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FAA orders airlines to inspect older Boeing 737s for fuselage cracks after Southwest incident

The airlines' increased maintenance costs, in addition to soaring fuel prices, are likely to mean higher fares, analysts say.

April 05, 2011|By W.J. Hennigan and Hugo Martín, Los Angeles Times
  • National Transportation Safety Board employees display the damaged fuselage skin section from a Southwest Airlines plane. Cracks were found in five Southwest planes after an emergency inspection was carried out on the airline's fleet after a hole ripped through the Boeing 737's fuselage on Friday.
National Transportation Safety Board employees display the damaged fuselage… (Shawn Thew / European Pressphoto…)

The hole that ripped through the fuselage of a Southwest Airlines Co. jet last week could have lasting repercussions: higher fares.

On Tuesday, the Federal Aviation Administration formally ordered U.S. airlines to inspect their older and most heavily used Boeing 737 jetliners for fuselage cracks.

The FAA directive initially requires the inspections of 80 planes flown in the U.S. by Southwest and Alaska Airlines Inc. But that could expand to as many as 570 planes in the next few years because the FAA wants all older Boeing 737s closely inspected within five days if they've made at least 35,000 takeoffs and landings, or flight cycles. The FAA also called for inspections of Boeing 737s before they reach 30,000 flight cycles.

"Increasing prices on maintenance may make its way down to passengers," said Tom Captain, aerospace analyst with Deloitte. "These types of costs are often borne by the flying public."

Although many airlines lease jets from companies such as Century City's International Lease Finance Corp., the carriers are still responsible for maintenance and inspection costs. And those costs could not come at a worse time because airlines already are struggling with higher fuel costs.

In January alone, U.S. airlines spent $3.95 billion on fuel, a nearly 19% increase over the same period in 2010, according to the Air Transport Assn., the trade group that represents the country's largest airlines.

Fuel represents between 25% and 40% off all operating costs. Every dollar increase in the cost of a gallon of jet fuel increases the cost to the nation's airline industry by $175 million in annual expenses.

"Fuel prices are climbing," said Robert Herbst, founder of AirlineFinancials.com, which provides airline industry analysis of major U.S. carriers. "I expect ticket prices to jump about 15% for the year."

Rising fuel prices are one reason Wall Street seems to have soured on airlines. Shares of AMR Corp., parent of American Airlines, are down 20% since the start of the year, while Delta Air Lines Inc. stock is off 23%. The Standard & Poor's 500 index of blue-chip companies, by comparison, is up 6% on the year.

Southwest shares are down 6%; the stock fell 26 cents Tuesday to $12.20.

Higher fuel costs are already being passed along to travelers, with most major airlines imposing several fare hikes this year. That's on top of domestic and international airfare hikes averaging 7% in 2010, according to a study by American Express.

Estimating a total cost for the inspections called for by the FAA is difficult, said Steve Lott, a spokesman for the Air Transport Assn. Any cost estimate would involve many variables, including equipment costs, employee salaries and other expenses.

Airlines said they were replacing older airplanes on a routine basis and some said they had not veered from that path during the recession. A plane's safety doesn't depend solely upon its age, industry analysts said. Rather, it comes down to how well it is maintained and inspected.

FAA records show that the ruptured Southwest jet had flown 48,740 hours and gone through 39,781 flight cycles that can stress a plane's fuselage, along with regular changes in cabin pressure. That means the jet has made an average of 7.2 flights a day over its 15-year lifetime — well above the industry average of 5.6 flights a day.

Southwest refuses to say how much it lost in revenue when it canceled flights and inspected 78 planes, or about 15% of its fleet. The Dallas company said it found small cracks in just five planes.

The incident is likely to cost Southwest tens of millions of dollars, said Bob Harrell, a New York-based airline industry analyst.

"Southwest is a big airline," Harrell said of Southwest's fleet of 548 planes. "That was a big chunk of their fleet."

Vaughn Cordle, an analyst at Washington-based Airline Forecasts, estimated that canceled flights cost airlines an average of about $7,000 a flight. But the cancellations by Southwest to make inspections would be much lower because most of the passengers on those flights probably would rebook on later flights.

william.hennigan@latimes.com

hugo.martin@latimes.com

Times staff writer Dan Weikel contributed to this report.

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