Boeing CEO admits 'mistake' as FAA launches safety probe

The FAA said on Thursday that it notified Boeing it was conducting an investigation to determine if the company failed to ensure that completed products conformed to approved design, were safe for operation and in compliance with FAA regulations. The investigation was launched as a result of the Alaska Airlines flight where an emergency exit door plug was blown off 10 minutes into the flight of a 737 MAX 9. The FAA grounded the aircraft model and issued an emergency airworthiness directive after the incident and Boeing and its main supplier, Spirit AeroSystems, have faced heavy scrutiny over the last week. Both Alaska Airlines and United have reported finding loose parts on grounded aircraft and concerns have been raised over the quality of Boeing products. Spirit's initial statement after the incident said the company's primary focus is the quality and product integrity of what it delivers to customers. Boeing said safety was a top priority and issued inspection instructions. Boeing CEO Dave Calhoun told CNBC there was a quality escape that led to the nearly tragic incident."We're not going to point fingers there, because yes it escaped their factory, but then it escaped ours too," Calhoun told CNBC's Phil LeBeau on Wednesday. At the same time, a class action lawsuit was filed against Spirit AeroSystems, the main supplier for Boeing, less than one month before the depressurization incident on the 737 MAX 9 mid-flight has drawn additional attention to quality issues surrounding the two companies. The suit alleges that officials in the company were repeatedly warned about quality failures and that management told teams to falsify documentation and underreport defects.RELATED STORY:Latest on 737 MAX 9 Alaska Airlines emergency - aircraft had prior issues before panel ripped off mid-flight The suit was filed in May and amended in court less than one month before the highly publicized and scrutinized depressurization incident on Alaska Airlines Flight 1282 on Friday night. The class action suit includes allegations that Spirit has knowingly withheld information regarding quality defects in parts supplied to Boeing. The class action was filed on behalf of all persons and entities who purchased Spirit stock between April 8, 2020 and Sept. 7, 2023 and suffered as a result of numerous incidents involving Boeing aircraft with parts supplied by Spirit. The allegations state that these defects included the routine presence of foreign object debris in Spirit products, missing fasteners, peeling paint and poor skin quality. The suit claims that these failures stemmed from the culture at Spirit, which prioritized production numbers and short-term financial outcomes over the quality of products as well as Spirit's inability to hire sufficient personnel to deliver quality products at the rates demanded by the company, as well as customers like Boeing. Allegations also state that the quality failures were "so severe and persistent" that Boeing placed Spirit on probation from 2018 to 2021. Probation is the last step before a supplier is withdrawn for continued failures. Spirit was created after Boeing sold its commercial fabrication operations to Canadian private equity firm Onex Corporation in 2005. This included manufacturing facilities and about 8,500 employees, which began operating under the Spirit AeroSystems name and went public in 2006. Since 2005, Spirit has served as the major supplier of aircraft parts for Boeing, with supply agreements for products like the 737, 747, 767, 777 and 787. Through the agreements, Boeing is required to buy products like the fuselage, struts/pylons, nacelles, wings and wing components through Spirit. The suit states that Boeing accounts for 65 percent of Spirit's commercial segment net revenues and 60 percent of the company's overall net revenues. On Oct. 2, 2023 Spirit announced that President and CEO Thomas C. Gentile III resigned as a member of the board on Sept. 30, 2023. The suit claims that Gentile admitted knowledge regarding quality issues and the concealment of mis-drilled hole defects and three weeks later he was replaced with an interim CEO. On Oct. 18, 2023 Spirit and Boeing entered into a Memorandum of Agreement to enable greater collaboration, improve quality and increase the number of future deliveries. Interim President and CEO Patrick M. Shanahan said the teams would focus on generating supply chain performance and resiliency to enable greater market responsiveness and delivery assurance.RELATED STORIES:Spirit AeroSystems, Boeing reach agreement to support production stabilitySpirit Aerosystems strike could impact Boeing, Airbus, Bombardier The problems for Spirit did not begin in the fall however. On June 21 Spirit announced it was suspending factory operations after employees rejected a four-year contract offered and instead voted to strike. Many employees had concerns over changes to a core healthcare plan which would have eliminated many medications originally covered and others were not pleased with the guaranteed 16 percent pay raise over four years. On June 29 Spirit welcomed the ratification of a new contract and announced operations would begin again. After the depressurization incident, the FAA grounded all Boeing 737 MAX 9 aircraft and issued an emergency Airworthiness Directive. The specific variant contained a door plug whereas a model designed for more passengers would have had an emergency exit door. Fortunately, the plane made a successful return to the airport, landing