Czech airline sues Boeing in Seattle over 737 MAX losses
Czech airline Smartwings filed suit against Boeing in Seattle on Tuesday for the damage to its business from the fatal crashes and subsequent grounding of the 737 MAX.
In the suit, moved by a judge to King County Superior Court from a court in Boeing’s headquarter city of Chicago, the airline is seeking compensation for the financial losses incurred as well as the return of one airplane and the refund of payments on that jet and advance payments on others.
Boeing declined to comment on the lawsuit.
Smartwings ordered a total of eight MAXs directly from Boeing and, persuaded by the jet maker that it should switch to an all-MAX fleet, agreed to lease an additional 31 MAXs.
It took its first delivery of a MAX in January 2018 in a direct purchase from Boeing and took six more leased planes straight from the Renton assembly plant before the jet was grounded after the second crash in March 2019.
At various locations — including Renton; Moses Lake in Central Washington; San Antonio, Texas; and Victorville, California — Boeing had at one point stored a total of 13 undelivered MAXs built originally for Smartwings. Most of those have already been remarketed to new buyers.
The airline’s complaint alleges that in implementing a software addition to the MAX’s flight controls, “Boeing chose a cheap and hastily implemented bandaid” rather than more expensive aerodynamic changes to the airframe.
Smartwings also alleges that Boeing failed to conduct a full safety evaluation of the failure modes of the software, known as the Maneuvering Characteristics Augmentation System, and then “misled the Federal Aviation Administration and other regulators regarding the nature and purpose of MCAS.”
It further accuses Boeing of “material misrepresentations and nondisclosures” to pilots and the airline for not flagging the existence of MCAS before the first crash and of “gross negligence and fraud.”
After the first crash in October 2018 of a Lion Air MAX in Indonesia, Smartwings officials wrote to Boeing demanding answers about the safety of the system but received no substantive response, according to the complaint.
“Smartwings would not have committed to an all-MAX fleet or accepted delivery of any MAX had it known what has since been uncovered by outside investigators and what Boeing has grudgingly admitted,” the complaint states.
After Boeing developed a fix for the flaws in MCAS, the FAA late last year approved the MAX’s return to service. It’s currently flying with four major U.S. airlines — Alaska, American, Southwest and United — as well as with overseas airlines.
Smartwings has formally canceled its remaining direct orders with Boeing, yet alleges that the jet maker has breached the contract termination agreement by not returning $833,332 in advance deposits paid by Smartwings for two of those aircraft.
The lawsuit asks for this to be refunded, plus the rescindment of the purchase agreement for the one jet it bought directly from Boeing and the return of all payments on that aircraft.
It further demands “damages in an amount to be determined at trial.”
The MAX crisis has prompted a variety of lawsuits, including ongoing cases on behalf of the families of those who died in the crashes.
In at least one other customer lawsuit, by Irish aircraft lessor Timaero, in March a judge in Chicago threw out allegations similar to those raised by Smartwings that Boeing committed fraud.
Timaero’s remaining case against Boeing alleges breach of contract and has also been transferred to King County Superior Court.
U.S. jobless claims tick down to 411,000 as economy heals
WASHINGTON — The number of Americans applying for unemployment benefits dropped last week, a sign that layoffs declined and the job market is improving.
The Labor Department said Thursday that jobless claims declined just 7,000 from the previous week to 411,000. The number of weekly applications for unemployment aid has fallen steadily this year from about 900,000 in January. The level of unemployment claims generally reflects the pace of layoffs.
As the pandemic fades, states and cities are lifting more business restrictions — California just fully reopened June 15 — and the economy is picking up as consumers are traveling, eating out more, and visiting movie theaters and amusement parks. Growth could top 10% at an annual rate in the April-June quarter, according to the Federal Reserve Bank of Atlanta.
With many employers desperate to hire, some states are starting to cut off pandemic-related unemployment aid programs in response to business complaints that the assistance is making it harder for them to find workers. Starting this month, 26 states will end an extra $300 weekly federal unemployment payment and 22 of those states will also cut off all jobless assistance to self-employed, gig workers, and those out of work more than six months. The extra $300 ends nationwide on Sept. 6.
Economists at Bank of America have estimated that those who earned less than $32,000 a year at their previous jobs can receive more in jobless aid with the extra $300. At the same time, the federal government last year set up two unemployment benefit programs that covered millions of self-employed and contract workers for the first time.
Four states — Alaska, Iowa, Mississippi, and Missouri — stopped providing the $300 payment last week. All but Alaska also cut off the two programs that covered the self-employed and the long-term jobless.
In Iowa, Mississippi, and Missouri, about 163,000 people are no longer receiving jobless aid because of the cutoff.
