FAA Set to Slam American with $25 Million Fine

**Update: The FAA has officially proposed a $24.2 million fine against American.**

The Federal Aviation Administration (FAA) appears set to slam American with a $25 million fine. According to The Wall Street Journal, "High-level FAA officials ... seem determined to seek a civil penalty against American that could be nearly three times as large as any ever levied against a U.S. airline. The penalty appears intended to send a signal about the FAA's demand for strict maintenance compliance by airlines." Sources tell the WSJ the fine could even reach $30 million.

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The fine stems from violations in 2008 that affected nearly 300 planes and caused thousands of cancelled flights. Poorly fastened wiring was discovered on the landing gear of 290 MD-80 aircraft, leading to several instances of damaged wiring and electrical arcing, which could have caused fires. The FAA even speculated that the loose wiring could have ignited a fuel tank explosion. American's hasty repair of the loose wires resulted in several days of delays, and the airline has since ramped up maintenance procedures in the hopes of avoiding the FAA's ire. Still, according to the WSJ, the FAA seems determined to move forward with the penalty.

Complicating matters, however, is that lax oversight from the FAA likely played a role in the MD-80 fiasco. When the initial report on the wiring issue was made available in February, it coincided with a negative review of the FAA's handling of American. The WSJ reports that "in late 2008, a blue-ribbon panel that examined the MD-80 wiring issues at the request of then-Transportation Secretary Mary Peters found that mistakes were made by both FAA and American managers." The WSJ cites "bad blood" between the FAA and American, but says both sides have improved relations lately.

The largest FAA fine ever paid is a $9.5 million penalty against Eastern Airlines in 1987. The FAA levied a $10.2 million fine against Southwest in 2008, but that was negotiated down to $7.5 million. American would likely try to negotiate a lower fine as well, though whatever penalty emerges from this issue will be the largest ever paid.

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