Shares in Delta Air Lines (DAL) nosedived today after agreeing to pay a multi-million-dollar fine for a fuel dump over homes and schools five years ago.
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Dumping Drama
Delta said it would stump up $78.75 million to resolve a class action over the fuel dump which doused tens of thousands of properties, including homes and schools in Los Angeles and Orange counties in California in 2020.
A proposed preliminary settlement was filed this week in Los Angeles federal court, and now requires a judge’s approval.
In the incident, Delta Flight 89 to Shanghai from Los Angeles, carrying 167 passengers and crew, lost thrust soon after takeoff.
The pilots dumped about 15,000 pounds (6,804 kg) of jet fuel from the Boeing (BA) 777 before returning to Los Angeles International Airport, to reduce the risks of an overweight emergency landing. Several dozen people on the ground were treated for minor injuries.
Property owners said the pilots unnecessarily dumped fuel at a low altitude over densely-populated areas, instead of dumping it over the Pacific Ocean or at a high altitude so it would dissipate, or burning fuel by flying in a holding pattern.
Delta denied wrongdoing, and said it settled to avoid the uncertainty, distraction and cost of litigation.
The case highlights how much of a key risk legal and regulatory challenges are for airlines and their investors – see above.
Delta Defense
Delta said its pilots and cabin crew “did exactly what federal regulations and their Federal Aviation Administration-approved training required them to do to respond to that in-flight emergency and ensure the safety of the passengers, crew, and people on the ground.”
Indeed, an FAA investigation later cleared the pilots of wrongdoing, Delta said.
The net settlement, after legal fees and costs, may total $50.6 million, and be distributed to owners or residents of an estimated 38,000 properties, court papers show.
Filippo Marchino, a lawyer for the plaintiffs, in a statement said the settlement was fair and reasonable, and would compensate “hard-working families who asked only for respect and just treatment and rightly deserve this result.”
Delta, alongside rival flyer United Airlines (UAL), are also reportedly being sued by millions of passengers who did not get the window seats they had been promised.
The lawsuits, filed separately against the U.S. flyers, seek millions of dollars in damages for more than a million customers of each airline.
Is DAL a Good Stock to Buy Now?
On TipRanks, DAL has a Strong Buy consensus based on 12 Buy and 1 Hold ratings. Its highest price target is $90. DAL stock’s consensus price target is $67.88, implying an 11.42% upside.
