Federal officials have allowed Southwest Airlines Company (LUV, Financial) to fly planes that have missed inspection provided that the planes are checked in the next five days. On Tuesday, around 128 Southwest planes were grounded after discovering that these planes missed inspections. The 128 planes that were grounded constitute around one-fifth of the company's total fleet.
Reckoner
Southwest Airlines currently has a market capitalization of 28.79 billion. The major U.S. airlines has its headquarters at Dallas, Texas. Founded in 1967, Southwest is known as the world's largest low-cost carrier. The company introduced a new livery and logo in September 2014. Earlier this year, a fine of $1.6 million was imposed on the airline for delays on the second and third of January by the U.S. Department of Transportation. Citing severe winter storm issues, around 16 aircraft were delayed at the Chicago Midway Airport.
Earnings statistics for Q4 2014
The profit of Southwest Airlines for the fourth quarter 2014 was $190 million. Earnings per diluted share was 59 cents, excluding the special items whose value amounted to $214 million. The return on capital, before taxes and excluding special items, was 21.2% for the entire year of 2014. The return on invested capital, given the same conditions, was 13.1% for 2013. The company's operating cost performance was solid. Gary C. Kelly said that its costs were declining every year, and the company would repurchase Southwest common stock worth $955 million.
The issues
The company underwent a similar kind of situation way back in 2009 where a fine of $7.5 million was imposed on them by the FAA. Southwest Airlines at that time had failed to carry out inspections for cracks in the fuselage for dozens of planes. In 2011, a five-foot hole burst open mid-flight, resulting in an emergency landing. Looks like history has now repeated itself. Around 128 of their planes were grounded after discovering that these planes missed inspections. Brandy King, the company's spokesperson, said Southwest canceled about 80 flights on Tuesday. Around 19 more flights would be canceled on Wednesday given that these flights have to undergo immediate inspection.
Source: MamaGeek at the English language Wikipedia via Wikimedia Commons
The main concern was the missed inspections on the hydraulic systems that are used to control the rudder in case the main system fails to function. Brandy King said that the company voluntarily took these planes out of service and notified federal officials immediately. Safety of passengers was the airline's most important priority, she said. She also said that the company was looking into the matter and would take measures to fix the issue quickly. The company said in a statement that once the issue was identified, they initiated maintenance checks and developed an action plan to complete the inspections. The Federal Aviation Administration, on Tuesday night allowed the carrier resume flying while inspections are being carried out with immediate effect. Talks were held between the FAA and Southwest and Boeing (BA, Financial), the plane manufacturers, and the decision was made. The Dallas-based airlines can now operate for a maximum period of five days until checks are complete.
Parting thoughts
According to a statement issued by the carrier, Boeing 737-700 jets were flown without the required inspection. Nearly one-third of the carrier's total 737-700 model jets were grounded. Depending on the layout and the design, the 737-700 jets can accommodate around 137 to 143 passengers. Southwest Airlines has a total of 665 jets. Since the airlines has run afoul of the FAA on various occasions, we hope that the carrier has now learned its lesson.