UPDATE 2-US proposes $9.2 mln in fines against UAL, USAir

* Proposed USAir fine $5.4 million, UAL's is $3.8 million

* Allegations involve oversight, maintenance

* Airlines can appeal, say they have addressed issues
(Recasts first sentence, adds United comment, previous airline
fines)

By John Crawley

WASHINGTON, Oct 14 (Reuters) - U.S. regulators proposed on
Wednesday $9.2 million in combined safety-related fines against
US Airways Group (LCC.N) and UAL Corp's United Airlines
UAUA.O, which was cited for leaving towels inside a jet
engine for several months.

The Federal Aviation Administration (FAA) proposed a $5.4
million penalty against US Airways for operating eight planes
while out of compliance with certain safety directives or its
own maintenance programs.

The FAA proposed to fine United $3.8 million for allegedly
violating airworthiness rules when it flew a Boeing 737 (BA.N)
on more than 200 flights. The agency alleged United violated
its own maintenance procedures on engine work.

Fines can be reduced in settlement talks, an option
available to both airlines.

The agency has stepped up enforcement against major
carriers over the past year after congressional and other
scrutiny uncovered lapses in oversight.

Airline shares ended broadly higher on improved finances
ahead of quarterly results next week. US Airways shares gained
nearly 1 percent to close at $4.48 on the New York Stock
Exchange and UAL shares rose 7.4 percent to end at $7.82 on the
Nasdaq.

In United's case, the FAA said airline mechanics found two
towels, instead of protective caps, covering openings in an oil
sump inside one of the 737's two engines.

The towels apparently had been in place since the previous
December. Their discovery was prompted by low oil pressure
readings that forced pilots to shut down the engine after
takeoff from Denver on April 28, 2008, and return to the
airport.

United said it immediately reported the incident to the FAA
and is "fully confident" it has taken the right steps to
address the matter.

In the US Airways case, the FAA said it flew eight aircraft
on 1,647 flights between October 2008 and January 2009 that
were not in compliance with required safety inspections. Two of
the directives required inspections of Airbus A320s (EAD.PA)
for cracks on a landing gear part. Lapses also involved Boeing
aircraft.

US Airways said in a statement it would work with the FAA
to "achieve a negotiated resolution" of the agency's proposed
penalty. The incidents cited by the FAA occurred during the
carrier's integration of maintenance systems in 2007 after its
merger with America West.

US Airways said it has completed a full review of its
maintenance programs, and is working with the FAA to correct
any problems.

The fines announced on Wednesday were the largest since the
FAA sought $7.1 million in civil penalties against American
Airlines, a unit of AMR Corp AMR.N, in August 2008 for
allegedly deferring maintenance on two planes.

Southwest Airlines (LUV.N) agreed in March to pay $7.5
million to settle FAA allegations it flew planes without
performing required safety inspections in 2006-07.
(Reporting by John Crawley; Editing by Maureen Bavdek, Steve
Orlofsky and Matthew Lewis)