Airline safety concerns continued to grow, with American Airlines canceling more than a thousand flights yesterday and grounding three hundred of is planes after nine of them failed newly aggressive Federal Aviation Administration inspections of their wiring. American will have about 900 more cancellations today, approaching half of the carrier’s flights, says The Wall Street Journal on B1. The Los Angeles Times says more than 100,000 travelers were affected yesterday.
The American planes had been grounded just two weeks ago for similar concerns, and the hometown Dallas Morning News quotes an unnamed federal official saying the FAA didn’t tell the airline at the time that it was not in compliance.
It was the latest fallout from a congressional whistleblower investigation of lax FAA oversight of aircraft safety that began last month with allegations that inspectors let Southwest Airlines planes keep flying despite missing safety inspections.
As if the airlines could afford this. The Financial Times reports that American is paying for its stranded travelers’ hotels and food and giving them $500 travel vouchers.
The New York Times says on page one that the regulatory climate has shifted sharply from the post-9/11 solicitude meant to keep the struggling airlines above water, err, the clouds.
Still, former F.A.A. officials say there has long been concern over the warmth between agency inspectors and the airlines they are charged to investigate.
On one hand, the flying public can be helped if inspectors are thoroughly familiar with an airline’s record. But such familiarity can also cause inspectors to give an airline some breaks, one official said.
On C1, the NYT says this is a long time coming:
American Airlines and its domestic competitors have been scaling back maintenance spending for years. Some airlines sent work overseas in search of cheaper labor. Some also cut wages of mechanics in the United States and reduced their number. Others quickened the pace of work at maintenance facilities.
“They let too many people go,” said Kevin Cornwell, an MD-80 captain at American who is also a pilots union official. “They sold spare parts years ago to raise cash. Things don’t get fixed as fast.”
In a timely story, the NYT says (also on C1) that a pilot shortage is lowering standards at airlines and that “regional airlines have had to reduce hiring standards drastically.” A few years ago, they required new pilots to have a minimum 1,500 flight hours. Now it’s just 500.
Bank fears surge
The FT on page one says money markets are “signaling renewed fears about the financial strength of banks,” a sign that the three-week pause in the panic may be over for now.
The paper says the so-called Libor spread—a measure of how much banks are charging to lend to each other overnight—has almost returned to the high levels it reached before the Bear Stearns bailout.
Tensions are rising in the money markets in spite of the injection of huge amounts of liquidity into the banking system by central banks. Traders say market conditions suggest the Bear rescue has not completely alleviated worries about counterparty risks. Until confidence is restored, the availability of credit to investors and companies will be restricted, potentially hurting the broader economy.
Yahoo v. Microsoft, round III
The WSJ says on A1 that Yahoo and AOL are “closing in on a deal” to merge their Internet properties in an effort to block Microsoft’s $45 billion bid for Yahoo. The Journal and the NYT report that Microsoft is in turn talking with WSJ owner News Corporation about a joint bid.
Time Warner would give cash and the AOL portal (but not the dial-up business) to Yahoo in exchange for 20 percent of the newly inflated operation, valuing AOL at $10 billion and merging two top-ten Web sites. Bloomberg quotes investors saying the moves will likely force Microsoft to up its already high bid, but that it will ultimately win. It seems unlikely that Yahoo shareholders would spurn a bid that valued the shares at a 60 percent premium and see the shares collapse in the short term in the hopes of a better long-term return.