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Technology Stocks : Boeing keeps setting new highs! When will it split?
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From: John Koligman10/27/2019 8:43:28 PM
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Before Deadly Crashes, Boeing Pushed for Law That Undercut Oversight


Months after a second crash of the Boeing Max 737, the plane remains grounded and the company mired in crisis.Credit...Gary He/Reuters

Before Deadly Crashes, Boeing Pushed for Law That Undercut Oversight
The government has been handing over more responsibility to manufacturers for years. The new law makes it even harder for regulators to review Boeing’s work.

Months after a second crash of the Boeing Max 737, the plane remains grounded and the company mired in crisis.Credit...CreditGary He/Reuters

By Natalie Kitroeff and David Gelles

Oct. 27, 2019, 5:00 a.m. ET

With a few short paragraphs tucked into 463 pages of legislation last year, Boeing scored one of its biggest lobbying wins: a law that undercuts the government’s role in approving the design of new airplanes.

For years, the government had been handing over more responsibility to manufacturers as a way to reduce bureaucracy. But those paragraphs cemented the industry’s power, allowing manufacturers to challenge regulators over safety disputes and making it difficult for the government to usurp companies’ authority.

Although the law applies broadly to the industry, Boeing, the nation’s dominant aerospace manufacturer, is the biggest beneficiary. An examination by The New York Times, based on interviews with more than 50 regulators, industry executives, congressional staff members and lobbyists, as well as drafts of the bill and federal documents, found that Boeing and its allies helped craft the legislation to their liking, shaping the language of the law and overcoming criticism from regulators.

In a stark warning as the bill was being written, the Federal Aviation Administration said that it would “not be in the best interest of safety.”

A labor group representing agency inspectors raised concerns that the rules would turn the F.A.A. into a “rubber stamp” that would only be able to intervene after a plane crashed “and people are killed,” according to internal union documents reviewed by The Times.

Weeks after the law was passed, a Boeing 737 Max jet crashed off the coast of Indonesia, killing everyone on board. A second Max crashed in Ethiopia less than five months later, and the plane was grounded.

On both doomed flights, a new automated system on the Max, designed to help avoid stalls, triggered erroneously, sending them into fatal nose-dives. Mired in crisis, Boeing is still trying to fix the plane and get it flying again.

In the aftermath, lawmakers have seized on flaws in a regulatory system that cedes control to industry — an issue that is likely to put Boeing on the defensive this week when the company’s chief executive, Dennis A. Muilenburg, testifies before Congress for the first time since the two crashes.

The F.A.A. never fully analyzed the automated system known as MCAS, while Boeing played down its risks. Late in the plane’s development, Boeing made the system more aggressive, changes that were not submitted in a safety assessment to the agency.

The Max was certified under the old rules. The new law, the F.A.A. Reauthorization Act of 2018, makes it even more difficult for the government to review manufacturers’ work.

Image
President Trump signed the F.A.A. Reauthorization Act of 2018 into law last October. Most of the attention on the legislation had been on a failed Republican effort to privatize the air traffic control system.Credit...Official White House Photo by Joyce N. Boghosia

In the past, agency officials could decide whether to delegate oversight to the company or to maintain control, depending on the importance of a system or concerns about safety. Now, the agency, at the outset of the development process, has to hand over responsibility for certifying almost every aspect of new planes.

If F.A.A. officials decide a system may compromise safety, the new rules dictate that they will need to conduct an investigation or an inspection to make their case before taking back control. If the officials raise concerns, ask for changes or otherwise miss certification deadlines, any disputes are automatically elevated by law to managers at the agency and the company.

The law also creates a committee of mostly aerospace executives to ensure that the regulator is meeting metrics set by the industry, and the law allows companies to make recommendations about the compensation of F.A.A. employees.

“The reauthorization act mandated regulatory capture,” said Doug Anderson, a former attorney in the agency’s office of chief counsel who reviewed the legislation. “It set the F.A.A. up for being totally deferential to the industry.”

