Eastern Agrees to Pay Record Fine : Airline Had Balked at $9.5-Million Penalty Levied by FAA
Eastern Airlines has agreed to pay a record $9.5-million fine, by far the largest civil penalty ever imposed on a U.S. air carrier, which it had refused to pay last year for 78,372 alleged maintenance and record-keeping violations, the government said Tuesday.
The settlement was announced by the Federal Aviation Administration and the Justice Department, which became involved in the case after Eastern initially resisted paying the fine on grounds that the charges and the amount of the penalty were unfair.
Eastern decided to pay the fine because the penalty and “possible litigation were clouding both Eastern’s outstanding safety record and Eastern’s substantial maintenance improvements,” said Phil Bakes, who became Eastern’s president and chief executive after it was acquired by Texas Air last year.
“One of our highest priorities since coming to Eastern has been to resolve Eastern’s differences with the FAA,” Bakes said in Miami. He insisted that the airline is operating “to the highest degree of safety” and said it spent $20 million of its $440-million maintenance budget last year on “safety and reliability enhancement programs.”
FAA Administrator Donald D. Engen said in a statement that “the FAA is assured that the airline is operating and will continue to operate safely.”
The FAA alleged that Eastern had deferred maintenance, failed to make inspections or repairs ordered by the agency, permitted flights without required equipment and failed to keep adequate records. In addition, Eastern was accused of continuing to use a landing gear linkage that the FAA had condemned in 1968 on some of its Boeing 727 aircraft.
Under terms of the settlement, Eastern will pay $1 million immediately and the remaining $8.5 million by Dec. 31, 1989. Previously, the largest fines for safety violations by airlines were a $1.95-million penalty against Pan American World Airways and a $1.5-million fine against American Airlines.
The FAA announced the fine last March after conducting an intense two-month investigation of the airline’s maintenance and record-keeping practices in December, 1985, and January, 1986.
Eastern took immediate steps last March to announce a 53-point program to make corrections, the bulk of which were completed within three weeks, an FAA official said.
Last May, former Eastern Chairman Frank Borman said the airline had offered to pay $3.5 million to settle the enforcement action but the FAA rejected the offer.
Eastern contended that the FAA’s $9.5-million penalty was unreasonable and that the main issue was one of record-keeping and paper work, rather than of safety violations.
When the airline did not meet the deadline for payment last May, the FAA turned the matter over to the Justice Department and urged the maximum fine, $78.3 million.
