American Air Faces Record $24.2 Million Fine for 2008 Maintenance Lapses

AMR Corp.’s American Airlines faces a record $24.2 million fine for maintenance lapses that grounded its Boeing Co. MD-80s in 2008, stranding 360,000 passengers, the Federal Aviation Administration said today.

The proposal, exceeding the $10.2 million the FAA sought from Southwest Airlines Co. more than two years ago, sets up months of talks with American over a final penalty for alleged flaws that forced cancellation of 3,300 flights in a week.

American is “highly likely” to win a reduction in the sanction, said Robert Ditchey, a consultant and former airline maintenance executive in Marina del Ray, California. Southwest persuaded the FAA to reduce the penalty by a quarter before agreeing to pay $7.5 million last year.

The FAA’s announcement in Washington ends a two-year investigation into American’s alleged failure to inspect MD-80 wire bundles and take corrective action. The FAA forced American to ground the planes, which made up almost half its fleet, when it discovered the lapses in April 2008.

“We put rules and regulations in place to keep the flying public safe,” Transportation Secretary Ray LaHood said in a statement. “There can be no compromises when it comes to safety.”

American, the second-largest U.S. carrier, has challenged the FAA’s finding in the wiring case and said the safety of passengers was never an issue. The Fort Worth, Texas-based carrier has 30 days to respond to the FAA’s enforcement letter.

“We believe this action is unwarranted,” American said in an e-mailed statement today. “We plan to follow the FAA’s process and will challenge any proposed civil penalty.”

14,278 Flights

The FAA found that 286 Boeing MD-80s made 14,278 flights in violation of a 2006 inspection directive. The requirement was aimed at preventing the wires from shorting out or arcing, which could lead to fires, auxiliary power loss or fuel-tank explosions, according to the agency.

“Obviously American didn’t follow the rules exactly the way they should have,” said Fred Mirgle, retired chairman of aviation maintenance at Embry Riddle Aeronautical University in Daytona Beach, Florida. “If proper procedures and practices weren’t carried out, it’s a violation.”

American told employees in a message today “there was no evidence of any chafing of wires” in the 2008 inspections. “The company took significant steps to address FAA concerns” and received approval from the FAA’s regional office to use an alternate means to comply, the message said.

Carrier Collaboration

LaHood’s Transportation Department and the FAA, which rely on carrier collaboration to ensure safety, are moving toward stricter enforcement after being criticized for working too closely with carriers, Ditchey said.

“The DOT and FAA are trying to protect themselves, their reputation,” he said. “They’re getting a little hard.”

House Transportation and Infrastructure Committee Chairman James Oberstar, a Minnesota Democrat, said during the investigation of the Southwest allegations the FAA had a “cozy relationship” with carriers. An inspector general report in February faulted FAA oversight of American’s maintenance.

Today’s announcement adds to earlier flaws regulators detected at American. The FAA said in February that AMR’s American Eagle commuter carrier may be fined $2.9 million for improper repairs on landing-gear doors.

On Feb. 1, the FAA proposed a $2.5 million fine on Eagle for failing to properly calculate baggage weights. In August 2008, the FAA proposed penalties of as much as $7.1 million against American over allegations of deferred maintenance, drug and alcohol-testing deficiencies and inadequate lighting inspections.

Southwest, Eastern

The $7.5 million fine for Southwest, which the carrier expects to pay by Jan. 15, would be the largest collected from an airline so far. The FAA in 1987 imposed a $9.5 million penalty on Eastern Airlines, which went out of business after paying $1 million, the FAA has said.

The FAA said Southwest operated 46 Boeing 737s on 59,791 flights without full fuselage inspections for cracks. The carrier flew jets after discovering the inspection lapses, and later found cracks in six of the planes, the FAA said in 2008.

To contact the reporter for this story: John Hughes in Washington jhughes5@bloomberg.net Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

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