A spokesman for Boeing, Gordon Johndroe, said that the certification process is “part of an effective F.A.A. oversight of safety that permits them to focus on the most important issues that are critical to the safety of flight.” He added that “this authority has been a proven way for decades for government regulators across many industries to prioritize resources and rely on technical experts to maintain quality, safety and integrity.”

When the legislation was hashed out, the lobbying effort barely registered in the country’s vast political machine. Boeing’s push, and the use of industry language in the crucial paragraphs, was standard amid the deregulatory drive by many businesses. Most of the attention on the bill was focused on a failed Republican effort to privatize the air traffic control system.

Since the two fatal accidents, the law has set off worries in Washington about whether the rules championed by Boeing make company deadlines a priority over passenger safety.

The manufacturer helped author a report that congressional aides used as a reference while writing the law, borrowing language and ideas that had long been used by Boeing. Its executives pressed Michael Huerta, then the head of the F.A.A., for support, telling him that the regulator’s inefficiency was threatening Boeing’s ability to compete against its chief rival, Airbus of France. They also helped persuade Senator Maria Cantwell, Democrat of Washington State, where Boeing has its manufacturing hub, to introduce language that requires the F.A.A. to relinquish control of many parts of the certification process.

“The method by which the F.A.A. certifies aircraft is in need of repair — I don’t think anyone could argue otherwise at this point,” Representative Rick Larsen, a Democrat from Washington, who voted in favor of the legislation, said in an interview. “No matter what we did last year, we need to be pulling some of that back into the public sphere, and take some of it out of the hands of industry.”

Dennis Muilenburg, Boeing’s chief executive, is testifying before Congress this week.Credit...Johannes Eisele/Agence France-Presse — Getty Images

In closed-door meetings with congressional staff members, in testimony on Capitol Hill, in memos to lawmakers, the talking points were all the same.

Starting in 2014, Boeing and its trade associations explained that streamlining certification would make American aerospace companies more competitive with overseas rivals, by allowing them to develop planes more efficiently.

They argued that F.A.A. employees were interpreting the rules in seemingly arbitrary ways and slowing down the development process, according to seven people involved in the discussions and documents reviewed by The Times.

In a 2015 memo sent to congressional staff members that was reviewed by The Times, the General Aviation Manufacturers Association, which represents the business jet unit of Boeing, urged lawmakers to “fully implement” the so-called system of delegation. If disputes caused delays, the trade group called for “automatic escalation to appropriate F.A.A. and company management” so that issues didn’t languish.

The Aerospace Industries Association, which was headed during part of the lobbying campaign by Mr. Muilenburg of Boeing, echoed those priorities. Richard Efford, a lobbyist for the group, said in an interview that he emphasized the need to “fully utilize” delegation.

Boeing executives made the same pitch to Mr. Huerta at industry events and in meetings at the F.A.A., according to three people with knowledge of the matter. It became a routine discussion, they said.

And they made their case publicly as well, at times citing the company’s safety record.

In a 2015 hearing, Ray Conner, then the head of Boeing’s commercial airplane division, pushed like others for making “full use” of the system. He said it took too long to get approvals for interiors, like seats and bathrooms, that company engineers could assess. He argued that European regulators outsource far more.

The language of their lobbying push was rooted in a 2012 report from an industry-dominated committee run by Christine Thompson, a Boeing executive, and Ali Bahrami, an F.A.A. official at the time who later became a lobbyist.



Ali Bahrami, a Federal Aviation Administration official and former lobbyist, was co-chairman of a committee that in 2012 recommended streamlining certification.Credit...Andrew Harrer/Bloomberg

In aerospace speak, it called for “full utilization of available delegation,” outsourcing as much oversight as possible. It outlined six recommendations that “will result in the reduction of certification delays” and “enhance the global competitiveness of the U.S. aviation industry.”

“There was a consensus that they had good recommendations, and that we ought to put them into writing,” said Matt Bormet, who formerly worked for Mr. Larsen. “I heard no complaints about the report.”

