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WARNING!

Bogus parts have turned up in commercial jets. Where's the FAA?

One minute, Edward Zwig, an Atlanta periodontist on a trip to Miami, was reading the paper in an aisle seat, waiting for takeoff from Atlanta's Hartsfield International Airport. The next minute, he was fighting his way to the emergency chutes amid screaming fellow passengers as the cabin of the DC-9 filled with smoke. "After we got out, we could see flames dancing around the fuselage," recalls Zwig, who was one of 57 passenger on a ValuJet flight last June when the No.2 engine exploded. "We actually stood on the runway and watched the plane burn." The explosion sent metal fragments flying through the cabin. Flames and smoke quickly followed, injuring several passengers as well as a flight attendant, who suffered severe burns.

The cause: an engine that had been overhauled and later sold to ValuJet by a repair station in Turkey that lacked FAA approval. The station denies responsibility, but investigators found that the engine contained a cracked and corroded compressor disk. The excessive corrosion had been plated over during the overhaul. ValuJet says the engine's documentation appeared to be in order and the defect was undetectable. When the engine revved up, the disk fractured, causing the engine to explode. Had that happened in midflight or in a more crowded plane, the results could have been catastrophic.

The accident caused no fatalities--unlike last month's crash of ValuJet Flight 592 into the Everglades. But in some ways, it was more ominous, because it highlights a safety issue that affects every carrier in the air: the growing stream of substandard or bogus parts that are finding their way into commercial aircraft. In a porous and underregulated market, the selling of substandard replacement parts for planes can be even more profitable than trafficking in illegal drugs. Bogus parts are fast becoming an underworld growth industry--and, many airline officials, FAA inspectors, and law-enforcement officers fear, a catastrophe waiting to happen.

You will not find bogus parts listed as the cause of any accidents in the publicly available

National Transportation Safety Board database. But that's not because they're not a problem. The FAA allegedly pressured the NTSB to stop listing bogus parts in its database as a possible cause of crashes, according to four independent sources: a senior FAA official, as well as sources in the Transportation Dept., the airline industry, and congressional staff. Instead, the category has been changed to the more innocuous-sounding "unapproved parts." The FAA says that it discussed the change with the NTSB, but did not pressure the board. The NTSB denies it was pressured. The sources say the FAA also changed its own database last year to show far fewer accidents attributed to bogus parts. David Fox, supervisor of information management at the FAA, says the agency reconfigured the database to make it more accurate. Some accidents attributed to bogus parts, for example, were actually the result of a legitimate part used incorrectly, Fox says.

But a three-month BUSINESS WEEK investigation of the aircraft-parts trade has revealed that bogus parts, including fakes, used parts sold as new or refurbished, and new parts sold for unapproved purposes, have found their way into the inventory of every major commercial airline in the country. "I've got bad parts," says the head of quality control at a U.S.-based discount airline. "We've all got 'em, but who's going to admit it and lose his job? If the American public knew what was out there, it'd scare the s--- out of them." Not even Air Force One is exempt. Recently, fire extinguishers intended for the President's plane were found to be falsely certified by a repair station. The station pled guilty to making false statements to the FAA.

Rather than confront the problem, the FAA appears to have orchestrated what outside critics and its own inspectors have described as a coverup designed to hide the perils of bogus parts from the flying public. This view was echoed by dozens of aviation sources, including Robert Wieckowski, a veteran FAA flight-safety inspector for the Great Lakes Region and regional business agent for Professional Airways Systems Specialists, the inspectors' union. "The airlines won't admit they have a bogus-parts problem," says Wieckowski. "The FAA's top brass is in bed with the airlines, so they won't admit it, either. The flying public is getting screwed."

MORE REPAIRS. In written responses to questions, the FAA said it has made available to the public all of its data related to unapproved parts, except in cases still under investigation. It added: "It has been the FAA's experience that the prevalence of counterfeit parts in the aviation system is quite low." Nevertheless, last fall, the agency released a report from a task force on the issue that outlined a plan to deal with the problem.

Bogus parts are certainly not routinely causing planes to plunge from the sky. Commercial airliners remain one of the safest modes of travel. From 1980 to 1992, according to the National Safety Council, the fatality rate for people traveling by car, for example, was 37 times greater than the rate for people traveling on scheduled U.S. airlines. The real issue posed by bad parts is whether they are eroding the system erected by the industry and its regulators that produced that enviable record of safety. The dangers reach far beyond the U.S. Many airlines in developing nations, particularly in Africa and South America, "knowingly and openly" install bogus parts since oversight of the carriers is virtually nonexistent, says one bogus parts expert with extensive overseas experience.

