Abu Dhabi, UAEWednesday 19 June 2019

US market regulator probes 737 Max investor disclosures amid mounting pressure on Boeing

The Securities and Exchange Commission is investigating whether Boeing properly disclosed issues tied to the grounded aircraft to investors

American Airlines Boeing 737 MAX jets sit parked at a facility in Tulsa, Oklahoma, US. Reuters
American Airlines Boeing 737 MAX jets sit parked at a facility in Tulsa, Oklahoma, US. Reuters

The US Securities and Exchange Commission is investigating whether Boeing properly disclosed issues tied to the grounded 737 Max jetliner, according to people familiar with the matter, as the regulators intensify their scrutiny of the company following two deadly crashes.

Officials in the SEC’s enforcement division are examining whether Boeing was adequately forthcoming to shareholders about material problems with the plane. The agency is also reviewing the aircraft manufacturer’s accounting to make sure its financial statements have appropriately reflected potential impacts from the problems, Bloomberg the people said.

The SEC inquiry is in its early stages and the market regulator’s investigations often don’t lead to allegations of misconduct. Still, the probe deepens the crisis facing Boeing since a 737 Max crashed in Ethiopia March 10. That wreck, which followed a deadly October crash in the waters off Indonesia, prompted regulators around the world to ground the jet.

Spokesmen for Boeing and the SEC declined to comment to the news agency.

Boeing has already faced questions about its level of disclosures. It revealed in a May 5 statement that it knew a cockpit alert wasn’t working properly for more than a year before the company shared its findings with airlines or the US Federal Aviation Administration (FAA). Boeing made the disclosure to customers and the FAA after the October crash, according to the statement.

Federal authorities have been conducting a criminal probe of Boeing related to the crashes. While that investigation is looking into the certification process for the new 737 Max planes, the SEC’s probe is focused on whether Chicago-based Boeing fulfilled its reporting obligations to investors as a public company. US securities rules require that companies inform shareholders about issues that could have a material impact on their finances, typically by filing statements with the regulator.

The problems associated with the 737 Max center around a piece of flight control software that may have contributed to the planes’ sudden and deadly loss of altitude in Ethiopia and near Indonesia. Both crashes occurred shortly after takeoff. Boeing said earlier this month that the Max had successfully performed more than 200 flights with a software upgrade.

Still, US authorities haven’t yet tested or approved the fix and its unclear when the plane might be allowed to fly again. FAA Acting Chief Daniel Elwell said Thursday that a meeting of aviation regulators from around the world to discuss the grounded jetliner was “both comprehensive and constructive.”

Flydubai, the second-biggest customer of the Boeing 737 Max globally, is working closely with the US plane-maker and its aviation regulator ahead of the jet's certification.

The UAE's low-cost carrier will not return the grounded single-aisle aircraft into service before it gets the go-ahead from the UAE aviation regulator General Civil Aviation Authority (GCAA), Flydubai said in a statement to The National on Friday.

"Flydubai is working closely with Boeing and its regulator ahead of certification of the Boeing 737 MAX aircraft which will not rejoin the operational schedule until it has received regulatory approval by the GCAA," a Flydubai spokesman said. "With the grounding of the aircraft, Flydubai continues to minimise the disruption to its passengers."

The GCAA could not be reached for comment on Thursday and outside business hours on Friday.

Flydubai is in talks with Boeing's European rival Airbus for an order of the competing A320 Neo narrow-body model in the absence of a time frame for the return of the troubled Maxs to the skies.

The low-cost carrier is seeking compensation from Boeing for its grounded 14 Boeing 737 Maxs and believes the US plane maker’s communication about fixes on the jet can be improved, its chairman Sheikh Ahmed bin Saeed Al Maktoum, said last month.

Reuters earlier reported that the FAA expects to approve Boeing's 737 MAX jet to return to service as soon as late June, representatives of the US air regulator informed members of the United Nations' aviation agency in a private briefing on Thursday, according to the sources.

While the jets remain grounded across the world, the cost is mounting for the airlines and so is the pressure on the plane maker. The company described facing “multiple legal actions” as a result of the tragedies in an April 24 quarterly report filed with the SEC, according to Bloomberg.

“We are fully cooperating with all ongoing governmental and regulatory investigations and inquiries relating to the accidents and the 737 Max program,” It cited Boeing filing as saying. “We cannot reasonably estimate a range of loss, if any, that may result.”

Updated: May 25, 2019 09:55 AM

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