Delta climbs clear of rivals 737 MAX woes – Breakingviews

Delta climbs clear of rivals\ 737 MAX woes - Breakingviews
737 Max Wont Fly Until F.A.A. Is Satisfied, Elaine Chao Says, Defending Agency
In this April 8, 2019, file photo, Boeing 737 Max 8 jets are parked at the airport adjacent to a Boeing Co. production facility, in Renton, Wash.

A Boeing shareholder is suing the company for allegedly hiding problems with its 737 Max jet to push its shares higher.

The company and its top executives “effectively put profitability and growth ahead of airplane safety and honesty,” the lawsuit alleges. “Defendants misled investors about the sustainability of Boeings core operation – its Commercial Airplanes segment – by touting its growth prospects and profitability, raising guidance, and maintaining that the Boeing 737 Max was the safest airplane to fly the skies.”

Boeing sued by shareholders for fraud after deadly 737 crashes

Shareholder Richard Seeks argues that Boeing should have told investors about safety problems with its bestselling plane after a fatal crash in October. Instead, it pushed the stock up to artificial highs by speaking optimistically about future sales before a second fatal crash in March sent shares tumbling, he says.

The federal suit also named Boeing CEO Dennis Muilenburg and the chief financial officer, Gregory Smith, as defendants.

The company misled investors by touting its growth prospects and profitability, raising guidance, and maintaining that the Boeing 737 Max was the safest airplane to fly the skies, the lawsuit alleges. By doing so, investors bought shares at artificially inflated prices.

A Boeing 737 MAX 8 airplane being built for India-based Jet Airways, flies after taking off on a test flight, Wednesday, April 10, 2019, at Boeing Field in Seattle. Flight test and other non-passenger-bearing flights of the plane continue in the Seattle area where the plane is manufactured, as a world-wide grounding the the 737 MAX 8 continues, following fatal crashes of MAX 8s operated by Ethiopian Airlines and Lion Air. (AP Photo/Ted S. Warren)

The suit filed in U.S. District Court for the Northern District of Illinois seeks class action status for all Boeing shareholders who bought stock between January 8 and March 21.

Delta climbs clear of rivals 737 MAX woes

The company has been named as a defendant in growing number of suits filed by families of passengers killed in a Lion Air crash off the coast of Indonesia on October 29 and an Ethiopian Airlines crash on March 10. All 346 aboard the two flights died.

The lawsuit said that Boeing should have told investors that the safety features were optional on the Max jets it sold. It also alleged that the company hid from investors that the U.S. Federal Aviation Administration had given it authority to help certify that the Max plane was safe, along with allowing the company to greenlight a flight-control system involved in the two crashes.

Its stock hit $440 early last month, then fell to $362 after the Ethiopian Airlines crash. The stock was at $369 in mid-afternoon trading Wednesday.

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Boeing announced that it is making changes to a flight-control system implicated in both crashes. It has vowed to a software fix to get the planes back in the air since a worldwide grounding last month. The company is also promising that it would provide airlines with certain safety features previously offered to them as options and that it would provide additional training for Max pilots.

In the wake of Boeings 737 Max grounding, Icelandair had earlier announced that flights to Cleveland in the U.S. and Halifax in Canada would be suspended over spring and summer. On Wednesday, the airline said that would now apply over the whole calendar year.

The lawsuit said that Boeing should have told investors that the safety features were optional on the Max jets it sold. It also alleged that the company hid from investors that the U.S. Federal Aviation Administration had given it authority to help certify that the Max plane was safe, along with allowing the company to greenlight a flight-control system involved in the two crashes.

Icelandair said its flight changes were “partly due to the suspension of the Boeing 737 Max” but also because of a switch in focus away from transatlantic services. It said the financial impact of the changes was “uncertain.”

The practice by the FAA of delegating safety checks to manufactures has come under fire by Congressional investigators since the crashes. The company is also facing probes by the U.S. Justice Department and the Transportation Departments inspector general.

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WASHINGTON — The United States will not clear Boeing 737 Max jets for flight again until federal officials are satisfied that Boeing has fixed its flawed flight control system, Transportation Secretary Elaine L. Chao said in testimony on Wednesday.

Selling more premium seats helped the $39 bln airline to a strong first quarter. With American, Southwest and even United constrained by the grounding of Boeings new jets, Deltas Airbus fleet positions it nicely to take further advantage of a booming travel market.

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Ms. Chao, appearing before House subcommittee hearings concerning her departments budget, offered no timeline for the plane to return to service after the Federal Aviation Administrations decision to ground the jets on March 13.

A Delta Air Lines flight is pushed put of its gate at the airport in Salt Lake City, Utah, U.S., January 12, 2018.

But she said Boeing appeared close to completing a software upgrade on a crucial sensor believed to have played a role in the crashes of two Max jets. An Ethiopian Airlines flight crashed shortly after takeoff from Addis Ababa on March 10, killing 157, and a Lion Air 737 Max crashed last October, killing all 189 people on board.

Video: Boeing shareholders sue company

The F.A.A. will not approve Boeings proposed changes until the F.A.A. is satisfied it is safe, said Ms. Chao, who has come under fire for her departments actions after the Lion Air disaster.

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Ms. Chao, reading from prepared answers at times, defended the F.A.A.s decision not to follow the lead of 40 other countries by immediately grounding the fleet, despite the possibility that the Ethiopia crash might have resulted from a flaw in a plane whose basic design dates to the 1960s.

The F.A.A., which Ms. Chao oversees, waited three days to ground the fleet and was one of the last major regulators worldwide to do so. She flew back to Washington from a festival in Texas on March 12 on a 737 Max, in what seemed to be an endorsement of the planes safety. Less than a day later the F.A.A. uncovered evidence that suggested the planes were not fit to fly.

“The disclosure highlights the mounting uncertainty among customers, Boeing investors and suppliers about when the new MAX version of the 737 might return to flight following the global grounding of the plane after two fatal crashes”, the WSJ pointed out.

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The F.A.A. saw no basis upon which to ground these planes, she said. It is a very technical organization. It is very data-driven. They saw no data until the morning of Wednesday the 13th.

It was at that time, she added, that F.A.A. investigators discovered new information on the first three minutes of the Ethiopian flight that revealed parallel conditions involving the two accidents.

But in an interview after the hearing, Ms. Chao made it clear that the decision to ground the jets was the F.A.A.s — not her own — and said that she had no legal say, then or now, in deciding when the planes fly.

F.A.A. officials are very careful about jumping to conclusions, having gone through other tragedies, she said. They are very careful about rushing to action.

Ms. Chaos critics have argued that she could have exerted greater pressure on F.A.A. officials and avoided the appearance that she was endorsing the aircrafts airworthiness.

When asked, after the hearing, about her 737 flight from Texas, Mr. Chao said: I flew down on the 737 and I flew back on the 737. Those are the flights that were chosen, so I went on it. I didnt really have any concern about the safety, but that is irrelevant now.

At the hearing, Representative David Price, Democrat of North Carolina and the chairman of the House Appropriations transportation subcommittee, asked a pointed question: Were there any lessons learned? He added, Should or could the F.A.A. have taken a different approach?

Mr. Price also pressed Ms. Chao on whether the review process for new aircraft designs gives Boeing and other manufacturers too much latitude in overseeing their own designs and upgrades, a process critics have likened to self-certification.

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Ms. Chao said she did not yet have answers but said she had taken two steps — prompting an inquiry into the crashes by the departments inspector general and convening a special panel to look into the issue.