FAA Tells Court It May Fine American Airlines Over Safety

AMR Corp.’s American Airlines may face the largest penalties ever pursued by the U.S. Federal Aviation Administration for safety violations, according to a bankruptcy court filing.

The agency’s cases, several of which have never been disclosed, may lead to as much as $162.4 million in fines against American and affiliated companies, according to documents filed by the agency with the U.S. Bankruptcy Court overseeing AMR’s reorganization.

“The documents detail both proposed and potential civil penalties in connection with ongoing enforcement cases involving both American Airlines and American Eagle,” the agency said in a statement. “Because these cases remain open, the FAA cannot discuss the details of the individual investigations.”

The agency said it had identified 36 separate instances in which Fort Worth, Texas-based American violated safety rules, including failure to perform repairs and mechanics mistakenly putting jets back into service with inoperable equipment. Sixteen of those hadn’t previously been made public.

The AMR claims register shows the FAA filed four secured claims totaling $162.4 million July 12 against the airline company. The agency filed the claims to ensure that the government was paid as a creditor in AMR’s restructuring, it said in an e-mailed statement. As a secured creditor, the FAA would be paid ahead of many holders of priority, administrative and unsecured claims, under bankruptcy law.

Systemic Failure

The largest claim was for $39.3 million in recommended fines that resulted from what the FAA called a systemic failure to repair Boeing Co. (BA) 757s in 2009, according to the filings.

FAA inspectors found that only three out of 124 of American’s 757s had had proper repairs to wiring near the plane’s two engines. The single-aisle planes made 1,480 passenger flights without the repairs, according to the filings.

In another case, American was told by Boeing in 2008 that it had improperly repaired engines on wide-body 767s. The airline made 2,118 flights on the planes, according to the FAA. The agency intends to seek $27.6 million for these violations.

American is aware of the FAA’s potential claims, Michael Trevino, a spokesman for AMR, said in an e-mailed statement.

“The claims process is a routine part of any Chapter 11 filing,” Trevino said. “It is not an admission that money is owed, nor is it an admission that the amount cited is correct.”

Previous Record

The FAA’s claims include $24.2 million sought against American in 2010 for maintenance lapses that grounded its fleet of Boeing MD-80s in 2008. That’s the largest fine the agency has proposed to date.

The case hasn’t been settled, and carriers typically negotiate lower payments with the FAA.

American had to cancel more than 3,300 flights over five days in April 2008, stranding 360,000 passengers while the conducted wiring inspections and made repairs on MD-80 aircraft that made up almost half its fleet.

The carrier said it had to park the planes after FAA spot checks found that clamps used to secure wiring bundles in the jets’ wheel wells didn’t comply with an agency order.

American executives said at the time they believed the carrier had met the FAA’s safety directive when it grounded the MD-80s. Those planes weren’t reinspected by the FAA before they returned to service.

Since then, the airline has made improvements in its maintenance procedures and worked with the agency to improve relations, Trevino said.

Claims against American totaled $156.5 million, according to the AMR register. Regional unit American Eagle faces a $5.3 million claim while the FAA is seeking $629,500 from AMR’s Executive Airlines Inc. and $17,875 from Eagle Aviation Services.

The case is In re AMR Corp. (AAMRQ), 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Alan Levin in Washington at alevin24@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.