Aircraft manufacturer Boeing is now contending with a lawsuit from shareholders alleging that the company prioritised profits over safety and provided misleading information about its commitment to ensuring the safety of its aircraft.
This is based on a Reuters report.
The legal action follows a mid-air cabin panel blowout incident on an Alaska Airlines 737 MAX 9 that occurred on January 5. Shareholders claim that Boeing, despite the crashes of two MAX planes in 2018 and 2019 that resulted in 346 fatalities, assured investors of its unwavering focus on safety.
The lawsuit contends that Boeing’s statements concealed poor quality control on its assembly line, ultimately leading to an inflated stock price.
Boeing’s share price experienced a notable decline of 18.9 per cent from January 5 to January 25, 2024, the day after the Federal Aviation Commission (FAA) restricted Boeing from expanding MAX production due to safety concerns. This decline erased more than $28 billion of market value.
The lawsuit, filed in the federal court in Alexandria, Virginia, covers shareholders from October 23, 2019, to January 24, 2024, and is led by Rhode Island General Treasurer James Diossa. Defendants include Boeing’s Chief Executive Dave Calhoun, his predecessor Dennis Muilenburg, and Chief Financial Officer Brian West, along with his predecessor Gregory Smith.
James Diossa, the lead plaintiff, highlighted the lawsuit’s potential to drive changes in Boeing’s practices, emphasising the importance of safeguarding passengers and ensuring their safety in the future. The legal action draws attention to the incident on January 5, which prompted the FAA to temporarily ground 171 MAX 9 planes, resulting in numerous flight cancellations for Alaska Air Group and United Airlines. While there were no fatalities in the Alaska Airlines incident, some passengers have initiated lawsuits against Boeing and the carrier.
Boeing, in response to the legal proceedings, has refrained from commenting. The company recently faced uncertainty over its planes, leading to an inability to provide full-year financial targets.
Despite this uncertainty, Boeing reported better-than-expected fourth-quarter results, including a $30 million loss, $22 billion of revenue, and $3.38 billion of cash flow.
(With inputs from Reuters)