government officials for several hours on Wednesday in Washington. They asked officials to revive the criminal fraud charge against the company by determining that Boeing violated the terms of the 2021 settlement, but they left disappointed.

Boeing officials did not mention the meeting, but they spoke repeatedly during the quarterly earnings discussion of the renewed focus on safety.

“Although we report first-quarter financial results today, our focus remains on the comprehensive actions we are taking in the wake of Alaska Airlines Flight 1282,” Calhoun told employees in a memo on Wednesday.

Calhoun pointed to a series of actions the company is taking and reported “significant progress” in improving manufacturing quality, mostly by slowing production, which means fewer planes for its airline customers. Calhoun told CNBC that careful inspections resulted in an 80% reduction in defects in the fuselage coming from the main supplier. Air spirit systems.

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“In the near term, yes, we are in a difficult moment,” he wrote to employees. “Reduced deliveries may be difficult on our customers and our financials. But safety and quality must and will come before all else.

Calhoun, who would? get down At the end of the year, he again said he was very confident the company would recover.

Calhoun became CEO in early 2020, as Boeing struggled to recover from the MAX crashes, which prompted regulators to ground the planes worldwide for nearly two years. The company believed it had avoided any risk of criminal prosecution when… The Ministry of Justice agreed The company will not be prosecuted for fraud if it complies with US anti-fraud laws for three years – a period that ended in January.

Boeing has reached confidential settlements with the families of the passengers who died, but relatives of those killed in the Ethiopian plane crash are continuing to pressure the Department of Justice to sue the company in federal district court in Texas, where the settlement was filed. On Wednesday, administration officials told relatives that the agency was still examining the matter.

After leaving the meeting, Paul Cassell, a lawyer for the families, described the meeting as “all for show.” He said the Justice Department appears intent on defending the agreement it secretly brokered with Boeing.

“We simply want this case to move forward and let the jury decide whether Boeing is guilty or not,” he said.

It was an emotional reunion, according to Nadia Milliron, whose daughter Samia Stumo died in the 2019 plane crash.

“People are angry. People are screaming. People are starting to talk about other people,” said Milliron, who watched the event online from her home in Massachusetts while her husband attended in person. Relatives believe the Justice Department is “ignoring a mountain of evidence against Boeing,” she said. “It's confusing.”

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According to Milliron, Glenn Lyon, chief of the Justice Department's criminal division's fraud division, said his agency may extend its review beyond this summer, seek to prosecute Boeing for defrauding regulators who approved the Max, or seek a prosecution against Boeing. The judge dismissed the charge. She said that Leon did not make any commitments.

The Ministry of Justice declined to comment.

A federal judge and appeals court ruled last year that they did not have the authority to overturn the Boeing settlement. The families of the accident victims had hoped that the government would reconsider suing Boeing after the door plug of an Alaska Airlines plane exploded on January 5 while the plane was flying over Oregon.

Investigators looking into the Alaska flight say the screws that help hold the door plug in place were also missing Missing after repair work At the Boeing factory. The FBI told the passengers they might be Victims of crime.

Boeing shares have fallen by about a third since the explosion. Federal Aviation Administration It strengthened its oversight and gave Boeing until late May to develop a plan to fix problems in manufacturing the 737 MAX planes. Airline customers are unhappy that they are not getting all the new aircraft they ordered due to delivery disruptions.

The company said it paid $443 million in compensation to airlines for grounding Max 9 aircraft after the Alaska accident.

Many former and current managers have reported various problems in the manufacturing of the Boeing 737 and 787 aircraft. The latest, a quality engineer, told Congress last week that Boeing is taking manufacturing shortcuts that could ultimately lead to the disintegration of the 787 Dreamliner. Boeing backed down Strongly against his claims.

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However, Boeing has several things in its favor.

Boeing, along with Airbus, forms half of a duopoly that dominates the manufacturing of large passenger aircraft. The two companies have been suffering from a backlog of orders for years from airlines eager for new, more fuel-efficient planes. Boeing is a major defense contractor for the Pentagon and governments around the world.

Despite all the setbacks, Boeing still has a strong mix of high-demand products, technology and people, said Richard Aboulafia, an industry analyst and longtime advisor at AeroDynamic Advisory.

“Even if they are in second place and have major problems, they are still in a very strong market and an industry that has very high barriers to entry,” he said.

Aboulafia said that despite huge losses – about $24 billion in the past five years – the company is not at risk of failure.

“This is not General Motors in 2008 or Lockheed in 1971,” Aboulafia said, referring to two prominent companies that needed massive government bailouts or loan guarantees to survive.

All of these factors help explain why 20 analysts in a FactSet survey rated Boeing shares a “buy” or “overweight,” while only two had a “sell” rating. (Five of them have “comment” ratings.)

Boeing said its first-quarter loss, excluding special items, was $1.13 per share, better than the $1.63 per share loss that analysts had expected, according to a FactSet survey.

Revenue fell 7.5% to $16.57 billion.

Moody's downgraded Boeing's unsecured debt by one notch to Baa3, the lowest investment grade rating, citing weak performance in its commercial aircraft business.

Boeing shares closed down 3%. They are down 34% since the Alaska explosion.