Numerous FAA inspectors, who spoke on the condition of anonymity, say the problem of substandard parts has grown dramatically in the past five years. That's partly because the nation's aging airline fleet needs more repairs and more parts to keep flying--increasing the opportunities for bad parts to sneak in. And cash-strapped startups outsource much of their maintenance, making it harder for them to keep tabs on the work. Meanwhile, lax oversight makes dealing in bargain-priced bogus parts far less risky than some other lucrative criminal activities. "The potential for a catastrophic accident due to suspected unapproved parts is growing and has entered the stage of critical mass," Howard Davidow, president of Miami-based aviation consultant ETC., testified before Congress last year.

Bogus parts have already caused numerous private and commercial airplanes worldwide to crash, killing dozens of people, according to aviation-industry records. A printout of an internal FAA database obtained by BUSINESS WEEK showed that from 1973 to 1993, bogus parts played a role in at least 166 U.S.-based aircraft accidents or less serious mishaps. Four of those were accidents involving commercial carriers that resulted in six deaths. The actual number may have been far greater, say accident investigators at both the FAA and the NTSB, since it's often impossible to determine the cause of a crash. Sometime in the past two years, however, the FAA edited that database, reclassifying accidents that had been attributed to bogus parts. Fox says many cases were reattributed to "unapproved" parts to reflect unintentional misuse of legitimate parts. In its written response, the FAA could not confirm that any change was made. Sources in the FAA, the Transportation Dept., congressional staff, and the industry say the change was a way to minimize the problem.

LOOSE BOLTS. Outside the U.S., the picture is even more troubling. Crashes include a Convair 580 belonging to Norway's Partnair charter airline, which disintegrated 22,000 feet over the North Sea in 1989, killing all 55 people aboard. The cause? Counterfeit bolts and bushings in the plane's tail, according to Norwegian aviation officials. Investigators, who were able to reassemble the wreckage in a hangar, said the plane's tail shimmied violently as the bolts came loose--and fell off in midair. Lawyers for the now-defunct airline deny the bogus parts caused the crash.

A Louisiana crop duster, Billy Kenney, was killed instantly in 1992 when his plane nosedived shortly after takeoff. Accident investigators found a bogus part in the propeller's pitch-control unit that had been installed by Eugene Shanks, a local mechanic. "As far as I'm concerned, what Shanks did is tantamount to murder," says Clarice Kenney, Billy's widow. Shanks has since pled guilty to making false statements on maintenance documents and paid a $10,000 fine. Shanks' attorney denies that the suspect parts caused Kenney's death, and Shanks has petitioned the NTSB to change its conclusion that bogus parts led to Kenney's crash.

In the past two years, two more fatal crashes of private aircraft have occurred, including a Cessna 175 that crashed on takeoff in September, 1994, in Oklahoma City, killing two people. NTSB investigators found that bogus engine bearings led to the accident. Last October, another pilot was killed in Longmont, Colo., when a bogus propeller failed in midflight.

Opportunities for bad parts to find their way onto commercial jets are myriad. A Boeing 747, for example, has roughly 6 million parts. By the time it's 10 years old, many of those parts will have been replaced five times or more. Airlines, which lose $20,000 to $100,000 in revenue each day their planes are grounded, depend on a largely unregulated network of more than 5,000 dealers to keep spares in stock.

Unscrupulous dealers can launder parts into the system in a number of ways. Before most new replacement parts can be installed, they're supposed to carry paperwork indicating that they were made by an FAA-approved manufacturer. Overhauled parts must be accompanied by a yellow tag or other document saying they have been inspected and repaired in accordance with FAA regulations. That's important, because parts have to meet critical standards for strength and precision, and many are certified for only a specified number of flying hours. But there is no requirement to track who buys and sells a part as it wends its way from manufacturer to the airlines. Anyone with a word processor can cook up fake paperwork, and yellow tags can be bought on the black market for $100 in Miami, a center for the illegal-parts trade, according to Detective Luis Vergera, a bogus-parts specialist at Miami's Metro Dade Police Dept. The FAA says it's the airlines' responsibility to make sure any part they install meets regulatory standards.

One Florida mechanic, Frank "Angel" Molinaris, sold fake FAA yellow tags from the back door of his Florida repair station--until he pled guilty to making false statements in 1993 and was sentenced to 21 months. Molinaris, an approved FAA mechanic, signed the names of jockeys lifted from the sports section of the Miami Herald on yellow tags for numerous bogus flight-critical parts, including anti-ice valves.

Similarly, Russell Fagan, an FAA-licensed mechanic in Porterville, Calif., confessed to signing yellow tags--for a fee--for two parts brokers, who then sold the suspect parts to major carriers, including Northwest Airlines Inc. and Trans World Airlines Inc. Fagan pled guilty last year to making false statements and was fined $5,000. Many of these parts may still be flying; investigators say tracking them down is impossible because in some cases, there's no record of where they were installed. TWA confirmed the problem. Northwest says it replaced all of the parts in its fleet that could have been affected.

