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American Cancels Its Flights for Inspections

Updated from 3/26/08



AMR (AMR) subsidiary American Airlines canceled more than 10% of its schedule Wednesday in order to reinspect the wiring on its MD-80 fleet.

The inspections, carried out on a rolling basis throughout the day, will cause about 300 cancellations, American said. The carrier operates around 2,300 daily mainline flights, as well as 1,700 flights on regional partner American Eagle. The mainline fleet includes roughly 300 MD-80s, all of which have been or will be reinspected.

The reinspections reflect enhanced auditing of aircraft maintenance records by the Federal Aviation Administration, a step that followed ongoing Congressional review of a 2007 move by Southwest (LUV) to defer fuselage inspections on 46 Boeing 737s.

In American's case, the airline said that during an audit, a joint team of airline and FAA inspectors raised questions about how a certain bundle of wires is secured to the MD-80.

"We are reinspecting the MD-80s to make sure the wiring is installed and secured exactly according to a prior directive," the carrier said, noting that the process can take several hours per aircraft.

American shares were trading down 10.6% to $8.61 Wednesday, in line with the Amex Airline Index, as oil prices gained.

In another ongoing review, which is unrelated to the audits, the FAA has ordered inspections of 652 older Boeing (BA) 737 jets for faulty bolts that could lead to fuel leaks. That inspection follows an August incident in which a fire destroyed a China Airlines 737 after a bolt from the right wing slat broke free and penetrated the fuel tank. Those inspections by various airlines must be completed by July 8.

Know What You Own: LUV operates in the airline industry, and some of the other stocks in its field include JetBlue (JBLU), Delta (DAL), Continental (CAL) and US Airways (LCC). These stocks were recently trading at ($5.56, -0.18%), ($8.70, -0.46%), ($18.90, -2.02%) and ($8.32, -2.46%) respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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