Boeing board strips CEO of chairman title amid 737 MAX crisis

(Reuters) - Boeing Co’s (BA.N) board has stripped chief executive Dennis Muilenburg of his chairmanship title, in an unexpected strategy shift announced by the U.S. planemaker on Friday only hours after a global aviation panel criticized development of the troubled 737 MAX.

Separating the roles, which will enable Muilenburg to have “maximum focus” on steering daily operations, was the latest step the board has taken in recent weeks to improve executive oversight of its engineering ranks and industrial operations.

Lead Director David Calhoun, a senior managing director at Blackstone Group, will takeover as non-executive chairman, Boeing said in its announcement, which came late on Friday afternoon without warning. It added that the board had “full confidence” in Muilenburg, who will retain the top job and remain on the board.

The decision came as Boeing struggles to get its best-selling 737 MAX back into service following a worldwide safety ban in March triggered by two crashes that killed a total of 346 people in Ethiopia and Indonesia.

It also comes some six months after Muilenburg survived a shareholder motion to split his chairman and CEO roles, part of the intense pressure he has faced during the worst crisis of his four years at the helm of the world’s largest planemaker.

“This decision is the latest of several actions by the board of directors and Boeing senior leadership to strengthen the company’s governance and safety management processes,” the company said.

INTENSE SCRUTINY
Earlier on Friday, an international aviation panel criticized U.S. regulators and Boeing over the certification of the plane.

An internal review in August revealed that the company was working to reorganize its engineering reporting lines company-wide and ensure higher ranking officials, including its CEO, get faster feedback about potential safety concerns from lower levels of the company.

As part of the move, Muilenburg received granular weekly reports of potential safety issues discussed at meetings of rank-and-file engineers.

It also plans to name a new director with deep safety experience and expertise to serve on the board and its newly created Aerospace Safety Committee in the near term, Boeing said.

Muilenburg is set to testify before a U.S. House panel on Oct. 30 and lawmakers have raised questions about Boeing’s actions prior to the 737 MAX certification. Federal prosecutors aided by the FBI, the Transportation Department Inspector General and several blue-ribbon panels are investigating the plane’s approval.

The company is also facing more than 100 lawsuits over the crashes alleging design flaws allowed erroneous sensor data to set off an automated anti-stall system and overwhelm pilots.

MORE DELAYS
Earlier this week, Reuters reported that a key certification test flight would likely not take place until at least Nov. 1, a move that will push its approval to resume flights until at least December.

On Friday, United Airlines Holdings Inc (UAL.O) became the latest U.S. airline to say it would not resume 737 MAX flights until January.

Shareholder advisory firms Institutional Shareholder Services Inc and Glass Lewis had urged Boeing to split the role of chairman and CEO in April, saying shareholders would benefit from a robust form of independent oversight.

Muilenburg is set to testify before a U.S. House panel on Oct. 30. Lawmakers have raised questions about Boeing’s actions prior to the 737 MAX certification.

FAA failed to properly review 737 MAX jet's anti-stall system: JATR findings

WASHINGTON/SINGAPORE (Reuters) - A panel of international air safety regulators on Friday harshly criticized the U.S. Federal Aviation Administration’s (FAA) review of a safety system on Boeing’s (BA.N) 737 MAX airliner later tied to two crashes that killed all 346 people aboard.


The Joint Authorities Technical Review (JATR) was commissioned by the FAA in April to look into the agency’s oversight and approval of the so-called MCAS anti-stall system.

The report also faulted Boeing for assumptions it made in designing the airplane and found areas where Boeing could improve processes.

“The JATR team found that the MCAS was not evaluated as a complete and integrated function in the certification documents that were submitted to the FAA,” the 69-page series of findings and recommendations said.

“The lack of a unified top-down development and evaluation of the system function and its safety analyses, combined with the extensive and fragmented documentation, made it difficult to assess whether compliance was fully demonstrated.”

Boeing did not directly address the report’s findings but said it “is committed to working with the FAA in reviewing the recommendations and helping to continuously improve the process and approach used to validate and certify airplanes.”

Regulators around the world continue to scrutinize proposed software changes and training revisions from Boeing aimed at returning the Boeing 737 MAX to service.

Boeing’s top-selling airplane has been grounded worldwide since a March 10 crash in Ethiopia killed 157 people, five months after a Lion Air 737 MAX crashed in Indonesia, killing 189 people on board.

Major U.S. airlines including Southwest Airlines Inc (LUV.N) and American Airlines Inc (AAL.O) currently do not expect 737 MAX flights to resume before January.

The JATR draft recommendations, obtained by Reuters ahead of their release on Friday, also said the FAA’s longstanding practice of delegating “a high level” of certification tasks to manufacturers such as Boeing needs significant reform to ensure adequate safety oversight.

“With adequate FAA engagement and oversight, the extent of delegation does not in itself compromise safety,” the report said.

“However, in the B737 MAX program, the FAA had inadequate awareness of the MCAS function which, coupled with limited involvement, resulted in an inability of the FAA to provide an independent assessment of the adequacy of the Boeing-proposed certification activities associated with MCAS.”

The report also questioned FAA’s limited staffing to oversee certification tasks it designated to Boeing and said there were an “inadequate number of FAA specialists” involved in the certification of the 737 MAX.

There were signs that Boeing employees conducting FAA work faced “undue pressure. ..which may be attributed to conflicting priorities and an environment that does not support FAA requirements,” it said.

FAA Administrator Steve Dickson said in a statement he would look at the panel’s recommendations and take appropriate action following the “unvarnished and independent review of the certification of the Boeing 737 MAX.”

MCAS UNDER SCRUTINY
The U.S. planemaker has stopped short of admitting any fault in how it developed the 737 MAX, or MCAS, which repeatedly pushed the plane’s nose down in the Indonesian and Ethiopian crashes while the pilots struggled to intervene.

However, it has said erroneous Angle of Attack (AOA) data fed to MCAS - the Maneuvering Characteristics Augmentation System - was a common link in two wider chains of events leading to the crashes.

Slideshow (2 Images)
The JATR report recommended the FAA review the stalling characteristics of the 737 MAX without MCAS and associated systems to determine if unsafe characteristics exist and if so, if a broader review of the system design was needed.

JATR said MCAS and those systems could be considered a stall identification or stall protection system, depending on how the aircraft handled without them.

Boeing has said MCAS was not meant to prevent stalls and was instead designed so that the 737 MAX would have similar handling characteristics to its predecessor, the 737 NG.

The European Union Aviation Safety Agency (EASA) last month said it planned to undertake flight tests of the 737 MAX including a test without MCAS to check its performance during high-speed turns and stall.

Boeing is revising the 737 MAX software to require the MCAS system to receive input from both AOA sensors, and has added additional safeguards. If the AOA sensors differ by 5.5 degrees or more then MCAS cannot operate, FAA Deputy Administrator Dan Elwell said last month.

If MCAS does operate it can only operate once unless the problem had been “completely resolved,” he added.

The JATR is headed by Christopher Hart, former chairman of the National Transportation Safety Board (NTSB), and includes air safety regulators from the United States, Canada, China, Indonesia, European Union, Brazil, Australia, Singapore, United Arab Emirates and Japan.

Last month, Hart said it was important to note “the U.S. aviation system each day transports millions of people safely, so it’s not like we have to completely overhaul the entire system, it’s not broken. But these incidents have shown us that there are ways to improve the existing system.”