Investing.com -- Southwest Airlines Company (N:LUV) and U.S. regulators agreed on the terms of a $2.8 million agreement on Monday to settle allegation that the commercial airline company violated federal safety regulations related to the maintenance of its Boeing (N:BA) 737 fleet, the Department of Justice said in a statement.
In November, 2014, the Justice Department filed two lawsuits against Southwest after the parties failed to agree on a settlement regarding the Dallas-based company's inability to meet federal safety standards required by the Federal Aviation Authority. Eight years earlier, Southwest allegedly enlisted Aviation Technical Services, an Everett, Washington-based company, to repair 44 Boeing 737 aircrafts in order to prevent the planes' aluminum skins from splitting apart. During the repair process, Aviation Technical Services failed to comply with the FAA's guidelines, according to the Justice Department.
While the Justice Department said airlines companies maintain the right to outsource maintenance to third-party companies, the airlines are also responsible for overseeing the repairs and ensuring the procedures meet the policies set forth by federal regulators.
“The Justice Department believes the settlement agreement with Southwest Airlines Co. will provide meaningful improvements in safety and compliance and further ensure the integrity of FAA air safety regulations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
As part of Monday's settlement, Southwest also agreed to pay a $2.8 million civil penalty and up to $5.5 million in deferred civil penalties if it does not implement the operational changes set forth in the settlement.
“Safety depends on compliance with our regulations,” said FAA Administrator Michael Huerta. “This agreement provides strong incentives for Southwest to take specific steps to address the compliance problems that the FAA investigations uncovered.”
Shares in Southwest Airlines were unchanged in after-hours trading after closing at 43.37, up 1.45% in the regular session.
“We are pleased to have reached a comprehensive settlement with the U.S. government over matters that are now fully resolved and far behind us,” Southwest spokeswoman Casey Dunn told the Dallas Morning News. “The settlement allows us to move forward and focus on our current and future priorities. The safety of our aircraft remains our top priority.”