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Southwest Grounds Dozens of Jets

DAVID KOENIG   03/12/08 08:23 PM ET   AP

Southwest Airlines

DALLAS — Southwest Airlines Co. canceled flights Wednesday and temporarily grounded 43 planes to examine if they were sound enough to carry passengers, the latest twist in the low-cost carrier's saga of missed safety inspections and civil penalties.

The groundings affected about 8 percent of Southwest's fleet, and came as the airline faces a $10.2 million civil penalty for continuing to fly nearly 50 planes that hadn't been inspected for cracks in their fuselages.

Southwest shares fell more than 9 percent before closing down 7.3 percent.

Since the Federal Aviation Administration announced the penalty last week, Southwest has endured a steady drip of bad publicity, which is unusual for the nation's most consistently profitable carrier and one that has never had an accident that killed passengers or crew members.

On Wednesday, word filtered out that the airline had taken 38 planes out of service, along with five others that were already in hangars undergoing routine maintenance. That's about 8 percent of Southwest's fleet.

Spokeswoman Linda Rutherford said Southwest took the action after getting clarification from manufacturer Boeing Co. on Tuesday night about the type of inspection _ visual or magnetic, or a combination of both _ needed for areas around the windows on some older Boeing 737-300 and 737-500 jets.

By late Wednesday afternoon, Rutherford said, 25 planes had undergone the 90-minute inspection at maintenance bases in Dallas, Houston, Chicago and Phoenix and returned to service.

Rutherford said the remainder of the 38 taken off tarmacs were expected to be back flying by Wednesday night. A 44th plane covered by the Boeing instructions had already been retired, she said.

Southwest had canceled 139 flights by late Wednesday afternoon, or about 4 percent of its scheduled flights for the day, according to Flightstats.com, which tracks airline operations.

The company said it had 520 Boeing 737 jets at the end of last year. Nearly 200 of them are older models, the Boeing 737-300, that were supposed to undergo extra inspections for cracks in the fuselage.

The FAA said Acting Administrator Robert A. Sturgell met Wednesday with Southwest Chief Executive Gary Kelly, who gave a briefing on the steps the airline is taking to comply with inspection orders. The FAA is conducting its own review.

Sturgell has acknowledged that the FAA should have grounded the jets last year, when Southwest itself reported that it had inadvertently missed inspections of the fuselages on its all-Boeing fleet. He has said that "at least one FAA inspector looked the other way."

Rep. James Oberstar, D-Minn., chairman of a House committee looking into the actions of both the airline and the FAA, said this week's groundings and fresh inspections raised serious questions about the FAA's follow-up to the missed examinations last year.

Beyond Wednesday's canceled flights _ airline officials said they expected to operate a normal schedule on Thursday _ it was unclear what impact the unfolding events might have on Southwest's ticket sales and reputation.

Ted Marzilli, an executive at consumer-surveying firm BrandIndex, said Southwest's ratings have held up despite nearly a week's worth of bad publicity. But Wednesday's news of airplanes being grounded and flights canceled could change things for the worse, he said.

"At first this was something that happened a year ago, there were no injuries, and it was being corrected," Marzilli said. "This new story prolongs the news cycle and has the potential to do more serious impact to the Southwest brand."

But Paul Biederman, a former chief economist at TWA who now teaches at New York University, said Southwest appeared to be taking charge by announcing earlier this week that it was suspending three employees. He predicted the fallout would be short-lived.

"There wasn't an accident. Nobody got hurt or killed," he said. "It'll go away unless something else happens, like we find out cracks weren't repaired."

The $10.2 million penalty is the largest the FAA has ever imposed on a carrier. Most of the amount was related to charges that Southwest for several days last year continued to put passengers on planes that it knew had not been properly inspected.

Southwest has said it will appeal. CEO Kelly, who earlier announced an internal investigation into the missed inspections, said Wednesday that Southwest has a clean record over its 37-year history.

"We have been a safe company. I believe we are a safe company," he said. "I am committed to making sure we become safer still."

Southwest shares fell 91 cents to end at $11.49 in trading on Wednesday after they earlier fell to a 52-week low of $8.87.

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Filed by Nick Graham  |