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Boeing could face 'absolutely devastating' economic impact after crash

Causes of two fatal Boeing 737 MAX 8 passenger jet crashes in less than six months, both now under investigation, are expected to amount to hundreds of millions in liability for Boeing Co. (BA), and could escalate if the company failed to properly disclose new features concerning the aircraft’s controls.

“The economic impact on Boeing is just absolutely devastating if they don't fix this immediately,” Arthur Rosenberg, a partner with the law firm Soberman & Rosenberg who specializes in aviation liability, said. “In all my years of doing this, I have never seen anything like this,” he said of the two crashes having nearly identical fingerprints.

Sunday’s Ethiopian Airlines crash of a MAX 8 jetliner that killed all 157 passengers on board, followed an October crash of the same model operated by Lion Air, resulting in the deaths of all 189 passengers.

Questions over the Boeing 737’s autopilot system

Early questions surrounding two crashes center on an autopilot system new to Boeing’s 737 line in the MAX 8. The feature automatically tilts the nose of the aircraft down as a method to prevent aerodynamic stall.

Rescuers work at the scene of an Ethiopian Airlines flight crash near Bishoftu, or Debre Zeit, south of Addis Ababa, Ethiopia, Monday, March 11, 2019. A spokesman says Ethiopian Airlines has grounded all its Boeing 737 Max 8 aircraft as a safety precaution, following the crash of one of its planes in which 157 people were killed. (AP Photo/Mulugeta Ayene)

While causes of the two crashes have not been fully investigated, Rosenberg said the MAX 8’s new autopilot system is suspected because of the close similarities between that crash and the one involving Lion Air.

“In every crash sequence there's kind of a fingerprint. In both the Lion Air and the Ethiopian Air crash, the planes took off and within six to 12 minutes both planes with similar altitude excursion profiles gained and lost altitude, which is strong evidence of pilots struggling with this MCAS system,” he said referring to the Maneuvering Characteristics Augmentation System, the planes’ autopilot system.

Another possible sign that the autopilot feature could have caused the pilots to fully lose control of the aircraft, according to Rosenberg, is the impact site.

“What was really striking to me is the impact crater of this Ethiopian Airlines plane looked to me like it came straight down,” Rosenberg said. “A lot of times when planes crash, the pilots do have partial control, so there's still a lot of forward movement and when the plane hits with all that momentum and inertia they break apart and pieces [are] strewn all over the place.”

Tom Routh, a partner with the Nolan Law group, a firm that specializes in aviation litigation, said Boeing, in his experience, typically carries enough insurance coverage for catastrophic crashes caused by manufacturing defects. Routh’s firm currently represents multiple families whose loved ones were killed in the Lion Air crash.

Boeing deferred to its customers and regulators for discussions concerning aircraft operations and decisions, in a statement issued Monday.

“Safety is our number one priority and we are taking every measure to fully understand all aspects of this accident,” the statement said. “The investigation is in its early stages, but at this point, based on the information available, we do not have any basis to issue new guidance to operators.”

Source: David Foster

Questions over whether carriers that have placed orders for MAX 8 aircraft that have not been delivered can cancel their contracts is another issue.

Both Rosenberg and Routh say cancellation would depend on the provisions of each contract, though most contracts have provisions covering airworthiness, Rosenberg said.

“I haven’t seen the contracts so I can’t say specifically. I'm sure if they can't get out of it, there's probably some de minimis liquidated damages clause to get out of it,” Rosenberg said.

According to the Capa Fleet Database Boeing has delivered 378 MAX 8 aircraft, globally. Another 5,526 are on order. In 2018, list price for the MAX 8 was $117.1 million.

Routh said his firm successfully won a case on behalf of crash victims in the Asiana Flight 14 crash, based on a showing that pilots were not made aware of aircraft features.

Did pilots know about features of the new autopilot?

“Even when the autopilot is disengaged on this airplane, this MCAS still operates to prevent a stall...this feature lowers the nose of the airplane without the pilot knowing about it,” Rosenberg said.

Whether pilots knew about the new autopilot feature in the Max 8 is disputed. According to Boeing, Rosenberg said, the feature was included in the aircraft’s pilot manual and in a bulletin following the Lion Air crash of a Boeing 737 in October.

That’s not enough, critics argue, explaining that part of the reason Boeing slipped past more stringent pilot training requirements for the MAX 8 is based on information the company passed along to the FAA.

“It's our position in the Lion Air case that Boeing should have should been required to and should have sought a new type certificate, rather than the amended type,” Routh said.

The MAX 8 aircraft had other significant changes from its predecessor, aside from the MCAS autopilot, including new engines, new avionics, and different aerodynamic characteristics.

Aviation authorities in China, Indonesia and the Cayman Islands joined Ethiopian Airlines in temporarily grounding all Boeing model MAX 8 aircraft. Turkish Airlines and Korean officials are said to have similar measures under consideration. So far, no American carriers have grounded their fleets.

Alexis Keenan is a New York-based reporter for Yahoo Finance. She previously produced live news for CNN and is a former litigation attorney. Follow her on Twitter at @alexiskweed

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