American agrees to pay $24.9 million to settle FAA safety claims

Posted Friday, May. 10, 2013  comments  Print Reprints

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American Airlines has agreed to pay the Federal Aviation Administration $24.9 million to settle up to $162 million in claims made by the agency related to various problems.

According to bankruptcy documents filed late Thursday, the Fort Worth-based carrier also agreed to perform additional training of maintenance personnel and increase oversight of third-party maintenance providers.

“This settlement recognizes the many changes, including enhancements to our maintenance and engineering processes, increased training, inspections and audits that have taken place at American over the past several years that address past FAA concerns,” American spokeswoman Andrea Huguely said. “The safety of our people and our customers always has been — and always will be — our top priority.”

Before the bankruptcy filing, the FAA had proposed $37.2 million in civil penalties against American and other AMR Corp. subsidiaries. Last summer, the FAA filed several claims with the Bankruptcy Court to potentially fine AMR up to $162 million as part of safety investigations.

One claim relates to American’s MD-80 fleet, which was grounded by the FAA in 2008 after inspectors found improper wiring around the landing gear. About 3,000 flights were canceled during one week in April 2008. In 2010, the FAA proposed a $24.2 million fine.

An FAA spokesman said the agency agreed to reduce the total claims in the settlement because American has made safety and compliance improvements with an estimated value of more than $50 million.

American admitted no wrongdoing as part of the settlement, court documents said. It also covers safety claims against subsidiaries including American Eagle and Executive Airlines.

The proposed settlement requires approval by the Bankruptcy Court. A hearing is tentatively set for May 30, with objections due to the court May 23.

Also Thursday, AMR received Bankruptcy Court approval to borrow up to $3.25 billion as it prepares to exit bankruptcy protection.

The company had asked for the financing to reorganize and repay debt. The loans, approved by Bankruptcy Judge Sean Lane, will be backed by airport gates, takeoff and landing slots, and routes between the U.S. and South America, according to court documents.

AMR is preparing to merge with US Airways this year upon emerging from bankruptcy. The merger still needs to be approved by government antitrust regulators and US Airways shareholders.

Separately, American announced that it reached a new distribution deal with Amadeus.

Under the agreement, travel agencies that use Amadeus can continue booking tickets on American through the Amadeus system.

The companies will also work on a technology connection that will let travel agents book ancillary items such as Main Cabin Extra, which gives passengers more legroom and allows them to board the flight in the first group for an extra fee.

“Amadeus has shown an ability to adapt its technology to our business needs, and we appreciate this spirit of partnership,” said Derek DeCross, American’s vice president of global sales.

American has been trying to lower the booking fees it pays global distribution systems like Amadeus and Sabre. The carrier has also been working on technology for travel agents to directly connect to its reservation system.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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