Getting a part to attach to the tags isn't hard, either. A decent machinist can whip up a convincing fake of the highly engineered $30 bolts that hold an engine onto a plane for about $3. In other cases, parts that are made and certified for one use are sold for another. "How am I supposed to tell the difference between a $150 bolt and a $2 bolt with forged paperwork?" asks Garry White, manager of quality assurance at Garrett Aviation Services, a leading aircraft-repair company based in Phoenix. "These things can kill."

There's also a brisk business in old parts that are simply shined up and sold back to the airlines, a practice known as a "strip-and-dip" operation. Law-enforcement officials say it's widespread. "I know of people who quit running drugs and switched to aircraft parts because it was more profitable," says Detective Vergera.

EASY BUCK. A dishonest broker can buy scrap compressor blades for jet engines for about $1 apiece. Those blades can then be smoothed, coated, and, with a forged yellow tag, sold as overhauled for up to $1,200 apiece, according to aircraft-parts consultant Peter Friedman. In one case, a repair station rewelded worn-out turbine blades. The blades broke off in operation, damaging the engine on a commuter aircraft. "It's very easy to launder bad parts into the system," says Paul Philip, special agent in charge of the Miami division of the FBI, whose agents have uncovered numerous strip-and-dip operators.

Every major domestic air carrier--including American, Continental, Delta, Northwest, United, USAir, and TWA--has in recent years unknowingly bought unsafe or defective parts, according to court transcripts. The airlines declined to comment on specific cases. In many instances, transcripts show, at least some of the bogus parts were installed. "There's an awful lot of unapproved parts flying around out there," confirms aviation consultant Tony Halsema, Federal Express' manager of technical audit until mid-1994. The airlines say they are aware of the problem and have set up systems to ensure that such parts do not end up on planes. Those systems include buying parts only from approved vendors and making multiple checks during receiving, inspection, and installation. The airlines also say they have backup systems to ensure that if a part fails, safety isn't imperiled.

The FAA usually lumps bogus parts into the far broader category of unapproved parts, the vast majority of which are probably airworthy and simply lack proper paperwork. There are $45 billion in aircraft parts in inventory today, according to Canaan Group, an aviation consultant. The FAA says 26 million parts are installed on airplanes every year in the U.S. Even if only 2% of them have been intentionally substituted with counterfeit parts, as estimated by an internal FAA audit last year, that still leaves more than half a million bad parts installed every year. The FAA says the sample in its audit was too small to extrapolate the prevalence of counterfeit parts.

But even one bad part can be real bad news at 30,000 feet. In 1991, a mechanic at United noticed something odd about what were supposed to be six Pratt & Whitney bearing-seal spacers used in P&W's jet engines--engines installed on Boeing 727s and 737s and McDonnell-Douglas DC-superscript9s worldwide. The spacers proved to be counterfeit, and P&W determined that they would have disintegrated within 600 hours of use, compared with the 20,000-hour service life of the real part. A spacer failure in flight could cause the total failure of an engine. Investigators traced the counterfeits to a broker who allegedly used unsuspecting small toolmakers and printers to fake the parts, as well as phony Pratt & Whitney boxes and labels. The broker, Gary Shafer, pled guilty to trafficking in counterfeit goods and received a seven-month sentence in 1994. United confirmed the incident.

THRIVING MARKET. Then there's the burgeoning and profitable trade in stolen aircraft parts, according to law-enforcement agencies around the country. While stolen parts aren't counterfeits, they lack authentic service histories, so a buyer often can't tell how close they are to the end of their service lives. As a BUSINESS WEEK reporter listened in, a confidential government informant in Miami telephoned three parts brokers in an attempt to sell a stolen constant-speed drive, a crucial component that sells for about $100,000 new. Every broker was interested in buying the piece for prices that ranged from $10,000 to $25,000.

So why doesn't the FAA simply require that all parts be closely tracked? It would be prohibitively expensive. "If the FAA required the airlines to trace every part back to an approved manufacturer, we'd all go out of business tomorrow," says Michael Rioux, vice-president for engineering and maintenance at the Air Transport Assn., an industry group representing 21 large U.S. airlines. The FAA says it recognizes "the need for additional guidance dealing with the issue of documentation of parts" and says it's developing standards to help airlines ensure that any parts they receive are legitimate.

