Alaska Airlines Reform Plan Approved; Internal Controls At Other Major Carriers, Regional And Cargo Airlines To Be Examined

Air Safety Week, July 3, 2000

A reprieve from strangulation has been granted to Alaska Airlines [ALK]. However, a second phase is unfolding affecting the entire industry.

Like a searchlight beam opened to cast a wider light, other carriers will be subject to similar inspections that led the Federal Aviation Administration (FAA) to threaten to shut down Alaska Airlines by denying it the ability to maintain its airplanes.

The specter of that action, if carried out, would have led to the slow shrinkage of Alaska, at the rate of about half a dozen airplanes per month, which is the rate at which they must be cycled through heavy maintenance to maintain fleet strength of about 90 aircraft (see ASW, June 12).

The carrier's June 9 response to the FAA's June 2 "show cause" letter outlined corrective actions that the FAA deemed sufficient for the carrier to continue performing in-hangar maintenance on its airplanes. "The ineffectiveness of its programs was unacceptable. Alaska has responded adequately," declared Nick Lacey, FAA Flight Standards director. "Remember, we said give us a good reason not to close your maintenance program," Lacey added.

Nevertheless, the carrier remains under the shadow of intensified FAA scrutiny, and it faces fines that may well run into the seven-figure range for inadequate record keeping. This estimate of penalties running into the 7-figure range is based on the FAA's June 21 proposed fine against American Airlines [AMR] of $698,000 for flying two Fokker F100 jets 113 times with improper circuit breakers (20 amp. vs. the required 25 amp). Alaska's sins are greater, given the belief among some industry experts that the FAA had sufficient evidence to ground the airline outright. Grounding would have been a significantly tougher action than threatening to strip the carrier of its authority to perform maintenance.

Irrespective of penalties, Alaska must successfully clear three additional hurdles to retain, without restriction, its operating certificate. Its corrective action plan was conditionally accepted after a team of 11 FAA experts, including the primary maintenance inspector (PMI) assigned to another carrier, scrutinized Alaska's proposed reforms. Alaska's corrective actions include hiring 130 additional mechanics and filling two previously vacant yet critical positions: the directors of maintenance and operations. Lacey characterized the sum of Alaska's actions as "a complete revision of maintenance policies and procedures."

Four Hurdles to Clear

The goal is to ensure that Alaska's improved internal controls work effectively over the long term.

Hurdle 1: June 9, the due date for Alaska to respond to the FAA's June 2 "show cause" letter. Nick Lacey, director of FAA Flight Standards, declared, "The plan, quite frankly, looks good."

Hurdle 2: Mid-July (assume July 14), the FAA will verify that the carrier is putting the people and programs into place contained in its action plan. Many significant actions occur in the latter half of July, and the FAA wants to make sure the carrier is on track. "We do not want to get into a more serious situation," Lacey intoned.

Hurdle 3: 90 days later (assume Friday, 13 October), FAA inspectors will determine if the carrier's programs are working.

Hurdle 4: 6 months later (assume April 2001), FAA inspectors will conduct a final analysis. Lacey explained that the goal is to ensure that "these programs are working over the long term." Source: FAA

Broad Implications

An FAA team also will examine the other nine of America's 10 biggest carriers, of which Alaska was one. Those carriers can expect the visiting inspection teams to examine the same areas, processes and functions that led to some 60 findings of the operation at Alaska Airlines. In this respect, the FAA's June 20 final report serves as a checklist for other carriers to prepare for these upcoming inspection visits. Beginning July 17, the team is slated to spend 120 days examining other carriers. Lacey said the inspections are to answer three questions regarding oversight and internal controls:

* "What have you said you are going to do?"

* "Are you doing it?"

* "Is it effective?"

The goal is to identify pro-active "best practices" throughout the industry. Lacey said the intent is to "get out of reacting to disasters" by focusing on the effectiveness of each operator's internal controls. If a carrier has a good reliability program, Lacey said, "We shouldn't see what we saw at Alaska." He wants to be assured that reliability programs, under which inspection intervals can be extended, are "not just cost-reduction programs." Some carriers, for example, inspect the jackscrew assemblies on their MD-80s roughly every 1,000 hours, while others may extend the interval to significantly more than twice as many hours.

Of greater importance, the special FAA team will be looking at the effectiveness of each carrier's Continuing Analysis and Surveillance System (CASS). In its "show cause" letter to Alaska, Lacey pointedly recalled that the FAA made a "major issue" of the need for Alaska to overhaul its CASS activity.