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Alaska Air faces censure
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June 2, 2000: 4:16 p.m. ET
FAA mulls forcing carrier to contract out maintenance in wake of recent crash
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NEW YORK (CNNfn) - The Federal Aviation Administration proposed Friday to suspend Alaska Airlines' authority to conduct heavy maintenance on its own aircraft.
The news sent shares of Alaska Air Group (ALK: Research, Estimates), which operates the airline, down 2-1/8 to 29-13/16 shortly before the close of trading Friday.
Alaska Air Group reported just over $2 billion in revenue last year.
The FAA proposal follows its lengthy inspection of Alaska Airlines' maintenance practices, which found serious breakdowns in record keeping, quality control and other areas.
If the airline's maintenance authority is suspended, the company would have to contract out to other airlines to perform major maintenance jobs such as overhauling engines and replacing important parts.
"We understand the FAA's oversight obligation, and we look forward to demonstrating our continuing commitment to do everything we can to assure the highest level of safety in the airline business," John Kelly, Alaska Airlines' chairman and chief executive officer, said Friday during a press conference at the company's Seattle offices.
Kelly said the company has already addressed most of the issues raised by the FAA as they became known.
"We have viewed this as an opportunity not only to continue to improve our operations, but also to continue to prove to the FAA, the traveling public and ourselves that the changes we've already instituted are working and are making us a better airline," Kelly said. "This announcement today serves as formal notice to us to institutionalize those changes during the next 30 days. We're confident that we'll be able to prove that we've done that."
The FAA investigation began after Alaska Airlines flight 261 crashed into the Pacific Ocean off Los Angeles last Jan. 31, killing all 88 people aboard. That accident remains under investigation by the National Transportation Safety Board.
In February, the NTSB indicated that a key part on the aircraft that some believe caused the deadly crash was scheduled to be replaced during a routine maintenance check in 1997, but later was cleared to remain in the jet.
 "This is definitely not a positive for Alaska Airlines," said Rob Milmore, an analyst with Arnhold and S. Bleichroeder. "I think it's something they'd be able to address. They probably were aware that something like this was probably coming from the FAA."
Milmore said the FAA move, which is not without precedent, will put some volatility into Alaska Air's stock in the short term, but that both sides likely will come up with a workable solution.
In March, 64 mechanics at Alaska Airlines' Seattle maintenance base wrote a letter to company officials saying they had been "pressured, threatened and intimidated" into cutting corners on FAA regulations on repairs and parts. A senior airline manager was placed on administrative leave following that letter.
The FAA's investigation focused primarily on Alaska Airlines' maintenance and operations systems at Seattle and Oakland, Calif. In addition to its other findings, the FAA discovered that maintenance workers are not following FAA-approved procedures.
Alaska Airlines has seven days to file additional information with the FAA. Following a review of that information, the FAA will propose action and the airline will have 30 days to comply.
About 6-to-7 percent of the airline's fleet of 89 aircraft is in heavy maintenance in any given month, the FAA said.
Alaska Airlines has 30 days to appeal the FAA's ruling. 
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Alaska Airlines
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