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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American Feels Pinch of FAA-Ordered Groundings

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American Feels Pinch of FAA-Ordered Groundings

American Feels Pinch of FAA-Ordered Groundings

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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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