A lethal mix of regulatory and corporate shortcomings

Tuesday, March 10 marked the one-year anniversary of the Ethiopian Airlines crash that claimed 157 lives, including 18 Canadians.

About five months earlier, on October 29, 2018, the Lion Air crash in Indonesia killed 189 passengers and crew.

Both crashes involved Boeing’s 737 Max 8 aircraft.

The 737 Max 8 is a modification of an earlier version of the aircraft. The new model has heavier engines placed higher on the plane, which increases the risk of stall during takeoff. The problem was addressed via special anti-stall software, called MCAS.

In both crashes, a faulty sensor in the nose of the plane caused the software to malfunction, sending the planes plummeting to Earth. The aircraft had only one sensor in the plane's nose instead of the usual two, a deadly mistake.

The Ethiopian investigation team’s interim report released Monday, focused on the 737 Max 8 design flaws. But behind the technical cause is a story of corporate laxity and regulatory failure, the conditions the result of “regulatory capture,” Under regulatory capture, government regulators accommodate the bottom-line interests of the industries they regulate at the expense of their public safety obligation. Industry is able to block, delay, dilute, reverse regulations that adversely affect its costs—in effect regulate itself.

Meanwhile, a preliminary report by a U.S. congressional committee, released last Friday, concludes that Federal Aviation Administration (FAA) oversight was fundamentally flawed and in “critical need of legislative and regulatory reforms.”

Over the years, says the report, the FAA had outsourced more and more regulatory functions to Boeing itself. For example, it granted Boeing employees the power to certify the plane for flying. This is a classic example of self-regulation or regulatory capture.

Intense competition with Airbus led to Boeing’s prioritizing of costs at the expense of safety. Boeing had guaranteed airline company buyers of the plane it would require no additional pilot training, thus saving expensive costs for the airlines.

Among the reports other findings: The FAA not only failed to designate MCAS as a safety-critical system, it approved Boeing's demand to remove all references to the software’s existence in the operating manual. The agency also concurred with Boeing’s assessment that no simulator training for pilots was necessary. And throughout, FAA senior management showed that they were willing to internalize and identify with industry priorities, as when, at Boeing’s request, they overruled the agency’s own technical experts’ assessment of the aircraft’s vulnerability.

The congressional report was in sharp contrast to the report commissioned by Department of Transport Secretary Elaine Chao, which in describing the FAA's approval process used the phrases “rigorous and robust” and “safe and effective." Apparently, regulatory capture existed at the highest political levels.

The initial response

Following the Lion Air crash, both the FAA and Boeing continued for months to hide the existence of the aircraft’s MCAS software in their pilot advisories.

The FAA did, however, produce a risk assessment that calculated that if MCAS system were not repaired, there could be as many as 15 more catastrophic accidents during the lifetime of the 737 Max fleet — a finding that was not widely shared outside the agency.

Transport Canada, meanwhile, had outsourced the bulk of its regulatory responsibilities to the FAA and, by extension, to Boeing itself. Regulatory capture had infected the Canadian regulator as well.

Under the Transport Canada-FAA arrangement, the U.S. regulator certified the plane first, and then Canada cleared it the 737 Max to fly based on material provided by the FAA. Our government, though did not scrutinize the plane directly. It was essentially a bookkeeping exercise, another classic feature of regulatory capture.

Documents made public March 12 at the Commons Transport Committee hearings revealed that Transport Canada test pilots raised concerns about the 737 Max as far back as 2016 because it flew differently than its predecessor. Transport Canada, despite not getting answers from Boeing as to why it was not recertified, decided to approve the Max because of delivery obligations to Canadian carriers.

Hours after the Ethiopian Airlines crash, governments around the world began grounding the 737 Max aircraft. Canada was not among them. Transport Minister Marc Garneau and his officials were waiting to follow the U.S.’s lead.

And yet we now know that three weeks after the Lion Air crash, Transport Canada received the grim FAA analysis of the danger the 737 Max posed unless there was a fix to MCAS software. Still, Canada chose not to ground the plane in advance of its U.S. counterpart.

Garneau insisted it would be premature to ground the plane despite this foreknowledge. Two days later, he finally grounded the planes, just hours before the U.S., stating that new information had come to his attention “suggesting a possible, although unproven, similarity” between the two flight paths. What was this new information?

The Globe and Mail reported flight information collected by two radar data companies — available in real-time — showing a disturbingly similar pattern between the two crashes. One of the radar companies, Aireon, is partially owned by Nav Canada, Canada’s air-traffic control system. But Canadian officials did not request this information for three days. Why did it wait so long? Why was Garneau waiting for the U.S. lead?

The following month, April, the House of Commons transport and infrastructure committee — under a majority Liberal government — rejected a motion to study Transport Canada's role in greenlighting the 737 Max. Almost a year later — now under minority government — the same committee, in an about-face, decided to proceed with an investigation.

Appearing before the Commons Transport committee on Feb. 25, David Turnbull, Director of National Aircraft Certification at Transport Canada, testified: “We have faith and trust in the FAA, but ...we will investigate independently to determine and validate” [and later] “This is a situation where we learn and have learned about failure modes of the MCAS, how it relates to the basic architecture of the airplane.” After-the-fact rationalization?

A pervasive problem

Regulatory capture pervades Canada's regulatory system. I demonstrated in my book on the Lac-Mégantic disaster how it pervaded the rail sector. Others have shown its prevalence in pesticides, pharmaceuticals, food safety and other sectors.

A parliamentary committee hearing, while important, is only a first step. A Commission of Inquiry is necessary to undertake a comprehensive examination of regulatory capture in all of its manifestations, across all sectors — and its remedies.

The power of industry over Canadian regulators is one element of what Canadian philosopher John Ralston Saul termed a slow-motion corporate coup d'état. Regulatory capture poses a serious risk to public health and safety, and the environment.

Contrary to Michael Ignatieff's contention that obfuscation of the truth is a "necessary hypocrisy" for the functioning of liberal democracy, uncovering the truth is critical for the health of our democracy.