GILLIAN RICH
Monday March 18, 2019
A federal prosecutor is reportedly looking into the development of the Boeing (BA) 737 Max as a potential criminal case, while regulators question a safety analysis of the plane's flight control system.
The Justice Department is looking into the development of the Boeing 737 Max, a highly unusual probe, involving a prosecutor in the criminal division's fraud section, according to the Wall Street Journal. Typical safety probes are civil cases handled by the Transportation Department's inspector general, according to the report.
A grand jury also issued a subpoena March 11 to at least one person involved in the 737 Max's development, the Journal said.
The investigation comes after an Ethiopian Airlines jet crashed earlier this month, killing 157. The crash was the second in five months, following a fatal Lion Air crash in October.
The Transportation Department launched its own inquiry after the Lion Air crash into the analysis of the automatic flight control system.
The Federal Aviation Administration reportedly gave Boeing too much of the safety oversightduring the 737 Max's development, a Seattle Times report found. The report also found that Boeing turned in a safety analysis with major flaws relating to the automatic flight control system.
Multiple reports also said the U.S. aerospace giant rushed to develop the 737 Max to better compete with European rival Airbus (EADSY) in the lucrative narrowbody jet market.
The Seattle Times had asked for comment from the FAA and Boeing just days before the fatal Ethiopian Air crash.
Boeing Stock Falls Again
Boeing stock was down 2.3% at 371.14 on the stock market today. Airbus' U.S.-listed shares were down less than 0.1%. .
The iShares U.S. Aerospace & Defense ETF (ITA) was flat, and the SPDR S&P Aerospace & Defense ETF (XAR) rose 0.7%.
The FAA grounded the 737 Max last week, but only after officials grounded the jets in Asia and Europe, citing similarities between the Lion Air crash and the Ethiopian Airlines crash.
Boeing has halted deliveries of the 737 Max, but so far the production will continue at a rate of 52 a month.
On Monday, Vertical Research Partners said the grounding should last about two months, but cautioned that appears "optimistic" given that the FAA's approval process is under scrutiny.