American grounds 570 flights

FORT WORTH, Texas -- The cancellation of thousands of flights this week will cost American Airlines tens of millions of dollars, the company's chief executive said Thursday, but he said the nation's largest carrier can withstand the losses.

American said it canceled another 570 flights today and disruptions will continue through Saturday as it continues to check electrical wiring in all 300 of its MD-80 aircraft.

Chief executive officer Gerard Arpey said he took full responsibility for the airline's failure to comply with a federal safety rule designed to prevent electrical fires in the planes.

American scratched more than 900 flights Thursday, the third straight day of major cancellations, while its mechanics worked overtime to check the aircraft and comply with the rule. The company said all its MD-80s would be back in service by Saturday night.

Arpey said neither the airline's mechanics nor the Federal Aviation Administration were to blame for the more than 3,000 canceled flights so far this week.

The airline canceled more than 400 flights for the same reason two weeks ago. But the repairs done then didn't meet FAA standards, resulting in this week's debacle.

On Wednesday, Arpey's top lieutenant suggested that American had fallen victim to a suddenly more aggressive FAA. The agency has been under fire since disclosures last month of its lax enforcement of safety rules at Southwest Airlines Co.

In measured tones, Arpey said Thursday that the FAA "obviously is under their own set of scrutiny and pressure right now," but was only doing its job of "holding airlines to exacting standards."

Arpey said it was too early for the airline to estimate the cost of the cancellations. AMR is running a tab for meals, hotel rooms and $500 travel vouchers for stranded passenger and it lost revenue when it booked people on other airlines. On the other hand, it has saved what it would have spent for fuel on those 2,500 flights.

"I think it will be in the tens of millions of dollars," Arpey said of the final cost. But he said the airline had built up enough cash and paid down debt to deal with the loss. He said the carrier has business-interruption insurance, but he doubted that it would cover the cancellation-related losses.

American got some good news on Wall Street. Shares of parent AMR Corp., which fell 11 percent the day before, rose 70 cents, or 7.6 percent, to $9.87 Thursday.