Behind the Chaos in the Skies


The FAA says flying has never been safer. But critics contend that the spate of plane groundings shows airlines are finally getting serious about safety

For air travelers, the skies have turned particularly unfriendly. On Apr. 2, United Airlines (UAUA) grounded its 52 Boeing 777s for safety tests. That followed a spate of flight cancellations in the last month, including groundings by American (AMR) and Delta (DAL).

Amid a firestorm over the government's oversight of the industry, airlines are stranding passengers in the name of safety. On Apr. 3, two Federal Aviation Administration inspectors told lawmakers they were threatened with dismissal when they found fuselage cracks in the Southwest Airlines (LUV) fleet. The FAA ultimately fined Southwest $10.2 million and began an industry audit of 10 airlines Mar. 13.

Fears of more fines—and of a damaged reputation with customers—have led airlines to be more vigilant with inspections in recent weeks. "With the FAA under the microscope and the industry in panic mode, airlines are cooperating," says Kevin Mitchell, chairman of the Business Travel Coalition, a consumer advocacy group. "But the momentum is only a good thing if it's a sustained commitment to safety, and not just a show for the [Apr. 3] hearing."

At the hearing, FAA and airline representatives faced severe grilling about airplane inspections and whether the agency practices sufficient oversight. The hearing was scheduled by Rep. James Oberstar (D-Minn.), who contends the FAA and airlines have a far too congenial relationship that sacrifices safety.

Airlines, FAA Pledge Vigilance

In testimony released ahead of the hearing, Southwest Chief Executive Gary Kelly and Chairman Herb Kelleher said the airline has "a powerful personal motivation" to be vigilant about safety because employees and their families fly most frequently. "And, in addition to being a legal, moral, and personal imperative, being unsafe would be the worst business strategy any airline could have," they said. To defend its own safety record, the FAA on Apr. 2 held a press briefing at Reagan National Airport in Washington. FAA officials said as a result of the agency's audit, four U.S. airlines are under investigation for failing to comply with federal aviation regulations. Officials would not name the carriers in question. The probe will take several months to complete.

At the briefing, Acting Administrator Robert Sturgell said the FAA's audit is evidence of the agency's effectiveness at maintaining air safety. He said the FAA performed "almost 2,400 audits of our airworthiness directives," and found a 99% compliance rate. "What this means is that the fact that we are currently experiencing the safest period in aviation history is no accident or miracle," said Sturgell. "It is the result of an entire industry making safety their driving focus."

Outsourcing Maintenance Work

Consumer advocate groups and labor unions disagree. The Business Travel Coalition has joined forces with the International Brotherhood of Teamsters to highlight chronic safety problems in the U.S. airline system.

Mitchell says that moves by airlines to outsource and offshore repair and maintenance work, coupled with insufficient oversight of the industry by the FAA, are endangering passengers. According to Mitchell, aircraft maintenance outsourcing has increased from 22.8% of maintenance expenditures for major U.S. airlines in 1995, to 45.9% in 2006. He says that outsourced operations do not receive the same level of scrutiny from the FAA.

"The biggest problem is the lack of a single high safety standard," says Mitchell. "Outsourcing isn't likely to go away, but as it explodes there must be increased oversight."

Safety: Another Burden?

Also at the Apr. 3 hearing, Southwest said it had decided not to outsource some maintenance work to Aeroman in El Salvador in June, as it had planned. "The decision to alter our plans with respect to Aeroman was made entirely on the basis that given the intense scrutiny being given to our entire maintenance operation, top to bottom, now was not the time to add complexity with significant changes to our maintenance operations," the company said.

The increased scrutiny is coming at an already-harrowing period for most of the major carriers. Soaring jet fuel costs and worries about a possible recession shrinking passenger demand have slammed airline stocks for most of the year. So far in 2008, American Airlines' parent AMR has lost just under a third of its value, with shares closing at 9.59 on Apr. 2, while Delta is off 41% this year, to 8.80. Continental is down 11%, to 19.84, and United Airlines' parent UAL has shed 38%, to 22.04.

Herbst is a reporter for BusinessWeek.com in New York.

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