Two-and-a-half years after the deadly Ethiopian Airlines 737 MAX crash, with the final investigation report into the accident still pending, the airline’s management has reached a settlement with Boeing and said it expects to resume flying the jet again by January.
In an interview with Bloomberg News on Thursday, Ethiopian Airlines CEO Tewolde GebreMariam said he was convinced “beyond reasonable doubt” that the MAX as upgraded by Boeing after the two fatal crashes is now safe.
“We are happy on the settlement,” Tewolde said.
“I can confirm that we are committed to the Boeing 737 MAX,” he said. “My estimate is by the end of the calendar year or beginning of next year, January, we will be flying the airplane.”
The Ethiopian government’s aviation authority has not yet lifted the grounding of the MAX imposed a day after Flight ET 302 crashed in March 2019 and took 157 lives. Yet clearly the government-owned airline fully expects the regulators to approve the jet’s return to service by the end of the year.
The financial terms of the settlement were not disclosed. The Seattle Times reported exclusively in January that Boeing had then offered an amount on the order of $500 million to $600 million, a large portion of which was not cash but concessions, including discounts on future airplane sales and waivers on maintenance costs.
A Chicago law firm advising the airline wrote a letter to CEO Tewolde then urging him to reject a settlement and instead to sue the manufacturer for punitive damages in the U.S., hoping to win “not less than $1.8 billion in cash.” That advice wasn’t taken.
A person with knowledge of the final settlement said Saturday that it included a payment of $280 million in cash, discounts on future planes, free maintenance and parts for three years, and replacement of the aircraft that crashed — with an estimated value for the total package less than $600 million.
The settlement comes as Ethiopia is torn by a bloody civil war in the northern region of Tigray that has frayed relations with the U.S. and undermined its economy.
Meanwhile, the state-owned airline has struggled for 18 months with the extreme downturn in air travel due to the global COVID-19 pandemic.
Partnering with Boeing
Parallel to the settlement over the MAX, Ethiopian Airlines this week made public a related agreement: Boeing will partner with Ethiopian to make the airline’s base in Addis Ababa “Africa’s aviation hub” and to set up a manufacturing facility there to make airplane parts.
Ethiopia already supplies some small-scale wire harnesses for Boeing aircraft. Boeing has committed to expand local capabilities both in aerospace manufacturing and in airplane repair and overhaul.
This aviation work will complement the planned construction of a new $5 billion airport south of the capital.
In addition, the partnership will promote the training of pilots and aircraft technicians at the airline’s Aviation Academy in Addis Ababa, and STEM education in Ethiopian schools.
Bob Clifford, a Chicago-based lawyer representing families of the crash victims, isn’t surprised by the news of a settlement.
“Life goes on,” Clifford said. “Boeing very much wants to put this chapter behind it.”
Of course, for the families of those killed, there’s little inclination to “move on.”
Javier de Luis, an aerospace engineer and the brother of 63-year-old Graziella de Luis Ponce who worked as an interpreter for the U.N. and died on flight ET 302, noted “the steady cadence of reports of quality failures at Boeing” during the past year.
“The problems at Boeing are ongoing, and I see no evidence of any fundamental change in the company culture or behavior since the crash,” said de Luis. “I don’t understand why we keep acting as if this is the same Boeing from 30 years ago. It’s not.”
Michael Stumo, father of 24-year-old Samya Rose Stumo who was killed in the Ethiopian crash, said Boeing is “using money to buy off Ethiopian Airlines.”
He said he remains committed to pushing for increased aviation safety through tighter oversight of Boeing by the Federal Aviation Administration.
This summer, the FAA slowed certification of Boeing’s next new plane, the 777X; directed Boeing to rework its flight manuals for both the 777X and MAX 10 to include detailed emergency pilot procedures; and ordered Boeing to improve the independence of engineers working on airplane certification, after a third of those surveyed by the FAA said they feel they cannot raise safety concerns without interference.
“The only way to change their culture is the FAA continuing to be muscular,” Stumo said.
Boeing tries to move on
Boeing’s leadership no longer views the MAX program as deep in crisis. Focused now on surviving the impact of the global pandemic, they see the MAX instead as key to recovery.
With deliveries of the 787 suspended, restoring the MAX to market acceptance is now central to Boeing’s cash generation.
The jet has been back in service since late December, and more than 300 MAXs are now carrying passengers globally.
Even as the pandemic continues to suppress air travel, Boeing is building new MAXs at a rate of 16 jets per month with a plan to increase production to 31 per month early in 2022. By year end, Boeing hopes to deliver more than 200 of the MAXs that were parked during the prolonged grounding.
Southwest and United between them placed new orders for just shy of 400 MAXs, and Alaska has added 48 new orders to the 45 it had previously ordered.
In January, Boeing escaped serious consequences from a criminal investigation into the MAX crashes when the Department of Justice imposed a fine of $244 million, a relatively small amount for Boeing.
Boeing’s ongoing estimate of the total cost of the MAX crisis in financial filings has stabilized at about $21 billion, of which almost $9 billion is compensation to airline customers. Wall Street doesn’t expect that to grow.
Following the crash of Lion Air Flight JT 610 just over four months earlier, the ET 302 accident forced the grounding of the MAX worldwide. That makes the settlement with Ethiopian a watershed moment.
Although there’s no word of a corresponding settlement with Lion Air, the southeast Asian airline’s fleet is largely 737s and so eventually a deal seems likely there, too.
The only major region of the world that still hasn’t cleared the MAX to fly is China, which will probably hold up the jet’s return until political tension with the U.S. eases.
The final report into the ET 302 crash is very late but is expected to be released in the coming weeks. Its conclusions will likely repeat those in the interim report published exactly a year after the crash, in March 2020.
That interim report blamed the crash on Boeing’s design of the MAX’s new flight control system, MCAS — the Maneuvering Characteristics Augmentation System — and on the lack of training in that system that Boeing offered pilots.
The upgraded flight controls on the MAXs flying today include fixes to the MCAS design flaws. And all MAX pilots undergo simulator training specific to the system before they fly the aircraft.