Time to Break Up Boeing? The Pentagon Might Not Hate the Idea

As an old song warns, breaking up is hard to do. But in recent years, some giants of the business world have broken up, and it wasn't really hard at all. General Electric split into separate aerospace, healthcare, and energy businesses, while the once mighty Time Warner empire is now just a memory.

It isn't being discussed, at least not yet publicly, but one company that could benefit from a major break-up is aviation giant Boeing. It faces significant fines, but more importantly, it will require a waiver to bid for military contracts.

A Max Problem for Boeing That Isn't Going Away

On Sunday, Boeing announced its plans to plead guilty to fraud related to the approval of its 737 Max. Two of the aircraft crashed, killing a total of 346 people in accidents in Indonesia and Ethiopia in 2018 and 2019.

The potential plea isn't a done deal yet.

Relatives of some of the passengers who were killed in the two crashes are likely to ask a federal judge in Texas to throw out the agreement. Instead, they have called for the aerospace firm to face a trial, which could subject the company to more than just a huge fine. They also want executives at Boeing to face formal charges.

The U.S. Department of Justice announced late Sunday that the fraud charge was "the most serious readily provable offense" that could be brought against the company. As a result, Boeing now faces a $243.6 million fine, which would match a similar fine it paid in 2021 for making "misstatements" to regulators who certified the 737 Max in 2017.

"This resolution protects the American public," the Department said in a statement. "Boeing will be required to make historic investments to strengthen and integrate its compliance and safety programs. This criminal conviction demonstrates the department’s commitment to holding Boeing accountable for its misconduct."

As noted, this is now the second time the Department of Justice has gone after Boeing. It first filed charges against the company in 2021, but at the time agreed it wouldn't prosecute if Boeing paid the fine and successfully completed three years of corporate probation under a deferred-prosecution agreement.

However, it was determined in May that Boeing had failed to live up to the agreement, and the aerospace firm now faces a second fine. The new deal would further require the company to invest an additional $455 million to improve safety at the company, while it would also be on "court-supervised probation" for three years. Finally, the Department is expected to name an independent monitor to ensure the company's compliance.

Yet it is still possible that U.S. District Judge Reed O'Connor in Fort Worth could block the deal.

"This sweetheart deal fails to recognize that because of Boeing's conspiracy, 346 people died," said a statement from Paul Cassell, a law professor at the University of Utah who represents many family members of the 2018 Lion Air crash and 2019 Ethiopian Air crash victims, per CNN.

"This deceptive and generous deal is clearly not in the public interest," Cassell added.
Boeing is still facing scrutiny for the January incident that saw a door plug blow off an Alaska Airlines 737 MAX 9 aircraft, while the FAA is requiring inspections of 2,600 Boeing 737s due to an issue with passenger oxygen masks.

Military Contracts Will Need a Waiver

Because Boeing has agreed to plead guilty to a felony, the aerospace firm would normally be excluded from bidding on military contracts. However, the Department of Defense has the leeway to grant exceptions, AP reported.

This isn't the first time Boeing has been in this situation.

AP noted that in 2006, the Air Force cited "compelling national interest," which enabled Boeing to keep competing for government contracts "even after the company admitted charges that included using stolen information to win a space-launch contract and paying a $615 million fine."

Given the state of the American defense sector, it would be hard to imagine Boeing being barred from competing for future contracts. The firm currently produces the F-15EX for the U.S. Air Force and the F/A-18 Super Hornet for the Navy. The company is believed to be in the Air Force's Next Generation Air Dominance and the Navy's F/A-XX competitions – among other programs.

"DOD will assess the company's remediation plans and agreement with the Department of Justice to make a determination as to what steps are necessary and appropriate to protect the federal government," Pentagon spokesperson Air Force Maj. Gen. Patrick Ryder told reporters.

The Solution – Break Up Boeing

The fact remains that the Pentagon, NASA, and other government agencies only have so many options. Currently there are only three major aerospace firms competing for military contracts in the U.S. – Boeing, Lockheed Martin, and Northrop Grumman. The government won't benefit from removing one of the players, as it will limit competition and perhaps impact innovation.

Yet confidence in Boeing isn't flying high at present.

One possible solution could be for Boeing to spin off its military aviation business from its commercial aerospace operations. This could also ensure that Boeing doesn't try to pay off its fines to Uncle Sam by increasing the price tag for the combat aircraft it sells to the Pentagon. 

Breaking up the company was an idea floated back in early 2020 when the issues over the 737 MAX were first coming into focus.

As 24/7 Wall Street reported at the time, "Boeing’s defense, space and security businesses have as their primary customers U.S. and overseas governments. The division's backlog for defense and services is $62 billion, of which 30% is from customers outside America. Revenue from these operations is almost certain to be steady or to rise.

The same can't be said more than four years later for Boeing’s commercial business. 

Breaking up the company might be the only way to save Boeing, and to ensure the Department of Defense can continue work with one of its biggest contractors.

Author Experience and Expertise: Peter Suciu 

Peter Suciu is a Michigan-based writer. He has contributed to more than four dozen magazines, newspapers, and websites with over 3,200 published pieces over a twenty-year career in journalism. He regularly writes about military hardware, firearms history, cybersecurity, politics, and international affairs. Peter is also a Contributing Writer for Forbes and Clearance Jobs. You can follow him on Twitter: @PeterSuciu. You can email the author: Editor@nationalinterest.org.

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