American Feels Pinch of FAA-Ordered Groundings

American Airlines had plenty of financial problems, even before this week. A slumping economy and soaring fuel costs cut into earnings. Now, lost revenue from thousands of grounded flights could be a major hit to the nation's largest airline.

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ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

American Airlines says it's hoping to have all its jets back in the air by Saturday night. Until then, the airline continues to cancel flights more than 900 today alone, and over 500 flights are expected to be cancelled on Friday. American was one of several airlines forced to ground its M-D80 planes after the FAA cited them for wiring flaws. More than a quarter of a million passengers have been inconvenienced and even stranded as a result.

NPR's Jim Zarroli reports.

JIM ZARROLI: Throughout the country, it was another day of missed connections and ruined vacations. Bill Beehart(ph) founds himself stranded in Birmingham, Alabama today, unable to get back home to Dallas after a business trip.

Mr. BILL BEEHART (Passenger, American Airlines): It's a huge inconvenience. You know, that means I've got to change all of my business plans and everything for the next few days.

ZARROLI: For Samuel Mishra(ph) of Bangalore, India, nothing was working out as planned. He was supposed to be heading to Jacksonville, Florida, for a vacation. Instead, he was stuck in Chicago.

Mr. SAMUEL MISHRA (Passenger, American Airlines): There are no flights available so - which was a real pain, because, you now, we thought we would go hit the beaches. But then, you know, here we are stuck in this inclement weather, Chicago.

ZARROLI: Mishra was making the best of it, taking the time to see the city on American Airlines' dime. Over the past few days, American has been paying the food and lodging expenses for tens of thousands of stranded passengers, says airline spokesman Mary Francis Fagan.

Ms. MARY FRANCIS FAGAN (Spokesman, American Airlines): If a passenger was forced to stay overnight in a hotel, we're saying we'll take care of those obligations. We'll pay for that. Please understand we really do appreciate what we've done, and that we've inconvenienced people that we have to be incompliant. I mean, that's just the way it is.

ZARROLI: The Federal Aviation Administration has forced American to cancel some 2,500 flights this week, and some other airlines like Delta and Midwest have also been forced to ground a few planes. Aviation consultant Mike Boyd says the FAA's order is going to cost American many millions of dollars this year.

Mr. MIKE BOYD (Aviation Consultant, Evergreen, Colorado): We have 300 airplanes on the ground that are not generating revenue. And now we have to rebook passengers, and we're rebooking passengers at the time when everything going forward is full anyway. So, that's going to be a real challenge for the airline industry.

ZARROLI: And Boyd says when you factor in the other airlines now canceling flights, this whole experience is likely to be a huge financial setback for the airlines.

Mr. BOYD: Industry wide this is like a mini-9/11. And for American Airlines, that's almost half of their fleet. It's going to be tens of millions. Industry wide might be hundreds of millions.

ZARROLI: Boyd is a big critic of the FAA's move. He says the wiring problem cited by the agency isn't a major safety problem and could've been addressed at a more relaxed pace. By grounding so many planes, Boyd says the government is likely to aggravate some of the other problems facing the industry right now, like the weakening economy and huge increases in fuel costs.

Mr. BOYD: There isn't an airplane flying that was designed for $100 a barrel of oil, so they've got to work on getting revenues up and costs down. And this FAA stunt does just the opposite.

ZARROLI: Richard Aboulafia of the Teal Group agrees. He says the lost of revenue that the industry is experiencing right now will be tough to makeup later.

Mr. RICHARD ABOULAFIA (Vice-President, Analysis, Teal Group): In the best of times, airlines have razor-thin profit margins, so disruptions like this can mean the difference between profit and loss for a quarter.

ZARROLI: And Aboulafia says the industry will pretty much have to get through this crisis on its own.

Mr. ABOULAFIA: Well, unlike the 9/11 shutdown, there's unlikely to be any government cash that helps prop up the bottom line.

ZARROLI: The impact of the flight cancellations on American's bottom line could be seen in the airline stock price this week. It fell 11 percent on Wednesday, but it rebound at somewhat today after the company said it expects its planes to be back in the air within a few days.

Jim Zarroli, NPR News.

NORRIS: You can find out more about the flight delays and what to do if your flight got cancelled at npr.org.

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Grounded: What's Behind the U.S. Flight Delays?