Boeing and its allies found a receptive audience in the head of the House transportation committee, Bill Shuster, a Pennsylvania Republican staunchly in favor of deregulation, and his aide working on the legislation, Holly Woodruff Lyons.

The F.A.A. Reauthorization Act of 2018 was broadly meant to provide agency funding for the coming years. Lawmakers also used it to introduce new rules for drones, airport noise and the certification process.

As Ms. Lyons helped write the law, she was in regular touch with Boeing, according to two people with knowledge of the discussions. The critical paragraphs in the final bill borrowed heavily from industry language, instituting the “full utilization of F.A.A. delegation.”

“The certification reforms in the F.A.A. bill were strongly desired and had bipartisan support,” Mr. Shuster said in an email, noting that delegation “has worked well and safely for over 50 years.”



Then-Representative Bill Shuster, the Pennsylvania Republican who headed the transportation committee, in 2015. He recently said, “The certification reforms in the F.A.A. bill were strongly desired and had bipartisan support.”Credit...Bill Clark/CQ Roll Call

The evolution of the bill had the imprint of industry.

An early version that Ms. Lyons sent to lobbyists directed the F.A.A. to measure its own performance, according to a draft reviewed by The Times. In one circulated a month later, staff members had added a clause specifying that the agency would be judged in part by a committee dominated by aerospace executives, which would come up with metrics for the regulator.

As the Senate prepared its own version in early 2016, Boeing was in close contact with the office of Ms. Cantwell.

“Senator Cantwell is responsive to the needs of Washington State businesses,” said Nick Sutter, one of her former staff members. “Boeing people were in and out of the office all the time.”

In conversations with a top aide for the senator, Matt McCarthy, Boeing lobbyists pushed for language that would compel the F.A.A. to rely more on manufacturers, according to two people directly involved in the discussions. Mr. McCarthy took a job as a lobbyist for Boeing in September.

Regulators and companies agreed that the F.A.A.’s resources were best focused on new and high-risk systems, according to Peggy Gilligan, the agency’s head of safety back then, and several other officials.

As the Senate prepared its own version of the bill in early 2016, Boeing was in close contact with the office of Senator Maria Cantwell, Democrat of Washington State.Credit...Sarah Silbiger/The New York Times

Ms. Cantwell submitted an amendment that directed the F.A.A. to automatically give companies the right to approve anything deemed “low and medium risk” on an airplane. It was language that particularly helped Boeing, with its wide range of planes.

“Listening to your constituents is always the first step in legislating, but it’s certainly not the last,” said Ansley Lacitis, deputy chief of staff for Ms. Cantwell. “This concept of risk-based oversight was bipartisan, consensus-based and recommended by experts.”

The amendment passed without any debate. At the hearing, then-Senator Bill Nelson, a Democrat of Florida, cheered the changes. The law, he said, “will boost U.S. manufacturing and exports and — most importantly — create good jobs for Americans.”

Quieting Criticism



A 737 Max plane at the Boeing factory in Renton, Wash., earlier this year.Credit...Lindsey Wasson/Reuters

F.A.A. officials tried to push back, raising concerns to congressional staff members and aerospace executives. But they were constrained in their efforts.

As a federal agency, the F.A.A. is forbidden by law to use government resources to influence and lobby Congress. At most, officials could provide comments and feedback, so-called technical assistance in the legislative process.

“It is true that we were supportive of delegation as a general philosophy,” said Mr. Huerta, the former F.A.A. chief. “It is not true that means the agency supported every proposal to expand delegation and impose limits on the agency’s ability to take back delegations.”

Early on, Ms. Gilligan, the former F.A.A. official, said industry lobbyists suggested that the law should give companies input on performance evaluations of individual F.A.A. employees overseeing the certification of their planes. Two other agency officials confirmed her account.

“It appeared they were looking to influence the individuals’ pay outcome in some way, and for the F.A.A. employees to know that potential pay impact,” Ms. Gilligan said.

