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Emery Worldwide Grounded

Wed Aug 15, 2001 4:04 am

By David Armstrong, San Francisco Chronicle Staff Writer

Emery Worldwide Airlines, a major air-freight carrier under investigation for a plane crash that killed three people near Sacramento last year, has been grounded for the next 30 days, the Federal Aviation Administration said yesterday.

The FAA and Emery Worldwide, a unit of Palo Alto transport company CNF Inc.,

jointly said yesterday that Emery will suspend operations as a result of what the agency said are long-standing problems with safety and maintenance.

The problems include inadequate repairs and record keeping, unapproved installations, use of non-airworthy aircraft and failure to follow company manuals. In May and June, FAA inspectors found "more than 100 apparent violations of the Federal Aviation Regulations," according to the agency.

The suspension takes effect immediately and could last more than 30 days if problems identified by the FAA are not corrected by then, according to agency spokeswoman Diane Spitalieri.

"We no longer have the confidence that they can operate the airline in accordance with federal safety regulations," Spitalieri said. "At the end of 30 days, we will sign a consent decree outlining what Emery plans to do to rectify, X, Y, Z problems. If they're not resolved, the whole process could take quite some time."

"It's going to be longer than 30 days," acknowledged CNF spokesman Jim Allen. "It's going to take several weeks or months."

While Emery Worldwide Airlines remains grounded, a separate CNF-owned company, Emery Worldwide Freight Co., will contract out freight orders to other cargo carriers. "We expect to run a full schedule," using other carriers,

Allen said.

Emery Worldwide Airlines has been under what the FAA terms "a heightened state of oversight" for the past year and a half, according to the agency.

An Emery Worldwide DC-8 crashed on takeoff near Sacramento on Feb. 16, 2000,

killing all three crew members onboard.

Even before that, the airline had been under scrutiny by FAA safety inspectors, according to Spitalieri, who said stepped-up inspections began a month before last year's fatal crash.

Yesterday's grounding idles 37 aircraft based at the airline's hub in Dayton, Ohio, near its Vandalia, Ohio, headquarters. Some 800 employees will be furloughed, according to a statement released yesterday by CNF. Emery flies out of San Jose International Airport but none of its 1,200 employees is based in the Bay Area, according to Allen.

Emery was surprised by the suspension, Allen said. "We have been working with the FAA on an almost daily basis. We have remedied or were in the process of remedying every issue the FAA raised. Then we get a phone call at 3 Friday afternoon telling us to be in a meeting on Saturday. There we were told we were grounded."

Even before the suspension, the National Transportation Safety Board had scheduled a hearing on the crash near Sacramento. The NTSB public hearing, originally scheduled for late this month, has been postponed to an undetermined date in light of the suspension, safety board spokesman Paul Schlamm said yesterday.

A part in a crucial control system in the downed DC-8's tail was found to be disconnected, but the cause of the crash has not been determined.

At the public hearing, officials plan to examine issues surrounding Emery's contract maintenance and the associated oversight by airline and FAA personnel,

as well as cargo-loading operations.

Previously, officials said they were looking into whether shifting cargo threw the four-engine plane out of balance, causing it to bellyflop into a wrecked-auto auction yard in Rancho Cordova, near Sacramento.

The plane, built in 1968, was headed from Mather Field to Dayton, Ohio. But in a statement in April, the safety board said a review of airline records "has not revealed significant differences" between the actual cargo weight and the loading information provided to the flight crew.

The plane that crashed reported engine problems on four flights since 1994, with two cases prompting unscheduled landings, aviation safety records show.

In February of this year, the FAA proposed $698,000 in civil penalties against Emery on grounds unrelated to the crash. The agency accused the company of hazardous cargo violations. The airline is contesting the fines, according to Allen.

Emery's troubles resumed April 26, when another Emery DC-8 crash-landed at Nashville International Airport after the wrong part was installed in a left main landing gear, according to the NTSB.

Emery's rival air-freight carriers will benefit from the carrier's problems,

at least in the short term, Deutsche Banc Alex. Brown airline analyst John Barnes told Bloomberg News.

"You cannot come through something like this completely unscathed when it comes to customers," Barnes said. "You're going to have some failure in service or some customer who is going to panic about things."

CNF's shares fell $1.19 to $30.31 yesterday. The company's stock has declined about 10 percent this year.

CNF Inc. said profit fell 81 percent in the second quarter, as domestic shipments declined 30 percent by volume as a result of slowing economic growth.

The company responded by cutting 900 jobs, or 11 percent of its workforce, and reducing its aircraft fleet by 30 percent to trim costs.

CNF Inc. is a $5.3 billion management company of global supply chain services with businesses in regional trucking, air freight, ocean freight, customs brokerage, global logistics management and trailer manufacturing.

Chronicle staff writer Henry K. Lee and Bloomberg News contributed to this report.
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