Insurers Settle Air Crash Suits

The families of about 100 of the 131 people killed in the crash sued the American companies that owned the plane and leased it to Air Philippines, accusing them of providing a worn-out plane in need of constant maintenance that the airline was incapable or unwilling to do.

The case, filed in state court in Chicago, was scheduled for trial in September but was settled in late February by Air Philippines' insurers, who negotiated on behalf of the plane's suppliers. Neither the American companies, Air Philippines nor the insurers admitted responsibility.

Donald J. Nolan, whose Chicago law firm took the lead in the case, said the amount of the settlement will improve safety in developing countries, where carriers often buy aging aircraft no longer wanted by U.S. airlines.

Nolan said after legal fees of about one-third the award, families will get on average more than $1 million each. The judge must still approve disbursements from a trust fund to individual families, which will receive varying awards.

The lawyer said Air Philippines offered families about $20,000 each.

The Air Philippines Boeing 737 that crashed was made in 1978 and operated for 20 years by Southwest Airlines Co., which faces a $10.2 million fine by U.S. regulators for flying 737s without making required inspections for cracks in the fuselages.

Lawyers said the plane had cracks and a faulty altimeter when it was delivered to Air Philippines, but they did not sue Southwest because it had no role in selling the jet to the foreign carrier.

The plane was purchased in 1998 by AAR Corp., an Illinois-based company that sells aircraft parts and leases planes to some of the world's largest carriers. AAR leased the plane to Air Philippines and then sold the plane and the lease to Fleet Business Credit Corp., which is now a subsidiary of Bank of America Corp.

AAR "did some cosmetic work, didn't do a (heavy-maintenance) 'D' check ... and shipped it out to the Philippines," said Gerald C. Sterns, an aviation lawyer in Oakland, Calif., who also represented some of the families. "They are in the business of providing cheap aircraft to lease."