The final bill did not completely satisfy her concerns. The law created a panel with industry representatives to help assess “performance incentive policies” for F.A.A. employees, as long as they “do not conflict with the public interest.”

Peggy Gilligan, then an F.A.A. official, testifying to Congress in 2014. She recently said industry lobbyists suggested that the reauthorization law give companies input on performance evaluations of individual F.A.A. employees.Credit...Win Mcnamee/Getty Images

Mostly, top F.A.A. officials worried about the unintended consequences of giving more authority to manufacturers. Boeing employees have described pressures from their managers to meet deadlines while approving systems.

Under the old rules, the F.A.A. could decide to take back oversight authority on a system if they were concerned about safety. The new law would require the agency to conduct an investigation or inspection to prove that there was a problem before stepping in, a potentially lengthy process.

Industry groups told congressional staff members that manufacturers were sometimes subject to the whims of individual F.A.A. employees, who could block approvals and delay production schedules, according to three people with knowledge of the discussions.

“It causes delays and a lot of frustration within the companies,” said Mr. Efford, the lobbyist.

But regulators were concerned that the new law would keep them from effectively doing their job.

In early 2015, Brian Morris, a safety official at the agency, prepared feedback for lawmakers, arguing that the legislation would prevent the regulator from acting until a dangerous system had already been introduced onto an aircraft. “With this language, Congress is asking us to wait till we find a hazard before removing delegation,” he wrote, according to an F.A.A. document reviewed by The Times.

A current and a former F.A.A. official said that Mr. Morris was collecting feedback from multiple departments, so the comments reflected the opinions of other agency staff members. The document notes that the comments were “provided in response to a congressional request.”

The Professional Aviation Safety Specialists union, a small labor group that represents F.A.A. employees, had a similar warning. If the regulator could only intercede after documenting problems, it may not be able to stop manufacturers from installing risky systems.

“That will, as a practical matter, mean after the accident has happened and people are killed,” the union said in comments prepared for Congress in early 2016, which were reviewed by The Times.

Through a spokesman, Ms. Lyons, the congressional aide writing the law, said she did not receive comments from Mr. Morris or the union, but was aware of the F.A.A.’s worries.

“The concerns were discussed and considered in a bipartisan manner,” said the House transportation committee spokesman, Justin Harclerode. “Members did not agree with this interpretation of the language, and were not convinced the language would negatively impact the FAA’s ability to safely oversee the aviation industry”

He added that the F.A.A., under the law, could set the parameters of the investigation or inspection.

Lawmaker’s Remorse



Demonstrators hold pictures of victims of the crash of the Boeing 737 Max in Ethiopia at a vigil last month outside the Department of Transportation in Washington.Credit...Jose Luis Magana/Associated Press

At a ceremony in the Oval Office last October, President Trump signed the F.A.A. Reauthorization Act into law, while Representative Shuster, who shepherded the legislation, looked over his shoulder.

The agency has already begun to make the required changes.

In August, it announced the formation of the advisory committee charged with setting goals for the regulator. The committee includes two union representatives and 17 industry officials, among them Beth Pasztor, one of Boeing’s top executives. The F.A.A. recently selected managers for an internal office that will help enforce provisions of the law.

As the rules take hold, some lawmakers who originally supported the legislation are backing away.

Mr. Nelson, the former senator who co-sponsored the law, said he did not fully understand the ramifications. “This was never brought to my attention,” he said in an interview. “Had I known about it, I would have tried to put the kibosh on it.”

Representative Peter DeFazio, the Oregon Democrat who is the chairman of the House transportation committee, celebrated the bill’s changes last year, saying it would maintain safety and “will help our manufacturers become much more competitive in the world market and introduce their products more quickly.”

Mr. DeFazio, who is currently leading a congressional investigation into the crashes, said in an interview that he was reconsidering the law and might introduce legislation to restore some of the agency’s oversight authority.

“If the F.A.A. basically deferred on a safety critical system and did not provide proper oversight, then either the individuals involved are going to be at risk, or the whole system itself isn’t working properly,” he said.
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