Markets

Southwest Airlines to Shell Out $2.8M for Fed Suit Settlement

Dallas, TX-based Southwest Airlines Co.LUV will have to shell out $2.8 million to settle a lawsuit that alleges violation of maintenance norms by the low-cost carrier.

On Dec 21, the U.S. Department of Justice announced that Southwest Airlines has agreed to pay the amount in settlement of the Federal Aviation Administration's (FAA) charge that the carrier has flouted several safety regulations laid down by the regulator. According to a report in the Wall Street Journal, the decision was conveyed to a Seattle district court last week.

In its lawsuit, the FAA accused Southwest Airlines of supervising faulty repairs by a contractor to some of the Boeing 737s operated by the carrier between 2006 and 2012. Southwest Airlines has agreed to pay the civil penalty to improve its oversight and control of maintenance contractors working on Southwest Airlines' planes.

In the event of the carrier failing to implement the operational changes in the settlement deal, Southwest Airlines will pay a further $5.5 million in deferred civil penalties. According to an AP report, in Nov 2014 Southwest Airlines was dragged to court by the FAA over its non-compliance of the latter's maintenance norms.

We note Southwest Airlines and the FAA have been at loggerheads over maintenance issues for quite some time now. Consequently, the settlement can be viewed as a positive development for Southwest Airlines which, according to media reports, is "committed to meeting or exceeding all applicable FAA safety regulations". We expect investor focus to remain on the issue, going ahead.

Zacks Rank

Southwest Airlines currently carries a Zacks Rank #2 (Buy). Investors interested in the airline space may also consider SkyWest Inc. SKYW , Deutsche Lufthansa Aktiengesellschaft DLAKY and Controladora Vuela Compañía de Aviación, S.A.B. de C.V. or Volaris VLRS . All the three stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SOUTHWEST AIR (LUV): Free Stock Analysis Report

SKYWEST INC (SKYW): Free Stock Analysis Report

LUFTHANSA -ADR (DLAKY): Free Stock Analysis Report

CONTROLADORA VL (VLRS): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

VLRS DLAKY SKYW LUV

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More