The FAA's dilemma underscores a fundamental conflict that numerous sources claim has led the agency to cover up the problem of bogus parts. As has often been pointed out since the ValuJet crash, the FAA has a dual mission: promoting the business of aviation while ensuring aviation safety. The two goals are often incompatible, and dozens of critics say the FAA has long erred on the side of commerce, with its current administrator, David Hinson, continuing the tradition. "The FAA worships at the altar of industry groups. It's a simple matter of economics. The airlines can't afford to clean up the problem, so the FAA lets the bad parts fly," says the FAA's James Kelly, national branch agent for the flight inspectors' union. He's not the only one concerned. "We believe the FAA is not fully disclosing the extent of the problem and is not aggressively enforcing existing regulations," charges Senator William S. Cohen (R-Me.), chairman of the Oversight of Government Management subcommittee, which held hearings last May on whether unapproved parts pose a threat to aviation safety.

Mary Schiavo, inspector general of the Transportation Dept., the FAA's parent, began investigating the FAA's handling of the problem in 1991, when the agency failed to give her office the cooperation it needed on a bogus-parts case. "We shouldn't have to wait for another plane to drop out of the sky for the FAA to take action," said Schiavo, whose outspoken criticism of the FAA following the ValuJet crash has made her controversial.

The FAA's response to the problem of bad parts has gone beyond simple denial. It strongly discourages its own safety inspectors from addressing the issue and has hindered other authorities' investigations, according to more than 20 sources, including Transportation Dept. investigators, FBI special agents, local prosecutors, law enforcement officers, and numerous FAA employees who have requested anonymity. The FAA has threatened to fire or demote staffers who publicly state that bogus parts are a safety threat, say numerous FAA inspectors. "Acknowledge the problem publicly, and that's the end of your career," says one senior FAA official who works closely with Anthony Broderick, the FAA's associate administrator for regulation and certification as well as the agency's top safety watchdog. Seven FAA inspectors across the country confirmed to BUSINESS WEEK that they had been warned by their supervisors not to report bogus-parts cases. Senator Cohen has asked Attorney General Janet Reno to investigate whether the FAA is trying to identify one of its inspectors who testified anonymously before Congress about problems at the agency. "The top brass at the FAA has been covering up the bogus-parts problem for years. It's larger than anybody can imagine. But if they acknowledge the problem now, they'd have to admit they haven't been doing their job for years and that the airlines aren't safe," says one veteran FAA flight-safety inspector who spoke on condition of anonymity. The FAA said it can't determine whether threats were made to inspectors, but that such threats would be unacceptable to FAA senior management. It also says it is working to improve its support of law-enforcement efforts.

Last year's moves to downplay or eliminate use of the term "bogus part" in the FAA and NTSB databases were part of the same effort to disguise the extent of the problem, say sources in the FAA, the Transportation Dept., and others. Scoffs Schiavo: "That's one way to fix the bogus-parts problem: Just pretend it doesn't exist by changing a computer program."

Industry insiders say the airlines are also eager to avoid publicity on the subject of bogus parts. "If I had reported bogus parts while at Northwest, I'd have been fired," says aviation consultant James Frisbee, Northwest's manager of quality assurance until 1992, who made discreet calls to alert his counterparts at other airlines when he found bad parts rather than report the incidents officially. Other current and former quality-assurance executives at major air carriers, including American and Delta, report the same constraints. Northwest says it expects employees to report bad parts. Delta denies that it restricts its employees from reporting bogus parts. American declined to comment. All the airlines say they have safeguards to detect substandard parts.

The plane-maintenance industry includes four major groups, but the FAA regulates only three: the manufacturers that make the parts, the repair facilities that maintain them, and the aircraft operators that fly with them. The FAA says regulating brokers would be expensive and would probably not deter those brokers bent on breaking the law. Instead, it is working to develop an accreditation program for the the 5,000-plus companies that distribute aircraft parts.

"LUCKY." Although investigations of fraudulent aircraft parts launched by the Transportation Dept.'s office of the inspector general have led to 164 indictments and 130 convictions since 1990, such actions have not proven to be much of a deterrent. Airlines rely on eagle-eyed mechanics or quality-control inspectors to spot unsafe parts that arrive with forged documentation. In 1989, a Delta inspector noticed an odd color on an engine mount cone-bolt nut--the part that fastens the engine to the airplane on Boeing 727s and 737s. He checked further, and Delta determined that the nuts were counterfeit. Although the carriers' names have never been made public, the fake bolts were found--and quickly removed--from planes then flying for several major airlines, including Northwest, according to Frisbee. "It was lucky none of the engines fell off," says Frisbee. Delta confirmed the discovery of the counterfeit bolts.

Americans have long benefited from the best record of aviation safety in the world. For decades, faith in the safety and integrity of the airways was a given. But now, it appears, that system is in serious jeopardy as airlines look to hold down costs, regulators lean toward the imperatives of commerce, and a burgeoning underworld of traffickers seeps into a regulatory vacuum. "Aren't they supposed to make sure these planes are safe?" asks Zwig, the passenger who escaped the burning ValuJet plane in Atlanta. It's a good question.By Willy SternReturn to top


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