The decision by 26 states — nearly all run by Republican governors — to drop the $300 will sharply reduce unemployment aid for roughly 4.7 million people, the National Employment Law Project, a worker advocacy group, estimates. State jobless benefits provide, on average, about $320 a week and typically replace about 40% of an unemployed worker’s previous wages.
About 2.3 million people will lose all their unemployment aid in the 22 states that have decided to end assistance for the self-employed and long-term jobless, according to NELP.
A coalition of progressive groups released a report Thursday arguing that the early cutoff of benefits and the difficulties administering unemployment aid earlier in the pandemic show that the current unemployment insurance system, administered jointly by the federal and state governments, is inadequate for deep downturns such as the COVID-19 recession.
When the pandemic shutdowns kicked in suddenly in March 2020, most state unemployment systems were quickly overwhelmed by requests for jobless aid by millions of newly-laid off workers. Some did not receive benefits for months.
And when the federal government created the new programs covering those ineligible for state aid, many state agencies struggled to reprogram outdated software — some dating from the 1960s — to handle the additional applications.
In their report, the Economic Policy Institute, NELP, the Center for Popular Democracy, and the Washington Center for Equitable Growth recommended a range of reforms, such as permanently expanding eligibility to include gig workers and contractors; automatically extending benefits during recessions beyond the 26 weeks provided by most states; and increasing minimum benefit levels.
Lawyer: Death of John McAfee surprised the U.S. mogul’s family
MADRID — Authorities in Spain say a judge has ordered an autopsy for John McAfee, the gun-loving antivirus pioneer, cryptocurrency promoter and occasional politician who died in a prison cell pending extradition to the United States for allegedly evading millions in unpaid taxes.
A court spokeswoman for the Catalonia region said Thursday that a forensic team would need to perform toxicology tests on McAfee’s body to determine the cause of death and that results could take “days or weeks.”
Authorities say everything at the scene indicated that the 75-year-old tycoon killed himself.
The judicial investigation is being handled by a court in Martorell, a town northwest of Barcelona with jurisdiction over the prison where McAfee died. The spokeswoman wasn’t authorized to be identified by name in media reports.
McAfee’s Spanish lawyer, Javier Villalba, said the entrepreneur’s death had come as a surprise to his wife and other relatives, adding he would seek to get “to the bottom” of his client’s death.
“This has been like pouring cold water on the family and on his defense team,” Villalba told The Associated Press on Thursday. “Nobody expected it, he had not said goodbye.”
Although Villalba said he had no evidence of any foul play but blamed the death on “the cruelty of the system” for keeping a 75-year-old behind bars for economic, not violent, crimes after judges refused to release him on bail.
“We had managed to nullify seven of the 10 counts he was accused of and even so he was still that dangerous person who could be fleeing Spain if he was released?” the lawyer said. “He was a world eminence, where could he hide?”
Spain’s National Court on Monday ruled that McAfee should be extradited to the U.S. to face charges for evading more than $4 million in taxes in the fiscal years 2016 to 2018. The judge dropped seven of the 10 counts in the initial indictment.
Villalba said McAfee had learned about the ruling on Tuesday and that his death on Wednesday didn’t come in the heat of the moment. He also said McAfee and the legal team had been preparing an appeal to avoid being extradited.
A penitentiary source told the AP that McAfee was sharing a cell in the Brians 2 jail where he had been put in preventive detention since he was arrested in October last year on a U.S. warrant, but that at the moment of his death he had been alone.
Prosecutors in Tennessee accused McAfee of failing to report income from promoting cryptocurrencies while he did consulting work, earnings made in speaking engagements and for selling the rights to his life story for a documentary. The criminal charges carried a prison sentence of up to 30 years.
The British-born entrepreneur led an eccentric life after selling his stake in the antivirus software company named after him in the early 1990s. He twice made long-shot runs for the U.S. presidency.
McAfee often professed his love for drugs and guns in public remarks. And some of his actions landed him in legal trouble beyond Tennessee, from Central America to the Caribbean. In 2012, he was sought for questioning in connection with the murder of his neighbor in Belize, but was never charged with a crime.
Lilly to seek FDA approval for potential Alzheimer’s drug
INDIANAPOLIS — Eli Lilly said Thursday that it is nearly ready to take another shot at getting regulatory approval for a possible Alzheimer’s drug.
The drugmaker plans to submit its potential treatment donanemab to the Food and Drug Administration later this year.
The announcement comes a few weeks after the FDA approved a treatment from rival Biogen despite warnings from the agency’s independent advisers that it hasn’t been shown to help slow the brain-destroying disease.
