July 16 (Bloomberg) -- A U.S. aviation inspector recommended grounding regional airline Gulfstream International Group Inc. in 2008 for violations including giving pilots too little rest, deferring plane maintenance and falsifying records.
The Federal Aviation Administration inspector’s recommendation, which hasn’t previously been disclosed, was rejected by FAA attorneys who concluded there wasn’t enough evidence to warrant the sanction, agency spokeswoman Laura Brown said. The FAA instead sought a $1.3 million fine and accepted $550,000 under a settlement announced by Fort Lauderdale, Florida-based Gulfstream this week.
Safety practices at regional carriers, which account for about half of all scheduled U.S. passenger flights, have drawn scrutiny from regulators and Congress since a flight operated by Pinnacle Airlines Corp.’s Colgan unit for Continental Airlines Inc. crashed in February 2009 in Clarence Center, New York, killing 50 people.
The inspector’s report alleged “intentional” violations by Gulfstream, showing “an attitude of non-compliance.” The inspector’s name wasn’t disclosed in the documents.
The report is “filled with hyperbole, simply inaccurate statements of fact and law, and recommendations that are ludicrous,” said Andrew Steinberg, a partner at Jones Day in Washington who represents Gulfstream in the FAA case.
The inspector said in his report that in 155 instances, dispatchers for Gulfstream were scheduled to work longer than 10 hours, which the FAA allows only in emergencies or circumstances beyond a carrier’s control.
“Gulfstream International Airlines made false entries into required records, scheduled flight crewmembers that did not have the required rest and failed to maintain accurate flight and rest time records for company pilots,” the inspector also wrote.
Gulfstream, which operates 23 19-seat aircraft and provides flights for UAL Corp.’s United Airlines and Continental, was founded in 1988 and has never had a fatal accident.
It flies out of Cleveland and Florida cities such as Fort Lauderdale, including routes popular with business travelers, such as Fort Lauderdale-Tallahassee, Florida. It carries more than 500,000 passengers a year, according to an investor presentation by the company last month.
The FAA opened its investigation of Gulfstream in response to a whistleblower complaint by a former pilot, agency spokeswoman Brown said.
Kenny Edwards said in an interview last year that he was the former pilot who brought his concerns to the FAA in December 2007 after he was fired for refusing to fly a plane with a malfunctioning collision-avoidance system. He said he had already given two weeks’ notice he was leaving Gulfstream at the time he was fired.
The inspector, part of a reviewing team, said seven of nine aircraft examined had maintenance deferred, including work on an altitude-alerting system. Six crew members’ records showed they didn’t receive required rest, and Gulfstream made false entries into a record system so that short work periods by pilots could later be entered as a single workday, the inspector said.
The inspector recommended “revocation of their air carrier certificate,” meaning Gulfstream wouldn’t be able to operate flights until it successfully re-applied for a license.
FAA spokeswoman Brown said in an interview yesterday that the record falsification described in the report was the “only part of the allegations that would have met the threshold for revocation.” She said “there wasn’t sufficient proof” of falsification.
“The rest of the charges were sufficient for a civil penalty, but we couldn’t support a revocation based solely on the other charges,” Brown said.
Grounding of carriers by the FAA is infrequent, according to Brown, who said she couldn’t immediately provide statistics. The FAA in March 2005 ordered Platinum Jet Management, the operator of a corporate jet that crashed that year at New Jersey’s Teterboro Airport, to halt operations, according to documents provided by federal prosecutors at the time.
Steinberg, Gulfstream’s attorney, said maintenance deferrals weren’t included in the final penalty, so FAA “lawyers and higher-ups figured this was not justified.” While the carrier acknowledged two instances of crew members exceeding work-hour limits, the inspector misread records in suggesting there were broader infractions, he said.
Dispatchers were never scheduled longer than 10 hours, though some worked beyond that time under exceptions allowed under FAA rules, Steinberg said. The inspector confused notations used to track employee pay as records of pilot flight and duty time, he said.
“We feel as strongly today as ever -- even more so -- that the findings of the FAA were largely incorrect, but we are a small company and we don’t have the resources to continue to fight the federal government,” Gulfstream said in a statement.
Gulfstream had revenue of $87.3 million last year, a 17 percent decline from the previous year, and a loss of $7.55 million, or $2.45 a share, narrowing by almost half the loss of $14.8 million, or $5 a share, the year before.
The company said in regulatory filings this year that it needed to improve financially or would probably “be unable to fund continued operations or meet our financial obligations.”
Gulfstream shares fell 3 cents, or 3 percent, to 94 cents yesterday and have dropped 53 percent in the past year.
Continental spokeswoman Mary Clark declined to discuss the inspector’s report on Gulfstream. “Safety is Continental’s top priority, and we expect the same from the regional partners we work with,” she said.
“All of our code-share partners meet FAA and our own high standards,” United spokeswoman Megan McCarthy said in an e-mailed statement.
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