Boeing Can’t Catch a Break: A New Fine from the FAA


Just when it seemed as though Boeing Co. (NYSE:BA) was due for a break after all the bad press it’s been receiving, it appears that it will have at least one more issue to deal with — this one coming from the Federal Aviation Administration in the form of a civil penalty.

The FAA has proposed a $2.75 million civil penalty aimed at Boeing, claiming that Boeing failed to correct a problem with fasteners on its 777 airplanes for more than two years after discovering it in 2008. U.S. Transportation Secretary Anthony Foxx said, “Airplane manufacturers must take prompt and thorough steps to correct safety and compliance problems once they become aware of them.”

According to the FAA, Boeing discovered in September of 2008 that it had been installing nonconforming fasteners in its 777 airplanes. When the FAA investigated the problem and demanded a response, Boeing responded with a detailed timeline of when it would correct the problems.

Boeing, however, didn’t address the problems until November of 2010. The FAA also says that while Boeing stopped using the nonconforming fasteners following the discovery of the problem, several of the manufacturing issues continued. “Manufacturers must make it a priority to identify and correct quality problems in a timely manner,” the FAA Administrator Michael Huerta said.

Kate Bergman, a spokeswoman for Boeing, says that the company implemented a series of corrective actions following the discovery including: the creation of a database for tracking issues, additional management oversight, and regular meetings with the FAA.

However, some industry insiders see the move as having more to do with image than the actual issue at hand. Carter Leake, an investment banker with BB&T Capital Markets/Windsor Group, said, “The headline is so out of sync with the size of the penalty, I’m inclined to view this as muscle flexing by the FAA.”

The news of the FAA fine comes at a time when Boeing is preparing for an impending lawsuit from passengers aboard the Boeing 777 that crashed at San Francisco International Airport on July 6 — coincidentally, the same type of airplane connected with the FAA’s fine. Boeing has also been inundated with issues surrounding its lithium-ion based batteries along with the problems relating to the emergency locator transmitters.

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