CNF Agrees to $1-Million Emery Fine

CNF Inc. said Monday it agreed to pay a $1-million fine for maintenance and other violations found at its Emery Worldwide Airlines unit as part of an effort to get its grounded airline flying again.

The company has been moving freight through contractors since it closed down the airline Aug. 13.

The Federal Aviation Administration had threatened to ground the carrier after an investigation found inadequate records, lack of training, maintenance violations and unsafe aircraft.

Emery might be able to resume flying next year, an FAA spokesman said.

“Emery has 180 days to satisfy the FAA that they are in compliance in all of these areas,” said agency spokesman Les Dorr.

Nancy Colvert, a spokeswoman for the freight carrier, said the settlement sets up a 31-point plan that requires Emery to initiate operating safeguards.

Emery, which accounted for about 44% of CNF’s sales of $2.54 billion in this year’s first half, has been under investigation for more than a year.

One of the airline’s DC-8 freighters crashed in February 2000 near Sacramento after reporting balance problems. All three crew members died.

“It’s expensive to pay a fine and expensive to do the maintenance that is required, but it is far more expensive to let those multimillion-dollar assets go idle,” A.G. Edwards analyst Donald Broughton said of the Emery aircraft. Broughton rates CNF a “hold” and owns no shares.

CNF last week said Emery had “significantly lower freight volume” that contributed to an expected third-quarter final loss of 15 to 20 cents a share. The use of contractors cost Emery $16 million in the quarter, the company said.

CNF shares rose 78 cents to $22.60 Monday on the New York Stock Exchange.