FAA: Failure to Follow Airworthiness Directive Will Cost American Airlines A Record $24.2 Million

On August 26, 2010, the Federal Aviation Administration announced that it has proposed a $24.2 million civil penalty against American Airlines Inc. for failing to correctly follow an Airworthiness Directive involving the maintenance of its McDonnell Douglas MD-80 aircraft. This civil penalty is the largest ever proposed by the FAA.  The FAA alleges American:

[D]id not follow steps outlined in a 2006 Airworthiness Directive requiring operators to inspect wire bundles located in the wheel wells of MD-80 aircraft. The Airworthiness Directive, AD 2006-15-15, required a one-time general visual inspection by March 5, 2008 for chafing or signs of arcing of the wire bundle for the auxiliary hydraulic pump. It also required operators to perform corrective actions in accordance with the instructions of the applicable manufacturer’s Service Bulletin.

The purpose of the Airworthiness Directive was to prevent the shorting of wires or arcing at the auxiliary hydraulic pump, which could result in loss of auxiliary hydraulic power or a fire in the wheel well of the aircraft. The Airworthiness Directive also sought to reduce the potential of an ignition source adjacent to the fuel tanks, which, in combination with the flammable vapors, could result in a fuel tank explosion.

According to the FAA’s press release, this was not a single time event, nor one limited to a couple of aircraft.  It appeared to the FAA to be a systemic violation present in American’s MD-80 fleet.

The FAA first detected the violations on March 25, 2008, during an inspection of two aircraft. The FAA informed American’s management that the aircraft did not comply with the AD, prompting a series of re-inspections and additional maintenance work that occurred during the following two weeks. On March 26, after American performed additional maintenance on its MD-80 fleet, the FAA inspected eight aircraft at American’s Tulsa maintenance base and found that seven did not comply with the Airworthiness Directive. On April 7, the FAA inspected another nine MD-80 aircraft at Dallas/Fort Worth International Airport and found that eight of them still did not comply with the AD. A tenth aircraft inspected by American mechanics also did not comply. On April 8, American began grounding its MD-80 fleet to conduct new inspections and redo work as necessary.

The FAA subsequently determined that 286 of the airline’s MD-80s were operated on a combined 14,278 passenger flights while the aircraft were not in compliance with Federal Regulations. American ultimately completed the work required by the 2006 Airworthiness Directive.

See Press Release, FAA, FAA Proposes Civil Penalty Against American Airlines (Aug. 26, 2010) (available here).

American has stated that it plans to appeal the proposed penalty, giving American a chance “to present the facts, which will support our actions taken back in early 2008. American Airlines has always maintained its aircraft to the highest standards, and we continue to do so. We assure our customers there was never a safety of flight issue surrounding these circumstances more than two years ago.”

The Dallas Morning News points out that the $24.2 million fine represents just over a 10th of 1 percent of parent company AMR Corp’s 2009 revenue. FAA regulations allow the agency to assess civil penalties of up to $25,000 per violation, thus, the civil penalty could have been much worse.  American flew 14,278 flights with the noncompliant aircraft, each flight being a separate violation.  The FAA, thus, could have assessed a penalty up to nearly $357 million.

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