Boeing (BA) will face shareholders’ class action accusing the aircraft manufacturer of prioritizing profits over safety after a federal judge gave the case the green light to proceed. US District Judge for the Eastern District of Virginia Leonie Brinkema said shareholders could go ahead with their claim to sue Boeing for overstating its commitment to safety prior to the mid-air cabin panel blowout on one of its 737 MAX planes flown by Alaskan Airlines (ALK).
Shareholders led by Rhode Island’s state treasurer argue that they were misled for four years by Boeing’s claims to be focused on safety after fatal crashes in October 2018 and March 2019 of two other MAX planes, which killed 346 people. It alleges “serious safety lapses at Boeing and false and misleading statements or omissions to the market concerning those safety lapses.”
Mid-Air Blowout Led to Claims
Shareholders led by the Employees’ Retirement System of Rhode Island (ERSRI) launched their class action in June 2024, immediately after a panel fitted over an unused emergency exit door fell off a brand new 737 Max shortly after take-off, which prompted the Federal Aviation Administration to ground all Boeing 737 MAX 9 aircraft and open a safety investigation.
The lawsuit notes for instance that United Airlines (UAL) personnel had found loose bolts during inspections on an undisclosed number of grounded aircraft and Alaska Airlines also announced that their inspections found “loose hardware” on some aircraft.
Following these disclosures, Boeing’s stock price plummeted from $249.00 on January 5, 2024 to $200.52 on January 16, 2024.
Rhode Island General Treasurer James Diossa said, “The disregard for safety displayed in these series of events involving Boeing aircrafts are deeply concerning. We believe that this case has the potential to effect changes in Boeing’s practices to protect passengers and ensure their safety in the future.”
DoJ Case Is Outstanding
Boeing was charged with conspiracy over the fatal crashes in 2018 and 2019, eventually agreeing to pay $2.5 billion to settle a Department of Justice (DoJ) charge. In 2021, then acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division, said, “Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception.”
However, in May the DoJ said Boeing had violated the agreement and recommended criminal charges. A subsequent plea deal was rejected by a federal judge in December. In February it was reported the DOJ and Boeing were seeking more time to hammer out a revised plea deal.
Safety issues and quality control concerns, as well as industrial action, saw Boeing deliver just 348 aircraft last year. In comparison Airbus (EADSF) delivered 766 aircraft.
Is BA a Good Stock to Buy?
Wall Street analysts have a Moderate Buy consensus rating on BA stock based on 13 Buys, five Holds and one Sell assigned in the past three months. The average BA price target of $196.88 per share implies about 27% upside potential.
