Southwest Airlines Co. (
) may end up paying one of the heftiest fines ever charged by the
Federal Aviation Administration (FAA). The regulator has alleged
the carrier for non-compliance of maintenance regulations in some
of its 737 jetliners. The Dallas-based carrier has a months' time
to respond to the proposed charges.
The latest $12 million penalty dates back to 2006, when
Southwest Airlines had hired Aviation Technical Services (ATS) to
provide skin sealing work on 44 of its B-737 jets. According to the
FAA, the contractor followed a disapproved method to replace the
fuselage skins to prevent them from cracking. ATS also failed to
properly stabilize the planes while repairing them.
The regulator also found some improper ground firing issues on
two Southwest Airlines aircraft. The FAA has argued that the
carrier has operated the planes for more than 20 passenger
flight-runs without fixing the issue. Although technically this
stands as ATS' fault, in such cases, FAA generally holds the
airline responsible for repairs done by other companies.
In the past, the FAA has been unrelenting on maintenance-related
issues and has, without mercy, fined carriers that failed to follow
regulations laid down by it. This is the second biggest fine for
Southwest Airlines after the carrier was initially charged in 2008
for flying 60,000 passenger flights with 46 of its B-737 aircraft
without making the repairs mandated by the regulator. The then
record-high fine of $10.2 million was reduced to $7.5 million in
2009 following negotiations.
Other companies that have been on FAA's target list are the
erstwhile American Airlines, which is now a part of American
Airlines Group Inc. (
), and aircraft manufacturer The Boeing Co. (
). While American Airlines was fined $24.2 million for faulty
repairs, Boeing was charged $13.2 million for delays in
availability of fuel tank safety equipment.
Although Southwest Airlines has clarified that the latest
allegations do not involve any aircraft currently under operation,
we believe the extension of this issue might impact its traffic,
with passengers feeling jittery about boarding the carrier's
planes. However, Southwest Airlines may negotiate with the FAA in a
bid to lower the penalty amount.
Southwest Airlines currently carries a Zacks Rank #1 (Strong
Buy). Another similar Zacks Rank #1 stock to watch out for is Delta
Airlines Inc. (
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