Boeing's Legal Settlement: A Turning Point or a Governance Mirage?

The U.S. Department of Justice's non-prosecution agreement (NPA) with Boeing, finalized in 2025 after years of legal battles over the 737 MAX crashes, marks a critical juncture for the aerospace giant. While the deal resolves immediate criminal liability and avoids a felony conviction, it leaves unresolved governance flaws that threaten Boeing's long-term value. Investors must weigh the relief of legal closure against lingering risks tied to regulatory distrust, operational vulnerabilities, and governance failures. Below, we dissect the strategic implications for Boeing's future and its competitive standing.

The NPA: Legal Closure, but at What Cost?

The NPA allows Boeing to avoid a guilty plea, preserving its eligibility for federal contracts and averting the reputational stigma of a criminal conviction. The $444.5 million victims' fund addition (totaling $944.5M) and compliance measures address some liability concerns. However, critics argue the deal lets Boeing evade accountability for systemic governance failures exposed by the MAX crashes and subsequent compliance breaches.

Boeing's stock remains undervalued at a price-to-sales ratio of 0.7x, reflecting investor skepticism. While the NPA removes a legal overhang, the lack of an independent monitor—a key condition in the rejected DPA—raises doubts about whether Boeing will meaningfully reform its safety culture.

Operational Resilience: Progress Amid Persistent Risks

The NPA enables Boeing to accelerate production of the 737 MAX to 38 aircraft/month, addressing its $1.2 trillion backlog. A landmark $96 billion deal with Qatar Airways underscores renewed market confidence. However, Boeing's operational challenges persist:
- Supply Chain Strains: May 2025 deliveries lagged production targets, highlighting ongoing quality-control and logistics hurdles.
- FAA Oversight: Six Key Performance Indicators (KPIs), including employee proficiency and rework hours, must be met to regain full production autonomy.
- Safety Culture Conflicts: Unions like the SPEEA continue to clash with Boeing over transparency in safety reporting, signaling unresolved internal tensions.

Governance Flaws: A Threat to Long-Term Value

Boeing's repeated compliance failures—from breaching the 2021 DPA to the 2024 Alaska Airlines door incident—expose systemic governance weaknesses. The NPA's absence of independent oversight perpetuates a “self-policing” model that critics argue invites further misconduct.

• Regulatory Distrust: The FAA's hands-on inspection regime and ongoing fines (e.g., $700M in 2024) reflect diminished trust.
• Reputation Damage: Victims' families and legal experts denounce the NPA as a “get-out-of-jail-free card,” eroding Boeing's moral authority in safety-critical industries.
• Political Risks: The DOJ's shifting stance under different administrations raises concerns about external influence over accountability standards.

Competitive Landscape: Airbus Gains, Boeing Struggles

Boeing's governance struggles contrast with Airbus's regulatory compliance and market agility. Airbus has capitalized on Boeing's reputation crisis, securing orders and partnerships that Boeing once dominated. Key risks for Boeing include:
- Military Contracts: While Boeing retains monopolies like the KC-46 tanker program, persistent safety issues could jeopardize future Pentagon bids.
- Market Share Erosion: Airbus's A320neo series has outpaced the MAX in recent orders, leveraging Boeing's tarnished image.

Investment Recommendation: Proceed with Caution

Immediate Catalysts:
- 777X Certification: Expected by mid-2025, this could unlock $30B in deferred revenue.
- Qatar Deliveries: First shipments in 2026 will stabilize cash flows.

Risks to Monitor:
1. FAA KPI Compliance: Track Boeing's progress on metrics like rework hours and supplier shortages.
2. Safety Incidents: Continued defects or FAA fines could reignite regulatory scrutiny.
3. Governance Reforms: Look for independent oversight or leadership changes signaling cultural transformation.

Conclusion: Buy the Dip, but Demand Proof

The NPA removes an existential threat, and Boeing's backlog positions it for a recovery. However, its governance flaws remain a liability. Investors should wait for concrete evidence of reform—such as independent oversight, improved compliance metrics, and resolution of union disputes—before committing capital. Until then, Boeing's valuation gap offers a potential opportunity, but the governance risks demand a watchful, cautious approach.

Act now, but hold off on all-in bets until Boeing proves it has truly turned the page.