FAA proposes record $10 million fine for Southwest Air

By John Crawley

WASHINGTON (Reuters) - U.S. aviation regulators on Thursday proposed to fine Southwest Airlines Co a record $10.2 million for allegedly failing to inspect planes for structural cracks.

The Federal Aviation Administration (FAA) said Southwest continued to fly uninspected aircraft even after the carrier notified the agency that it had missed a mandatory deadline to complete the work.

"The FAA is taking action against Southwest Airlines for a failing to follow rules that are designed to protect passengers and crew," said Nicholas Sabatini, the agency's associate administrator for safety.

The FAA said there were no safety incidents related to the missed inspections of Boeing Co 737 aircraft but the allegations and the fine amounted to a startling mark against the airline that has been an industry model for efficient operation for nearly 40 years.

"This is going to hurt Southwest in the image of the public," said Richard Gritta, a professor of finance and transportation at the University of Portland. "This is not just a toilet that's not functioning. This is serious."

Southwest said it acted promptly and responsibly and that flight safety was never compromised. It said the inspections were routine and redundant.

After discovering the missed inspection area, Southwest said it promptly reinspected the aircraft. It said the FAA approved of its actions, which were supported by Boeing.

Shares in Southwest, the biggest U.S. carrier by market value, closed down 3.8 percent to $12.50 on the New York Stock Exchange on Thursday, burdened by soaring oil prices.

UNINSPECTED PLANES

Southwest flies only 737 planes and the inspection program was part of an industry-wide FAA initiative to examine older planes more closely for signs of structural fatigue.

While commercial jetliners are built to fly for decades, the repetitive fuselage inspections imposed in 2004 are aimed at finding any minor skin cracks or other structural issues that occur with heavy use. They usually can be fixed easily.

But the FAA asserted that Southwest operated 46 planes on nearly 60,000 flights while "failing to comply" with the inspection requirement between June 2006 and March 2007.

The carrier continued for eight days to operate the same planes on more than 1,400 additional flights after discovering last March that it missed the inspection deadline, the FAA said. This breach, the FAA said, prompted the heavy fine.

Cracks were found on six planes after the inspections were completed, the FAA said.

Southwest said it acted promptly once it discovered the lapse and reported it to the FAA.