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American Airlines hit with huge fine

An American Airlines flight awaits passengers in New York.

TEXT OF STORY

BILL RADKE: Federal regulators plan to slap a $25 million penalty against American Airlines for canceled flights and maintenance problems from 2008. The Wall Street Journal reports this morning the fine is a record -- almost three times higher than the Federal Aviation Administration has ever proposed. Joining us live from Philadelphia, Marketplace's Gregory Warner. Good morning.

GREGORY WARNER: Good morning.

RADKE: So, if this is for problems in 2008, why is the fine just coming now?

WARNER: Well, the FAA said that American Airlines hadn't fixed electrical wiring around the landing gear on 300 of its MD-80 jets. American ended up grounding those planes for a few days in 2008, causing thousands of cancellations. But since then, American has always maintained that the FAA was overreacting and the code violations were minor. Last year, the FAA did a system-wide audit of the airline. Actually, at one point, things got so heated that the inspector was allegedly ordered off airline property. So I talked to one of my sources about this -- David Learmount, he's the operations and safety editor at Flight Global. He says the FAA has been spending their time building their case.

DAVID LEARMOUNT: If you're going to make a fine as big as that, you have to be very legally sure of your position because if it doesn't have a very solid legal backing, American will successfully challenge the attempt.

RADKE: And Gregory, what kind of signal does a fine this big send to the rest of the industry?

WARNER: Well, the FAA hasn't confirmed the size of this fine. But if it's somewhere around that $25 million number, then the FAA definitely hopes to show that it's got the big stick. We should mention, though, that in the past these fines do get negotiated down.

RADKE: OK. Marketplace's Gregory Warner, thanks a lot.

WARNER: Thanks a lot.

About the author

Gregory Warner is a senior reporter covering the economics and business of healthcare for the entire Marketplace portfolio.

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