US proposes fine of US$1.25mil on Boeing

  • Aviation
  • Friday, 07 Aug 2020

The FAA said Boeing managers pressured workers to perform inspections on an aircraft that was not eligible for inspection because of various issues

WASHINGTON: The United States Federal Aviation Administration (FAA) has said it was proposing to fine Boeing Co US$1.25mil after the agency alleged Boeing managers at its South Carolina plant exerted undue pressure on workers who handle safety oversight work on behalf of the agency.

The FAA said Boeing managers pressured workers to perform inspections on an aircraft that was not eligible for inspection because of various issues; harassed people to make them perform inspections more quickly; threatened to replace workers; and retaliated against a unit manger for filing an undue pressure report by declining to interview the “highly qualified manager” for a promotional position.

The long-standing practice of delegating some FAA tasks to airplane manufacturers has come under criticism after two fatal Boeing 737 MAX crashes raised questions about the programme.

The FAA in two civil penalty notices alleged Boeing failed to ensure administrators were in a position to effectively represent the FAA’s interests and that some Boeing managers “exerted undue pressure or interfered” with people performing FAA tasks.

Boeing said the proposed fines “are a clear and strong reminder of our obligations” under the Organisation Designation Authorisation programme, or ODA.

“Undue pressure of any type is inconsistent with our values and will not be tolerated, ” the company said.

Boeing employees tasked with handling certification work on behalf of the FAA –so-called ODA unit members – at Boeing’s South Carolina factory were subjected to undue pressure or interference from at least four Boeing managers between September 2018 and May 2019.

The FAA said the pressure came from executives including the factory’s vice president of 787 operations, a senior quality manager and the director of jet deliveries, according to a five-page letter from the FAA’s enforcement division in Washington state to Boeing veteran Beth Pasztor, an executive in charge of Product and Services Safety.

The FAA also said Boeing, from roughly November 2017 through July 2019, implemented an organisational structure that did not conform to ODA procedures, with managers in unapproved roles.

The letter says the FAA will take no further action for 30 days to allow Boeing to pay the fines or furnish additional information.

Boeing said in both instances “allegations were appropriately reported, investigated, and disclosed to the FAA” and added it took “corrective action in response.”

A 2016 Boeing survey released by a congressional panel found nearly 40% of 523 employees handling safety-certification work perceived “potential undue pressure” from managers, such as bullying or coercion.

Evidence of “undue pressure” was also pinpointed by a group of international regulators reviewing the 737 Max certification.

Meanwhile, S&P Global Ratings had cut its outlook on Boeing to “negative” from “stable”.

It said recovery in the aerospace industry could take longer than expected due to the impact of the coronavirus crisis.

“This could result in weaker cash flow over the next few years, making it difficult for Boeing to pay down debt and improve earnings before interest, taxes, depreciation, and amortization (Ebitda) and restore credit metrics, ” S&P Global said.

The agency, however, reaffirmed Boeing’s credit ratings, including “BBB-” long-term and “A-3” short-term.

It cited “sufficient liquidity” with the planemaker.

Boeing should be able to cover large cash outflows over the next six to 12 months to manage the downturn and could generate positive free cash flow next year.

This is because it is expected to start deliveries of the grounded 737 MAX, S&P Global said.

The company does not see the need to add to liquidity through additional debt offerings to manage the downturn, Boeing chief financial officer Greg Smith said at a virtual conference on Wednesday.

Boeing’s “priority one” was to pay down its debt and get its balance sheet back in order when the industry recovers, Smith added. — Reuters

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