Russian company first customer to sue Boeing over 737 Max

Avia Capital Services claims crashes due to ‘negligent actions’ of manufacturer

 Boeing 737 Max airplanes parked near Boeing Field  in Seattle, Washington.

Boeing 737 Max airplanes parked near Boeing Field in Seattle, Washington.

 

A Russian aircraft leasing company is suing Boeing for breach of contract in connection with its grounded 737 Max in what is the first lawsuit brought against the US manufacturer by a customer over the safety crisis.

Avia Capital Services, a subsidiary of Russian state conglomerate Rostec, claims two deadly crashes were due to the “negligent actions and decisions of Boeing” not just in designing a plane that was “defective” but also in “withholding critical information” from the US aviation safety regulator during certification.

The complaint, which was filed in Cook county circuit court in Chicago on Monday, claims that Boeing “intentionally” failed to disclose information about the airworthiness of the Max to its customers, including Avia, in order to induce them to buy the aircraft.

Avia ordered 35 Max 8 jets from Boeing before they were grounded worldwide in March, and now it wants the order cancelled. The company says it gave Boeing a cash deposit of $35 million (€31 million) to secure the order, and is asking for that amount to be returned with interest, along with $75 million in lost profits for a total of $115 million in compensatory damages, plus “several times the amount” in punitive damages.

Fallout

Avia’s lawyer, Steven Marks of the Miami aviation law firm Podhurst Orseck, told the Financial Times in an interview that Boeing had offered compensation but it was inadequate. He said other Boeing customers had been in touch with him about bringing similar lawsuits. The Chicago-based aircraft manufacturer has been negotiating compensation deals with customers and it took a $4.9 billion charge in the second quarter for that purpose.

“I think you will see a number of other operators filing suit in coming months. This will be the first of many to come,” Mr Marks said.

The lawyer is also representing 30 families of victims of both the Lion Air crash in October last year and the Ethiopian Airlines tragedy in March, which together killed 346 people. The fallout from those two crashes has damaged Boeing’s reputation and finances; the company posted its biggest quarterly loss in July. Boeing declined to comment.

Even before the crashes, Avia and Boeing had agreed to delay delivery of 33 of the Max aircraft to the Russian company. Originally scheduled for delivery between October, 2019 and February, 2022, the orders were pushed back to between March, 2022 and December, 2024. The reason for the delay was not clear.

While official investigations into the accidents are ongoing, an anti-stall system, the MCAS, which is unique to the Max, has been implicated. The system is designed to pitch the plane’s nose automatically downwards when it senses a stall is imminent, which it was found to have done repeatedly in both accidents. Boeing has been working on a software fix to ensure the system only activates once. It will also no longer be triggered by one sensor only.

Dennis Muilenburg, Boeing’s chief executive, said in April that the company had “followed exactly the steps in our design and certification processes that consistently produce safe airplanes”. The company has said it expects the Max to start returning to service “early in the fourth quarter”. – Copyright The Financial Times Limited 2019