April 10 (Bloomberg) -- AMR Corp.'s American Airlines, the biggest operator of Boeing Co. MD-80 jets, said it had ``no choice'' in grounding almost half its fleet after the planes again failed to meet a U.S. safety order.

That decision forced the cancellation of about 1,550 flights over two days, stranded 171,000 passengers and helped send AMR's stock to the biggest drop in a month. American, the world's largest carrier, will scrub 900 more today as it continues another round of inspections.

American acted in response to spot checks by the Federal Aviation Administration that found the carrier hadn't secured some wiring in accordance with an FAA directive. Compensating stranded passengers and working on the jets will create ``very significant'' costs, American said, without elaborating.

``A very high percentage'' of American's 300-plane MD-80 fleet wasn't in compliance as the jets were rechecked, Executive Vice President Dan Garton said yesterday. ``We viewed ourselves as having no choice but to ground the aircraft.''

Falling short of FAA requirement for the earlier wiring adjustments meant that American didn't have the option of parking some jets on a rolling basis while flying others, Chief Executive Officer Gerard Arpey said. Fort Worth, Texas-based American checked all the MD-80s in March in response to the FAA order, spurring groundings and scrapping hundreds of flights.

The planes, flown mostly on domestic routes, account for almost half of American's total, and idling them erased half of the carrier's 2,200 flights yesterday. The cancellations may persist until tomorrow.

As travelers clogged airport terminals, especially at hubs such as Dallas-Fort Worth, American booked them to other flights, ran buses to destinations within driving distance or tried to find seats on rival carriers. By late yesterday, 60 MD- 80s had been returned to service, American said.

Cost to American

American's bill probably will run into ``tens of millions of dollars,'' said Alan Bender, a professor of airline economics and operations at Embry Riddle Aeronautical University in Daytona Beach, Florida.

The cancellations were the industry's worst in at least 30 years outside of severe weather and fallout from the Sept. 11 attacks, Bender said yesterday in an interview. ``There's been nothing of this magnitude since the early jet era of the 1960s and 70s,'' when engines were less reliable.

AMR tumbled $1.15, or 11 percent, to $9.17 yesterday in New York Stock Exchange composite trading. It was the biggest drop since March 12, and brought the shares' decline over the past year to 72 percent.

Jet-Fuel Expense

Like other U.S. carriers, American already was struggling with an 85 percent surge in the price of jet fuel over 12 months and signs that demand is weakening as the U.S. economy slows. AMR will post a full-year loss of $3.14 a share, based on the average of 14 analyst estimates compiled by Bloomberg.

Jim Corridore, a Standard & Poor's analyst in New York, switched his 2008 estimate for AMR to a loss of 95 cents a share from a profit of $1.50 because of costs from the repeated inspections and rising fuel expense. He rates AMR as ``hold.''

``This couldn't have come at a worse time,'' Garton said at a news conference at American's headquarters. ``If there is any good news, it's that this is a relatively concentrated event, a one-time event, unlike the price of jet fuel.''

The failure to meet FAA specifications regarding the wheel- well wiring wasn't a safety issue, Garton and Arpey said. The CEO spoke at a Oneworld airline alliance press conference in Marina del Rey, California.

FAA Directive

Garton said American concluded that it had met the FAA's safety directive when it grounded the MD-80s on March 26 and 27 for fixes to the wiring bundles. Those planes weren't reinspected by the FAA before they returned to service.

In the FAA spot checks that began on April 7, inspectors found that the attachment of the wiring bundles didn't match agency specifications such as the orientation of certain clamps and ties, Garton said.

Mechanics ``had taken certain latitudes'' in the work, Garton said, not realizing the ``greater emphasis on strict compliance'' at the FAA since U.S. lawmakers began raising questions last month about its oversight of airline maintenance.

``It's a question of how we did the work, not whether we did it,'' Garton said. ``We now understand the rules have gone to a very strict level of enforcement. We will meet that and get the planes in the air.''

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

Last Updated: April 10, 2008 00:00 EDT