Boeing, hit with $6.6
million FAA fine, faces much bigger 787 repair bill - sources
SEATTLE/WASHINGTON
(Reuters) - Boeing Co will pay $6.6 million to U.S. regulators as part of a
settlement over quality and safety-oversight lapses going back years, a setback
that comes as Boeing wrestles with repairs to flawed 787 Dreamliner jets that could
dwarf the cost of the federal penalty.
Boeing is beginning
painstaking repairs and forensic inspections to fix structural integrity flaws
embedded deep inside at least 88 parked 787s built over the last year or so, a
third industry source said.
The inspections and
retrofits could take up to a month per plane and are likely to cost hundreds of
millions - if not billions - of dollars, though it depends on the number of
planes and defects involved, the person said.
Boeing shares extended
losses in the final hour of trading, closing down 5.6%, after Reuters first
reported the settlement with the Federal Aviation Administration over the
planemaker's failure to comply with a 2015 safety agreement.
The penalties include
$5.4 million for not complying with the agreement in which Boeing pledged to
change its internal processes to improve and prioritize regulatory compliance
and $1.21 million to settle two pending FAA enforcement cases.
"The FAA is
holding Boeing accountable by imposing additional penalties," FAA
Administrator Steve Dickson said in a statement.
Boeing paid $12
million in 2015 as part of the settlement.
The planemaker is
strengthening processes and operations "to ensure we hold ourselves
accountable to the highest standards of safety and quality," a spokesman
said by email, adding that settlement "fairly resolves
previously-announced civil penalty actions while accounting for ongoing safety,
quality and compliance process improvements."
Boeing engineers are
working to determine the scope of inspections, including whether jets can be
used as-is without a threat to safety, two people said. Boeing has not told
airlines how many jets are impacted, another person said.
The FAA has been
investigating instances of oversight lapses, debris left inside finished
aircraft, and managers putting pressure on employees handling safety checks for
the FAA, people familiar with the proceedings said.
The FAA has also
wrapped into a single investigation three separate 787 defects arising over the
last year that have triggered the invasive inspections, the people said.
Boeing told the FAA in
August 2020 about the latest flaw, involving structural wrinkling in the
interior fuselage skin where carbon-composite barrels that form the plane's
lightweight body are melded together.
The defect went
unnoticed for months or longer because computerized safeguards that crunch data
looking for quality flaws had not been programmed to look for the gaps, a third
industry source said.
DELIVERY TARGET
The 787 production
problems have halted deliveries of the jet since the end of October, locking up
a source of desperately needed cash for Boeing.
The fuel-efficient 787
has been a huge success with airlines, which have ordered 1,882 of the advanced
twin-aisle jet worth nearly $150 billion (74.7 billion pounds) at list prices.
But the advanced
production process and sprawling global supply chain caused problems over the
years.
As of February, Boeing
had fixed the 787 production process causing the wrinkling defect, according to
two people familiar with the matter.
However, planes rolled
off the assembly line with the flaw for more than a year, at least, continuing
even after the flaw was discovered in August 2020.
"It's difficult
to see a definitive fix that is agreeable by the aviation authorities and all
going forward," Boeing customer Air Lease Corp's CEO John Plueger told analysts
on an earnings call Feb 22. "I don't think that we're there yet."
Boeing has been
working on the three potentially-hazardous defects as it charted plans to
consolidate final 787 assembly in South Carolina starting next month, at a
sharply-reduced rate of 5 787s per month.
One senior supply
chain source said they will have to cut rate again, but another person close to
the company said there was no discussion of an imminent cut.
Boeing said last month
it expects to resume handing over a small number of 787s to customers later
this quarter.
It has an ambitious
internal plan to deliver 100 of the jets this year, one person said. Analysts
say deliveries are not expected to recover to 2019 levels until at least 2024.
'OPEN-HEART SURGERY'
But before any jet is
delivered, it must go through invasive inspections and costly repairs.
First, technicians
must pull out the passenger seats, open up the floor paneling and use specialty
tools to measure whether defects invisible to the naked eye are present,
according to three people with direct knowledge of the process.
The repair work -
already underway at Boeing factories in Everett, Washington and North
Charleston, South Carolina - is even harder.
In the bowels of the
jet, technicians have to remove multiple specialty fasteners on both sides of
the inner fuselage skin, then install newly produced "shims" that
fill out gaps and remove the structural dimpling. Workers then replace all the
fasteners, re-paint, and re-install the interior, they said.
"It's like
open-heart surgery," one of the people said. "They'll be retrofitting
the fleet for potentially several years.