An American Airlines arrivals list. The airline has canceled around 2,500 flights since Tuesday i i

An American Airlines arrivals list at New York City's LaGuardia Airport on Thursday. Mario Tama/Getty Images hide caption

itoggle caption Mario Tama/Getty Images
An American Airlines arrivals list. The airline has canceled around 2,500 flights since Tuesday

An American Airlines arrivals list at New York City's LaGuardia Airport on Thursday.

Mario Tama/Getty Images

American Airlines has canceled thousands of flights since Tuesday, disrupting travel plans for hundreds of thousands of people. Here, a guide to the safety issues involved and how travelers can navigate the disruption.

Why is American canceling so many flights?

American has grounded the flights while it inspects its fleet of MD-80 airplanes to make sure the wiring in the wheel wells is properly protected from chafing. Unprotected wires potentially could result in a short or spark that might ignite, explains Federal Aviation Administration spokeswoman Laura J. Brown. "It's a very low-probability risk, but it's an extremely high-consequence issue," she says.

Is this a new safety concern?

No. Brown says the FAA first asked American and other airlines to check the MD-80s in their fleet back in 2006. But the issue took on new urgency in March, when Southwest Airlines got threatened with a penalty of $10 million for continuing to fly while failing to address problems with its fleet of 737s. This prompted the FAA to initiate a check on all U.S. airlines — more than 100 carriers — to ensure that they are complying with the agency's safety directives.

Why are the delays hitting American so hard?

Because it has 300 MD-80s in its fleet — the most by far of any U.S. airline.

Are other airlines canceling flights for safety concerns?

Yes. Alaska, Allegiant Air, Delta and Midwest Airlines also use MD-80s. All of them have canceled flights to check on the wheel-well wiring.

Southwest Airlines previously grounded planes to check on fatigue cracking in its fleet of 737s. The company says it now has no related delays or cancellations. And United voluntarily canceled flights earlier in April to check the fire-suppression system on its 777s.

Are American's canceled flights causing a "domino effect" of delays and cancellations?

No. But a spokesman says Southwest has seen a spike in last-minute bookings — likely from people whose flights were canceled by other carriers.

And even though it filed for bankruptcy protection on Friday, Denver-based Frontier Airlines still expects to operate normally, with no cancellations.

Are flights in other countries also being affected?

"At this point, it doesn't appear to be a widespread problem abroad," says Marisa Thompson, an equity analyst for Morningstar. "The foreign carriers, from what I've seen, have not been dealing with the same types of issues because their fleet is much younger."

If you're planning to fly abroad on a domestic airline, you shouldn't experience the same kind of delays. Thompson says companies like American and United are using younger planes for overseas flights.

What if my flight got canceled?

The vast majority of cancellations have been on American. A notice on American's Web site says travelers whose flights were canceled can request a full refund or rebook. The airline is also allowing customers who were scheduled to fly on any MD-80 flight between April 8 and April 11 to rebook their flight. Passengers must initiate travel by April 17 to avoid paying a fee.

Travelers who had an overnight layover because of a flight cancellation should e-mail American about compensation for hotel stays.

How many travelers have been affected?

At least 250,000 passengers were affected by this week's cancellations on American Airlines alone. The carrier canceled nearly 600 additional flights on Friday, bringing total cancellations for the week to nearly 3,100.

When will the cancellations end?

American said cancellations will continue through Saturday.

Are all these flight delays behind the recent fare increases?

No. A number of airlines increased their fares by substantial margins this week. The fare hikes are an attempt by carriers to pass along more of their costs — especially rising fuel costs — to consumers as they struggle to stay in business.

The higher fares are "unrelated to the main inspections and the grounding of the aircraft," says Chris Mainz, a spokesman for Southwest. "It's a direct result of the record-high fuel costs."

Which airlines raised their fares?

On Friday, American joined the other five major airlines in the U.S. — United Airlines, Delta Airlines, Continental Airlines, Northwest Airlines and U.S. Airways — in raising airfares by up to $30 roundtrip, according to Bestfares.com, a travel Web site that tracks airfares. The most expensive increases are for flights that are coast-to-coast.

Southwest Airlines has raised roundtrip fares $4 and $12.

With reporting by Kathleen Schalch and Joshua Brockman. The Associated Press contributed to this report.

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