Boeing Co. (NYSE: BA) shareholders have filed a lawsuit accusing the aerospace giant of defrauding them by hiding the safety deficiencies in its 737 Max aircraft that led to two deadly crashes, including the Ethiopian Airlines crash that killed 157 people.
The accident occurred less than five months after another 737 Max belonging to Indonesia Lion Air plunged into the Java Sea, killing 189 passengers and crew. Shareholders filed the lawsuit in a Chicago federal court on Tuesday, seeking damages for alleged securities fraud after the company’s market value dropped $34 billion two weeks following the Ethiopian Airlines crash.
According to the lawsuit filed by shareholder Richard Seeks, the company “effectively put profitability and growth ahead of airplane safety and honesty” by rushing out the 737 Max to the market in order to compete with European rival Airbus SE. The complaint says that Boeing left out extra or optional features aimed at preventing the Lion Air and Ethiopian Airlines accidents.
The proposed class action has also named Boeing Chief Financial Officer Gregory Smith and Chief Executive Officer Dennis Muilenburg as defendants. Mr. Seeks also claims that the statements Boeing recently issued regarding its growth prospects and the 737 Max planes were undermined by the company’s alleged conflict of interest, relating to the fact that federal aviation regulators trusted it to certify the aircraft as okay to fly itself.
The plaintiff says he incurred a loss after selling 300 Boeing shares that he bought early in March. Boeing is also facing many other lawsuits over the two accidents, including by families of the victims.
Boeing on Tuesday reported a 19 percent decline in first-quarter commercial plane deliveries, thanks in part to the worldwide grounding of the 737 Max. The Chicago-based company delivered a total of 149 commercial planes during the quarter, including 89 of the 737s. In the same period a year ago, the company delivered 184 commercial planes, including 132 of the 737 Max aircraft.
Last week, the aircraft maker announced plans to cut monthly production of the 737 Max plane from 52 to 42 planes. Shares of the company were down $4.37, or 1.18% to 364.67 as of 10:27 a.m. ET on Wednesday. The stock is up more than 13% since the beginning of the year.
Boeing Co. Profile
Boeing manufactures commercial airplanes, provides defense equipment, and maintains a small captive finance division. With headquarters in Chicago, Illinois, the firm competes with Airbus in commercial aviation and with Lockheed, Northrop, and several other firms in defense. Sales are split about 70% and 30% between the commercial aircraft and defense end markets. In 2018, Boeing generated over $100 billion in sales.
