Beyond Baggage: United Airlines Slammed by Record Fine


On Friday, the Department of Transportation (or DOT) did something most Americans probably wish they could do – give an airline a fine of its own. United Airlines, a subsidiary of United Continental Holdings (NYSE: UAL), was fined $1.1 million for tarmac-delay violations that took place on July 13, 2012, according to a DOT press release.

In total, there were thirteen delays that violated a rule regulating tarmac delays that has been in effect since April 2010. The rule only allows passengers to be onboard a plane tarmac delayed plane for three hours. The length of time United passengers spent on the Chicago tarmac in excess of the three hour limit ranged from 2 to 77 minutes. As a result, United has received the largest fine ever given by the DOT for such a delay.

$475,000 of the fine will be paid to the United States and the rest will be distributed towards “mitigation measures for affected passengers and significant corrective actions by United to enhance future compliance with tarmac delay requirements.” Although United had a contingency plan, it was not implemented on July 13, 2012. After the incident, the DOT inspected the airline’s plan and found it lacked the ability to handle foreseeable issues, such as weather emergencies.

One day before being fine, United released its third-quarter earnings. The company saw a 13.5 percent year-over-year increase of income, $590 million for the quarter, excluding special charges. When those charge are factored in, third-quarter net income is reduced to $379 million, making diluted earnings per share 98 cents.

Some items included in “special charges” are labor agreement costs, merger integration-related costs, costs from the temporarily grounded Boeing 747, and voluntary severance and benefits.

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