The agency approved Biogen’s Aduhelm based on study results showing it seemed “reasonably likely” to benefit Alzheimer’s patients. It’s the first new Alzheimer’s drug in nearly 20 years and the only therapy that U.S. regulators have said can likely treat the underlying disease, rather than manage symptoms like anxiety and insomnia.
Lilly said Thursday that it will seek approval for its potential treatment, donanemab, based on data from a mid-stage clinical study of the drug involving 272 patients. The FDA gave donanemab a “breakthrough therapy” designation, which is intended to speed the development and review of drugs that show signs of being an improvement over established treatments.
The Indianapolis company also will examine the drug in a larger, late-stage study. A company spokeswoman said Lilly plans to complete enrollment in that study by the end of the year, and an 18-month treatment period will follow.
Both Aduhelm and donanemab help clear a protein called beta-amyloid from the brain.
Lilly may be able to file its application for approval in the next two or three months since the drugmaker appears to have all the data it needs, said Dr. Vamil Divan, an analyst who covers the company for Mizhuho Securities USA.
Some 6 million people in the U.S. and many more worldwide have Alzheimer’s, which gradually attacks areas of the brain needed for memory, reasoning, communication and basic daily tasks.
Lilly and several other drugmakers have previously failed in attempts to find a treatment that slows the progression of the mind-robbing disease.
More than four years ago, Lilly said another potential drug it developed called solanezumab did not work better than a placebo treatment in a study of over 2,100 people.
That drug also aimed to clear potentially harmful protein from the brain.
Shares of Eli Lilly and Co. jumped more than 8%, or $18.59, to $235.69 at the opening bell Thursday.
U.S. economy up 6.4% in Q1 with stronger future gains expected
WASHINGTON — The U.S. economy grew at a solid 6.4% rate in the first three months of this year, setting the stage for what economists are forecasting could be the strongest year for the economy in possibly seven decades.
The Commerce Department said Thursday that growth in the gross domestic product, the country’s total output of goods and services, was unchanged from two previous estimates. The gain represented an acceleration from growth at a 4.3% rate in the fourth quarter.
Economists believe GDP growth has accelerated even more in the current April-June quarter as increased vaccinations have allowed for more businesses to re-open and encouraged consumer to get out and spend. The spending has been aided by the nearly $3 trillion in support the government has approved since December.
“This summer will be hot for the U.S. economy,” predicted Lydia Boussour, lead U.S. economist for Oxford Economics. “As the health situation continues to improve, consumers sitting on piles of savings will give into the urge to splurge on services and experiences they felt deprived of during the pandemic.”
Boussour forecast that GDP growth in the current April-June quarter will surge to an annual rate of 12% and growth for the entire year will come in at 7.5%. That would be the best annual performance since 1951.
Even economists whose forecasts for 2021 growth range from 6% to 7% believe growth this year will be the best since a 7.2% gain in 1984 when the economy was still recovery from a deep recession triggered by the Federal Reserve to halt a bout of inflation.
Economists believe growth in the current quarter will be enough to push GDP output above the previous peak set in the fourth quarter of 2019 before the pandemic struck, ending the longest economic expansion in U.S. history.
Thursday’s GDP report was the government’s third and final look at first-quarter GDP.
Consumer spending, which accounts for more than two-thirds of economic activity, grew at a sizzling annual rate of 11.4% in first three months of the year, up slightly from the 11.3% growth estimate made a month ago. Consumers benefited from a round of $1,400 individual payments that were included in the $1.9 trillion support package Congress passed in March.
The first-quarter spending gain reflected increases in goods purchases, led by auto sales, and gains in spending on services, led by food services and travel accommodations, two areas that have benefited from the re-opening of the economy as vaccinations have increased.
Business investment grew at a strong 11.7% rate, better than the previous estimate of 10.8% growth, while government spending increased at a 5.7% rate, slightly below last month’s estimate of a 5.8% gain.
The trade deficit grew in the first quarter, subtracting 1.5 percentage points from growth, as a recovering U.S. economy attracted rising imports while U.S. exporters struggled with weaker overseas demand.
U.S. blocks solar components from China over labor abuses
WASHINGTON — A major Chinese producer of material used to make solar panels will be barred from the U.S. market as part of a broader effort to halt commerce tied to China’s repressive campaign against Uyghurs and other minorities, the Biden administration said Thursday.
U.S. Customs and Border Protection will immediately halt shipments from the Hoshine Silicon Industry Co. Ltd. and its subsidiaries under a law that bans the import of goods produced with forced labor.
In addition, the Commerce Department will add six Chinese organizations linked to the industry that produces raw materials and components of the solar industry in the Xinjiang region to a list of entities from any access to the U.S. market, the administration said in a fact sheet announcing the new restrictions.
