The Federal Aviation Administration has proposed fining American Airlines $7.1 million after it allegedly allowed two airliners to continue flying after they developed autopilot problems.

The proposed fine also would punish the Fort Worth-based airline for failure to do timely drug testing of several employees.

American said it doesn't agree with the FAA regarding the circumstances that led to the proposed fines. It will talk with the agency soon to ask it to drop or reduce those fines.

The fines stemmed in part from faults with the autopilot systems of two MD-80 jetliners. After the faults were discovered, the airline allowed those planes to make a toal of 58 passenger flights before repairing the defects.

SeaTac's Alaska Airlines and Horizon Air are waiving excess baggage fees for active military members traveling on orders, the airlines announced today.

The fee waiver now applies to up to three bags of 50 pounds or less and to military duffles of 70 pounds or less.

Alaska formerly had waived fees for the first two checked bags for military members. The airline charges its non-military passengers $25 to check a second bag except in the state of Alaska. The first checked bag is free on Alaska and Horizon, its regional airline affiliate.

"We realize soldiers may have more baggage than normal when traveling to or from an overseas deployment, and we want to accommodate and welcome them on Alaska Airlines and Horizon Air," said Gregg Saretsky, Alaska Airlines' executive vice president of flight and marketing. "It's a small thing we can do to thank the men and women of our armed forces for all they do for our country."

American Airlines recently suffered adverse public reaction after a story was published about a customer service agent making an active duty soldier pay excess baggage fees.

The Fort Worth-based airline has since waived bag fees for active military traveling on orders.

Boeing's three-year delay in delivering the first of four new aerial tankers to Italy is likely to cost Boeing a financial penalty according to Bloomberg News.

The company is negotiating with the Italian government over the size of that compensation, said the news service.

Boeing had promised to provide the first tanker to Italy in November 2005, but that delivery is now set for this November.

The second tanker's delivery is now projected to be 21 months late while the third and fourth planes are expected to be 16 and 12 months late.

The penalty payment to Italy will be the second Boeing has paid to customers. It agreed to compensate Japan last year for timetable slippage with the delivery of that country's first aerial tanker.

Boeing's performance on the Japanese and Italian tanker programs does not bode well for its competitive stance in its effort to win a U.S. Air Force contract to build 179 similar Boeing 767-based tankers.

Boeing rival Northrup Grumman-EADS has pointed out the Italian and Japanese delays as evidence of Boeing's unreliability on delivering on its promises.

The two companies are entering a third competition for the contract, estimated to cost the government about $35 billion.

The results of earlier tanker competitions, one favorable to Boeing and one favorable to Northrup Grumman-EADS, were thrown out because of Boeing's cheating in one instance and because of flaws in the competition in the other.

Vought Aircraft Industries has halted production of further rear fuselage sections of Boeing's 787 Dreamliner at its Charleston, S.C. plant.

The company, one of Boeing's principal partners on the 787, has shut down production because the 787's first delivery has been put off by some 15 months.

That delivery delay is rippling through Boeing's supply chain.

The Charleston Post and Courier said Vought expects production of the barrel-shaped components to be halted for several months.

Problems with incomplete work and parts shortage have delayed the first flight of the revolutionary twin-jet.

The first example of the 787 is now undergoing ground testing of its vital systems at the Everett final assembly site in preparation of its first flight now set for November.

Boeing has begun construction of the wing spar of the first of its line of new 747s at its Everett plant this week.

The wing spar is the backbone of the 747-8's redesigned wing. The 747-8 is the successor to Boeing popular 747-400 model.

Final assembly of the first 747-8 is expected to begin in Everett early next year. The first example of the new jumbo jet will be a freighter.

The freighter version has proven to be far more popular than the passenger version of the plane. Boeing has sold 105 747-8s, 78 of those are freighters.

The 747-8 will be larger than the existing 747-400 and will be equipped with the fuel-efficient engines developed for the 787 Dreamliner.

Lufthansa remains the sole airline to order the 747-8 passenger plane. Seven of the huge aircraft have been sold as executive aircraft. Delivery of the first 747-8F is scheduled to launch customer CargoLux at the end of next year.

As inflation climbed nationwide, prices in the Tacoma-Bellevue-Seattle also rose over the past two months. In a report out today, the Bureau of Labor Statistics said overall consumer prices on the area rose 2.2 percent in May and June.

The cost of transportation, up 7.1 percent, and housing, at 1.7 percent, led the increase.

Gasoline was up 19.7 percent in the period and has recorded a 36.1 percent increase since the end of June last year. For the year, housing is up 5.7 percent in the region, led by the cost of rent, up 7.9 percent.

The cost of electricity advanced 11.7 percent over the past two months. The cost of natural gas was unchanged for the two-month period, and has declined 12 percent since the summer of 2007.

For the two months, food and beverages were up 1.4 percent – with groceries were ahead by 1.9 percent. The cost of meals eaten away from home was up 1.5 percent.

The cost of furniture, up 1.7 percent for the two months, dropped 4.4 percent from 2007, while the cost of medical care was down 1.1 percent for the two months and down 0.1 percent for the year, the BLS said.

Clothes were off 2.8 percent since April, but up 1.2 percent on the year.