All 737 Max planes were grounded in March after the second crash of the model in just a few months killed 158 people in an Ethiopian Airlines flight. As a result, the AOA disagree light, which warned pilots of issues with the sensors, functioned only for customers that purchased the optional indicator.
The indicator was created to tell pilots when sensors that measure the pitch of the plane's nose appeared to conflict, a sign that the sensor information is unreliable.
When the jet returns to service, all new aircraft will have a working AOA Disagree alert as a standard feature and a no-charge optional indicator showing the underlying data, Boeing said.
In a statement, the manufacturer said it had identified that the 737 MAX display system software did not correctly meet the (Angel of Attack) AOA Disagree alert requirements.
Boeing's statement makes it evident that despite knowing the flaw, Boeing's engineers made a decision to go slow with the logic that "the existing functionality was acceptable until the alert and the indicator could be delinked in the next planned display system software update".
Boeing engineers discovered this problem in 2017, but conducted an internal review and concluded that the dummy alarm "did not adversely impact airplane safety or operation".
Boeing said that management was unaware of the issue until the crash in Indonesia.
As investigations into the crashes continue, Boeing anticipates a US$1 billion increase in costs related to the 737 Max, including fixing software implicated in the disasters, adding pilot training and compensating airlines and families of crash victims.
The FAA statement then adds: "However, Boeing's timely or earlier communication with the operators would have have helped to reduce or eliminate possible confusion".
Erroneous data from a sensor responsible for measuring the AOA or the angle at which the wing slices through the air is suspected of triggering a flawed piece of software that pushed the plane downward in two recent crashes.
If it had been working, the warning light would have lit up on the fatal flights of both the Lion Air and Ethiopian jets.
Senior FAA and airline officials increasingly are raising questions about how transparent the Chicago aerospace giant has been regarding problems with the cockpit warnings, according to people familiar with their thinking.
So far, carriers have managed to avoid major disruptions, but analysts expect that idling the Max 8s, a fuel-efficient update of Boeing's popular 737, will crimp growth plans in the near future.
Boeing briefed the FAA on the display issue in November, after the Lion Air accident, and a special panel deemed it to be "low risk", an FAA spokesman said.
Nevertheless, it did not reportedly provide some carriers and pilots with consistent explanations even after the first tragedy and became "more forthcoming" with airlines only after the second 737 MAX crashed in Ethiopia.
After they discovered a discrepancy between the requirements and the software, Boeing said it "followed its standard process for determining the appropriate resolution of such issues". The tactic employed by Boeing is claimed to have paid off as the company landed new orders for the plane, convincing Lion Air to keep a multi-billion dollar order.