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Boeing’s financial problems continue as families of crash victims call on the US to sue the company
Boeing said on Wednesday it lost $355 million as revenue fell in the first quarter, another sign of the crisis gripping the aircraft maker as it faces increasing scrutiny over the safety of its planes and accusations of shoddy work from a growing number of whistleblowers.
CEO David Calhoun said the company is in “a difficult time” and its focus is on solving its manufacturing problems, not the bottom line.
Company executives have been forced to talk more about security and less about finances since a door was closed. exploded from a Boeing 737 Max during an Alaska Airlines flight in January, leaving a hole in the plane.
The accident halted the progress Boeing appeared to be making as it recovered from two fatal accidents of Max jets in 2018 and 2019. The crashes in Indonesia and Ethiopia, which killed 346 people, are also now back in the spotlight.
About a dozen relatives of passengers who died in the second crash met with government officials for several hours Wednesday in Washington. They asked employees to revive a criminal fraud charge against the company, ruling that Boeing violated the terms of a 2021 settlement, but left disappointed.
Boeing officials made no mention of the meeting, but spoke repeatedly as they discussed quarterly results from a renewed focus on safety.
“While we release first quarter financial results today, our focus remains on the comprehensive actions we are taking following the crash of Alaska Airlines Flight 1282,” Calhoun told employees in a memo Wednesday.
Calhoun listed a series of actions the company is taking and reported “significant progress” in improving manufacturing quality, much of it through slowing production, which means fewer planes for its airline customers. Calhoun told CNBC that more rigorous inspections resulted in 80% fewer failures in airframes coming from major suppliers Espírito AeroSistemas.
“In the short term, yes, we are in a difficult time,” he wrote to employees. “Lower deliveries can be difficult for our customers and our finances. But safety and quality must and will come above all.”
Calhoun, who will resign At the end of the year, he once again said that he was fully confident in the company’s recovery.
Calhoun became CEO in early 2020 as Boeing struggled to recover from the Max crashes, which led regulators to ground planes worldwide for nearly two years. The company thought it had avoided any risk of criminal prosecution when the Department of Justice agreed not prosecute the company for fraud if it complied with US anti-fraud laws for three years – a period that ended in January.
Boeing has reached confidential settlements with the families of passengers who died, but families of those killed in the crash in Ethiopia continue to pressure the Justice Department to sue the company in federal district court in Texas, where the settlement was filed. On Wednesday, department officials told relatives that the agency is still considering the matter.
Upon leaving the meeting, Paul Cassell, a lawyer for the families, called it “all for show.” He said the Justice Department appears determined to defend the deal it negotiated in secret with Boeing.
“We simply want the case to move forward and let the jury decide whether Boeing is criminal or not,” he said.
It was an emotional meeting, according to Nadia Milleron, whose daughter Samya Stumo died in the 2019 accident.
“People are angry. People are screaming. People are starting to talk about other people,” said Milleron, who watched 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. It’s mysterious,” she said.
According to Milleron, the head of the fraud section of the Justice Department’s criminal division, Glenn Leon, said his agency could extend its review beyond this summer, seeking a trial against Boeing on charges of defrauding regulators who approved o Max, or ask a judge to dismiss the charge. She said Leon made no commitments.
The Justice Department declined to comment.
A federal judge and an appeals court ruled last year that they did not have the power to overturn the Boeing deal. Families of crash victims had hoped the government would reconsider its lawsuit against Boeing after the Alaska Airlines plane’s door plug exploded on Jan. 5 as the plane flew over Oregon.
Investigators looking into the Alaskan flight say screws that help hold the door cover in place were missing after repairs at a Boeing factory. The FBI told the passengers they might be crime victims.
Boeing shares have plunged by about a third since the explosion. The Federal Aviation Administration Boeing Co. has stepped up its oversight and given Boeing until the end of May to produce a plan to fix manufacturing problems with the 737 Max jets. Airlines customers are unhappy about not receiving all the new planes they ordered due to delivery disruptions.
The company said it paid $443 million in compensation to airlines for grounding Max 9 jets following the Alaska crash.
Several former managers and one current manager have reported numerous problems in the manufacturing of the Boeing 737 and 787 jets. The most recent, a quality engineer, told Congress last week that Boeing is taking manufacturing shortcuts that could eventually cause the planes to break. 787 Dreamliners. Boeing retreated aggressively against their claims.
Boeing, however, has a few things going for it.
Along with Airbus, Boeing forms one half of a duopoly that dominates the manufacture of large passenger planes. Both companies have years of backlogs from airlines eager for new, more fuel-efficient planes. And Boeing is a major defense contractor for the Pentagon and governments around the world.
Richard Aboulafia, a longtime industry analyst and consultant at AeroDynamic Advisory, said that despite all the setbacks, Boeing still has a powerful mix of high-demand products, technology and people.
“Even if they are No. 2 and have major problems, they are still in a very strong market and an industry that has very high barriers to entry,” he said.
And despite huge losses – around $24 billion in the last five years – the company is not in danger of going bankrupt, Aboulafia said.
“This is not General Motors in 2008 or Lockheed in 1971,” Aboulafia said, referring to two iconic companies that needed huge government bailouts or loan guarantees to survive.
All of these factors help explain why 20 analysts in a FactSet survey rate Boeing stock as a “Buy” or “Overweight” and only two have “Sell” ratings. (Five have “Hold” ratings.)
Boeing said its first-quarter loss, excluding special items, was $1.13 per share, which was better than the $1.63 per share loss forecast by analysts, according to a survey by Boeing. FactSet.
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 the weak performance of the commercial plane business.
Boeing Co. shares closed down 3%. They have fallen 34% since the explosion in Alaska.