Emery’s Parent Grounds Planes
CNF Inc. agreed Monday to ground its 37-plane Emery Worldwide Airlines fleet after the Federal Aviation Administration confronted the cargo carrier with more than 100 apparent violations of government safety regulations.
The suspension runs the next 30 days, but Emery Worldwide’s planes probably won’t fly for two to four months, said FAA spokesman Les Dorr Jr.
Emery, which delivers freight to 200 countries, will stay in business by using airplanes flown by Wichita, Kan.-based Ryan Aviation and other contractors.
With its planes on the ground, Palo Alto-based CNF said it will furlough about 800 of its 1,100 Emery employees.
The airline’s main hub is in Dayton, Ohio. It also operates nine regional hubs in Los Angeles; the Sacramento area; Dallas; Chicago; Atlanta; Poughkeepsie, N.Y.; Charlotte, N.C.; Nashville; and Orlando, Fla.
Emery had been under FAA scrutiny since January 2000.
In February 2000, an Emery DC-8 crashed after taking off from Mather Field near Sacramento, killing the three-member crew. Monday’s suspension prompted the National Transportation Safety Board to postpone Aug. 22-23 hearings on the Mather Field crash.
Regulators decided to crack down on Emery after concluding the airline’s management was unlikely to address widespread safety problems.
“The FAA is not in the business of putting an air carrier on the ground,” Dorr said. “We only do it when it gets to the point where a carrier can’t find and fix their own problems.”
Dorr said Monday’s action represented the FAA’s largest suspension of a carrier’s fleet since the government grounded ValuJet in 1996 after a crash that killed 110 people in the Florida Everglades.
Emery regards the FAA’s action as “unnecessary and unwarranted,” CNF spokeswoman Nancy Colvert said.
“We knew we had issues with the FAA, but we really thought we had remedied most of these things,” she said.
CNF’s stock fell $1.19 to close at $30.31 on the New York Stock Exchange.
The suspension is expected to drive up CNF’s expenses substantially during the next few weeks as Emery pays contractors for airfreight.
But the crackdown could be a plus if it pushes the company to improve its safety procedures or results in a decision to cut long-term costs, said industry analyst John Barnes of Deutsche Banc Alex. Brown.
Emery operates mid-size jets, including McDonnell Douglas DC-10s and DC-8s and Boeing 727s, according to Flight International’s World Airline Directory.
CNF said profit fell 81% in the second quarter, as domestic shipments declined 30% by volume as a result of slowing economic growth. The company responded by cutting 900 jobs, or 11% of its work force, and reducing its aircraft fleet by 30% to trim costs.
Monday’s suspension represented the latest setback for Emery, which suffered an operating loss of $377 million on revenue of $1.1 billion during the first six months of this year. At the same point last year, Emery had an operating profit of $20 million on revenue of $1.2 billion.
