Are You Stupid, Southwest?

Could it be true? Could Southwest Airlines (NYSE: LUV  ) really have been so stupid as to try and stiff-arm regulators? Apparently so.

Two inspectors from the Federal Aviation Administration told CNN yesterday that their superiors did nothing when learning of the airline's failure to maintain a proper schedule of safety checks. One, Bobby Boutris, told the cable channel that Southwest lobbied to get him off inspection duty. Quoting:

My supervisor called me into his office ... and told me he had had a meeting with the director of quality assurance and the AD [airworthiness directive] compliance leader from Southwest Airlines, and he had requested my removal from the inspection.

Removal? Really? If true, it would constitute an outrageous cover-up of maintenance problems serious enough to pull 38 aircraft out of service for a day.

When we all thought this was a mistake -- a failure of oversight or, at worst, laziness -- the FAA was willing to let this end with a $10.2 million fine. No longer. If this really was a cover-up, and FAA supervisors were involved, as Boutris suggests, then someone, somewhere is going to get fired. Perhaps a few people. Or maybe a lot of people.

Southwest has thus far refused to comment to news organizations, opting instead to answer allegations via testimony to be given today by CEO Gary Kelly and Chairman Herb Kelleher in front of the House Transportation and Infrastructure Committee, which oversees the FAA.

I suppose that's fair. It would, after all, be premature to declare Southwest guilty of malfeasance. And yet, the few public comments we have aren't encouraging. For example, acting FAA administrator Robert Sturgell told CNN that, with regards to Southwest, there was a "two-way breakdown" in the system.

Translation: Boutris and his fellow whistle-blower, Douglas Peters, aren't far off -- if not exactly spot-on.

That's extremely troubling, Fool. Investing is, in part, a bet on superior management. Returns rarely follow executives who can't be trusted to do right by customers and shareholders. Witness MDC Holdings (NYSE: MDC  ) and its demented compensation proposals. Washington Mutual (NYSE: WM  ) has a similar problem. TASER (Nasdaq: TASR  ) executives can't handle the truth. And UAL's (Nasdaq: UAUA  ) executives act as if the promising airline they run doubles as an ATM.

Now it appears we can add Southwest, the carrier that was supposed to LUV us, to the list. A sad day, Fool. A sad day indeed.


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