American Airlines Faces $162m in Fines

According to court documents in AMR Corp’s bankruptcy case, the Federal Aviation Administration (FAA) is seeking a record $162.4 million in fines from American Airlines. The proposed civil penalties are from previously undisclosed probes into alleged maintenance and safety breaches by the carrier and its affiliates. This is the most dramatic indication yet that the regulator had extensive concerns about the airline’s maintenance system. These concerns seem to be shared among many of the agency managers and inspectors who directly oversaw the carrier – not to mention their bosses.

The FAA is pursuing new investigations now, and it has detailed recommended penalties. The new probes include several major enforcement cases, and some of these contend that the airline knowingly violated regulations, which means much larger penalties than ever could be imposed. A total $156.5 million is being sought from American Airlines alone over alleged maintenance issues from back in 2007. This includes a previously disclosed $24.2 million penalty in 2010 for its alleged improper fixes for electrical wiring in the landing gear of its MD-80s in 2008. This was the biggest penalty ever issued by the FAA at the time.

When controversy over the MD-80 wiring issue erupted in 2008, American Airlines had an intense relationship with the FAA. It basically threw an FAA official off its property at one point. Then in 2010, it promised to aggressively fight the penalty. However, the airline also took steps to persuade critics and leadership at the agency that it was changing. It hired experts from the outside to examine its maintenance practices and advise on how it could enhance these policies.

The airline also spent millions on rewriting manuals and improving its computer systems to track fixes to safety issues. Maintenance executives in charge at the peak of the battle with the FAA were replaced by new people as well. The new team vowed to be more cooperative with the agency, and senior FAA officials said last year that tension had eased between the two parties.

On Monday, the FAA said that its claims were filed to protect US taxpayers’ interests. The document had to be filed in the AMR Chapter 11 case by a July 16 deadline. Several investigations are still ongoing, while American Airlines hasn’t been issued formal penalty letters for the claims. The FAA says the filing details proposed and potential civil penalties connected to ongoing enforcement cases for both American Airlines and American Eagle. Due to the cases still being open, the agency can’t discuss their individual details.

The biggest possible penalties filed for individual cases are $27.6 million, $28.8 million and $39.3 million. The $27.6 million penalty stems from a failure to apply cadmium plating on a required Boeing 767 engine and wing modification. The $28.8 million penalty involves improper overhaul procedures for the landing gear of Boeing 777s, as well as incorrectly testing the assemblies of the gear. The $39.3 million penalty is for failing to properly conduct mandatory safety fixes on wire bundles for Boeing 757 engines and wings in 2009.

Usually, when the FAA officially proposes civil penalties, the carrier and agency negotiate the amount down. This process can take years to complete. A spokesman for American Airlines said on Monday that the carrier is aware of the FAA’s claims. The process isn’t an admission for money owed, and it’s not an admission that the cited amount is right either. They continue discussing their view of the alleged breaches with the FAA, he added, as well as negotiating possible ways to resolve the issue.