Southwest settles shareholder lawsuit over safety issues

Southwest settles lawsuit over safety issues

DALLAS — Southwest Airlines Co. has agreed to settle a shareholder lawsuit that grew out of safety violations at the carrier and will pay the investors’ lawyers $3.5 million.

Southwest disclosed the proposed settlement in a regulatory filing made Friday. A hearing on the deal was scheduled for Dec. 7 in state district court in Dallas.

The lawsuit was filed in August 2008, after the Federal Aviation Administration announced it would fine Southwest $10.2 million for operating some planes that had not gone through a required inspection for structural soundness. Southwest settled by agreeing to pay a $7.5 million penalty.

The investors said the airline’s leaders failed to protect the interests of shareholders.

Southwest declined to comment Monday, but in the settlement document the airline officials said they “believe that they acted properly at all times” and settled the case to avoid a long and costly fight.

Besides paying $3.5 million for the plaintiffs’ legal expenses, the Dallas-based company agreed to add safety-related employees throughout the company and increase training for maintenance workers for at least two years.

In exchange, the plaintiffs agreed to drop claims against Southwest and several directors and executives, including CEO Gary Kelly and former CEO Herb Kelleher. Southwest also said in the Securities and Exchange Commission filing that it agreed to make reforms in governance practices.

The lawsuit was filed by the Carbon County, Pa., Employee Retirement System and Mark Cristello. The plaintiffs’ attorney did not immediately respond to requests for comment from The Associated Press.

Southwest also faces class-action lawsuits filed by passengers who flew on the airline while it operated planes that hadn’t gone through all the required checks. They charge the airline was reckless. Southwest says the claims lack merit.

The nation’s leading discount airline has faced other safety issues. Last month, the FAA gave Southwest until Dec. 24 to replace unapproved parts that were installed on dozens of planes. Southwest blamed a subcontractor, and it stopped using the company.

In June, a Southwest jet had to make an emergency landing when a foot-long hole opened in the roof. There were no injuries.

Southwest shares fell 4 cents, to $8.80 on Monday.