safely with all 171 passengers and crewmembers departing without serious injury. NTSB Chair Jennifer Homendy said in a press conference it was fortunate that the incident did not end up in something more tragic. No one was in the two seats closest, the aircraft was only at 16,000 feet and only 10 minutes from the airport when the door blew out. While the passengers and crew all walked away from what could have possibly been a very deadly crash, concerns were raised over the quality of the 737 MAX as well as the oversight that led to defective parts being sent out and installed on numerous commercial aircraft. The company has faced criticism over its 737 MAX after two deadly crashes in 2018 and 2019 that killed over 300 people. Since the incident Boeing has said it is working with customers, the FAA and NTSB with full transparency. The FAA's latest statement, given on Tuesday, said that all 737-9 aircraft would remain grounded until the FAA finds each can return to service safely.The 2018 and 2019 crashes also led to a worldwide grounding for the 737 MAX, which remained in effect for much of the pandemic. The grounding and concurrent worldwide pandemic limiting air travel severely impacted Spirit's business, the suit alleges. Following the grounding and production halt, Spirit issued mass layoffs, reducing over 50 percent of its U.S. workforce according to the lawsuit. Investigations into the two crashes found a problem with the new Maneuvering Characteristics Augmentation System (MCAS), which caused the plane to pitch the nose down and led to the pilot losing control of the aircraft and crashing. Spirit has also shared updates on a quality issue regarding elongated fastener holes on the aft pressure bulkhead on certain models of the 737 fuselages. Boeing later admitted in court documents that two of the 737 MAX Flight Technical Pilots deceived the FAA Aircraft Evaluation Group, which evaluated and then mandated pilot-training requirements, about the speed range that the MCAS operated. Lawsuits and fines followed and as a response, the FAA adopted a new policy to require any design changes that would have a notable effect on the airworthiness of the plane to be considered "major," improving the safety of the aircraft certification process on Nov. 20, 2023. While none of the allegations in the suit specifically mention door plugs, it has opened up questions over a broader issue of quality control and possible deception. Spirit emailed a statement to CBS MoneyWatch on Wednesday, saying it strongly disagreed with the assertions made and intends to defend itself against these claims. Boeing declined to comment. In the suit, former employees shared concerns over company culture and quality control. A former employee claimed he frequently found tags, or significant defects, on his final walkthrough. He alleges that there was friction between quality inspectors and the production department and claims he was often berated for finding and reporting defects, creating a hostile environment. Former employees make claims in the suit that many defects often went ignored to save money and the production process was often rushed to quickly ship out products. He also claimed in the suit that Boeing frequently reported finding issues like foreign object debris in delivered fuselages, leading to a probationary period for Spirit. The suit has made numerous claims that Spirit knowingly sent out products with quality defects and often fabricated documentation to cover it up. The suit has been amended and a jury trial is demanded. Spirit is innocent of the allegations unless proven otherwise in a court of law. With the public on edge over the recent incident, the focus on quality and aviation safety remains a hot topic. In the suit, a former employee said he believed it was "just a matter of time until a major defect escaped to a customer."While the lawsuit is drawing additional scrutiny, the FAA investigation brings major concern for Boeing. The 737-9 remains grounded and the FAA will not reveal a timeline for its return to service. Safety is a priority in the industry and the aircraft will remain grounded until safety can be assured. "The safety of the flying public, not speed, will determine the timeline for returning the Boeing 737-9 Max to service," the FAA said.UPDATE 1/12One day after announcing it was launching an investigation, the FAA said it was taking new and significant action to increase oversight of Boeing production and manufacturing. After grounding 171 Boeing 737-9 MAX aircraft when a door plug was blown off of an aircraft at 16,000 feet, 10 minutes into the flight, the FAA is taking another step to ensure safety in the sky. The actions include an audit involving the 737-9 MAX production line and its suppliers to evaluate compliance with approved quality procedures. The FAA audit analysis results will determine whether additional audits are required. The FAA will increase the monitoring of 737-9 in-service events. There will be an assessment of safety risks around delegated authority and quality oversight and an examination of options to move the functions under independent, third-party entities. "It is time to re-examine the delegation of authority and assess any associated safety risks," FAA Administrator Mike Whitaker said. "The grounding of the 737-9 and the multiple production-related issues identified in recent years require us to look at every option to reduce risk. The FAA is exploring the use of an independent third party to oversee Boeing's inspections and its quality system."