These latest U.S. moves could make it harder for the administration to meet renewable energy goals because about 45% of the global supply of the polysilicon used to make photovoltaic cells for solar panels comes from Xinjiang.
“These actions demonstrate our commitment to imposing additional costs on the People’s Republic of China for engaging in cruel and inhumane forced labor practices and ensuring that Beijing plays by the rules of fair trade as part of the rules-based international order,” the White House said in announcing the trade actions.
It’s part of a campaign that has gained global momentum to apply economic pressure on the Chinese government over its forced assimilation of largely Muslim minorities in the far western Xinjiang region. The U.S. has already banned cotton and tomatoes from the area and both Canada and Britain have also moved to restrict imports over the issue.
The administration said the Labor Department will also update its list of goods known to be produced with forced labor to include polysilicon from China. That will put additional pressure on U.S. manufacturers to remove Chinese components from their supply chains.
China denies allegations that it uses forced labor in Xinjiang or elsewhere and has broadly rejected the consistent and well-documented reports that Uyghurs and other minorities have been detained under brutal conditions, subjected to indoctrination and intensive surveillance intended to force them to assimilate into the dominant Han culture.
Biden administration extends eviction moratorium for 30 days
WASHINGTON — The Biden administration has extended the nationwide ban on evictions for a month to help tenants who are unable to make rent payments during the coronavirus pandemic.
Dr. Rochelle Walensky, director of the Centers for Disease Control and Prevention, extended the evictions moratorium until July 31. It had been scheduled to end June 30. The CDC said Thursday that “this is intended to be the final extension of the moratorium.”
The White House had acknowledged Wednesday that the emergency pandemic protection will have to end at some point. The trick is devising the right sort of off-ramp to make the transition without massive social upheaval.
White House press secretary Jen Psaki said the separate bans on evictions for renters and mortgage holders were “always intended to be temporary.”
This week, dozens of members of Congress wrote to Biden and Walensky calling for the moratorium to be not only extended but also strengthened in some ways.
The letter, spearheaded by Democratic Reps. Ayanna Pressley of Massachusetts, Jimmy Gomez of California and Cori Bush of Missouri, called for an unspecified extension in order to allow the nearly $47 billion in emergency rental assistance included in the American Rescue Plan to get into the hands of tenants.
Ending the assistance too abruptly, they said, would disproportionately hurt some of the same minority communities that were hit so hard by the virus itself. They also echoed many housing advocates by calling for the moratorium’s protections to be made automatic, requiring no special steps from the tenant in order to gain its protections.
“The impact of the federal moratorium cannot be understated, and the need to strengthen and extend it is an urgent matter of health, racial, and economic justice,” the letter said.
Diane Yentel, president of the National Low Income Housing Coalition, called an extension of the eviction ban “the right thing to do — morally, fiscally, politically, and as a continued public health measure.”
But landlords, who have opposed the moratorium and challenged it in court, are against any extension. They have argued the focus should be on speeding up the distribution of rental assistance.
Stocks add to weekly gains, pushing S&P 500 back to record
Stocks were moderately higher in early trading Thursday, helped by some modestly positive economic data as well as a continued belief that the U.S. economy is recovering from the pandemic and inflation, while higher than usual, will not be a long-term problem.
The S&P 500 index rose 0.5% as of 10 a.m. Eastern. The Dow Jones Industrial Average rose 0.7% and the Nasdaq Composite rose 0.7%.
Markets have calmed notably since the Federal Reserve surprised investors last week by saying it could start raising short-term interest rates by late 2023, earlier than expected, if recent high inflation persists.
The super-low rates the Fed engineered to carry the economy through the pandemic have propped up prices across markets, and any change would be a big deal, so the Fed’s announcement triggered selling of stocks and a rise in Treasury yields last week. However that selling reversed this week. The three major indexes are all up more than 2% this week and are once again near records.
Investors had little negative reaction to a report that showed that 411,000 Americans filed for unemployment benefits last week, down 7,000 from the week before. That was a much more modest decline than investors had expected, and the second week in a row where unemployment benefits claims stalled after declining steadily for months.
Meanwhile, orders to U.S. factories for big-ticket manufactured goods rose for the 12th time in the last 13 months in May, pulled up by surging demand for civilian aircraft. The Commerce Department said Thursday that orders for durable goods — meant to last at least three years — climbed 2.3% in May, reversing a 0.8% drop in April and coming despite a backlogged supply chain and a shortage of workers.
The yield on the 10-year Treasury note was at 1.47% largely unchanged from a yield of 1.48% late Wednesday.
Shares of drugstore chain Rite Aid plunged nearly 15% after the company said it expects to report a loss for the year, due to pressure on its pharmacy benefits services and lower-than-expected sales.