Guy Norris/LOS ANGELES
GATX Capital says it will appeal against damages of $47.5 million awarded by a California court to Kalitta Air for alleged breach of contract and non-disclosure of information over the grounding of Boeing 747-100Fs modified by GATX/Airlog between 1988 and 1994.
GATX recently settled out of court with Evergreen International Airlines.
The appeal is the latest move in a long-running legal wrangle over the troubled conversion programme. It ran into problems in 1996 when the US Federal Aviation Administration issued an airworthiness directive (AD) restricting the loads that the 10 converted aircraft could carry. In the AD, the FAA stated that the original supplemental type certificates covering the conversion had been issued by the agency "in error".
Operators of the converted aircraft, unable to fly profitably, stored them and sought compensation for lost revenues, lost profits, associated costs and damages. These included American International Airways, later assigned to Kalitta Air, which owned two of the freighters, Tower Air and Evergreen, which had three. In its turn, Airlog sought $8.3 million damages in 1998 from the FAA, accusing it of negligence for approving the conversion in the first place.
This case was dismissed in August 1999, seven months after the FAA accepted that a series of Airlog service bulletins could remove the limitations of the AD. One Evergreen aircraft was returned to service by March 1999.
Litigation continued over the remaining nine aircraft, and in the first phase of a trial in a California Federal District Court last month, the jury found against GATX/Airlog on two counts of breach of contract and non-disclosure of information. Before the second phase could begin, GATX settled with Evergreen out of court. Although the terms have not been disclosed, Evergreen's original claim was for around $160 million. GATX also says it is taking a $100 million financial charge for its 2000 results, reducing year-end profits to around $64 million.
In the subsequent second phase, Kalitta was awarded $47.5 million plus interest, which GATX is now fighting. "We strongly believe that no GATX employee acted unlawfully, and that the jury came to the wrong conclusion. Throughout the entire experience, GATX felt its legal position was sound. It is also extremely difficult to sue the FAA, which admitted the initial approval was issued in error," the company says.
Source: Flight International
