American attorneys for Ethiopian Airlines, which lost 157 passengers and crew in the second fatal crash of a Boeing 737 MAX in early 2019, have advised the carrier not to accept a settlement Boeing has offered but instead to sue the manufacturer for punitive damages in the U.S.
In an urgently worded letter sent Sunday, the Chicago-based attorneys warned Ethiopian CEO Tewolde GebreMariam that the offer falls “grossly short” of what the airline could win before a U.S. jury — particularly since Boeing recently accepted responsibility for criminal fraud during the plane’s certification by regulators.
The settlement Boeing has offered is “a mere fraction” of the actual damage, the lawyers told Tewolde, and accepting it “will inevitably leave substantial money on the table and would be a tremendous political and financial mistake for Ethiopian Airlines.”
Yet like many airlines, Ethiopian is now desperate for cash.
Before the 2019 crash of Flight ET302, state-owned Ethiopian was the largest and most successful airline in Africa. It lost business after the tragedy and the subsequent grounding of the MAX fleet. Then last year its revenue plummeted further when the COVID-19 pandemic paralyzed air travel.
The letter conveys the attorneys’ concern that direct settlement negotiations between Boeing and the airline’s management are close to done and that a “financially disastrous” deal may be imminent.
A person familiar with developments in the private negotiations shared details from the letter with The Seattle Times.
It offers a rare look inside what are normally secret negotiations. And with the MAX back in the air and the second anniversary of the second crash approaching, it highlights a Boeing push to conclude customer compensation discussions and put the MAX crisis behind it.
The letter from law firm DiCello Levitt Gutzler, which Ethiopian hired to provide advice on its claims against Boeing, is signed by co-founding partner Adam Levitt.
Boeing declined to comment on discussions with its customer. Ethiopian Airlines did not respond to an emailed request for comment. Levitt did not return a call seeking an interview.
Levitt’s letter argues that Boeing’s Deferred Prosecution Agreement with the Department of Justice (DOJ) earlier this month provides Ethiopian new legal leverage because of “Boeing’s admission of its criminal conduct.”
The DOJ settlement staves off a criminal fraud charge against Boeing with a relatively light $244 million penalty.
It also explicitly exonerates senior management while pinning the fraud on two Boeing technical pilots who misrepresented to airlines the details of new flight control software on the MAX — the maneuvering characteristics augmentation system (MCAS) — that was a key contributing factor in both crashes.
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