EMERY WORLDWIDE AIRLINES GROUNDED

EMERY WORLDWIDE AIRLINES GROUNDED    Emery Worldwide Airlines, the cargo airline of CNF, grounded 37 freighters    yesterday morning to comply with a U.S. Federal Aviation Administration    order.
   On Saturday, the FAA had given the Vandalia, Ohio-based carrier, the    option to voluntarily cease flight operations by noon Monday or it would revoke Emery’s certificate to operate the planes.
   The FAA said Emery has been under a “heightened state of oversight” since January 2000. The agency conducted several inspections of the airline, most recently in May and June, during which FAA inspectors found more than 100 violations. These violations included:
   *Improper/inadequate repairs to mechanical problems, including numerous repetitive pilot write-ups of the same problem on the same plane over extended time periods;
   *Unapproved aircraft installations/alterations;
   *Operating unairworthy planes;
   *Not following the policies and procedures in manuals;
   *Inadequate recordkeeping;
   *Failure to distribute and use current manuals.
   The FAA “lost confidence” in the airline to operate in a safe manner and has ordered the airline to cease operations until the problems are corrected, said Ava Mims, deputy director of flight standards at the agency during a press conference in Washington yesterday.
   In an interim agreement entered with the FAA, Emery Worldwide Airlines grounded its 29 DC-8 and eight DC-10 freighters. The interim agreement will last 30 days. By the end of that period, the airline will sign a final agreement with the FAA, “laying out the areas in which Emery will have to demonstrate its qualifications before it can resume operations,” the FAA said.
   Emery Chief Executive Officer Chutta Ratnathicam said the company’s airfreight company, which is separate from the airline, would continue to operate globally.
   “There will be no interruption of freight service and Emery air freightwill meet all of the day-to-day operating requirements or our customers both in North America and around the world,” Ratnathicam said.
   Emery has made arrangements to serve customers in North America by using a fleet of planes operated by Ryan Aviation of Wichita, Kan. Emery’s airfreight business operates a network of service centers throughout North America and has operations in more than 200 countries. The airfreight company operates a hub in Dayton, Ohio to sort cargo. “That facility remains fully operational,” Emery said.
   Meanwhile, Emery Worldwide Airlines said it would furlough up to 800 airline pilots, crewmembers and other administrative staff, as necessary.
   The CNF unit has seen dwindling income. Emery’s operating income in 2000 dropped 46.6 percent to $40.3 million. In the second quarter of this year, ending June 30, the airline saw an operating loss of $25.2 million. Including charges from an operational restructuring and legal settlement, Emery had a
second quarter operating loss of $370.4 million.
   In May, Emery suffered another setback when the U.S. Postal Service announced that it would terminate its express mail contract with the airline, starting Aug. 26. The contract was originally scheduled to run out in 2004. The Postal Service will turn this business over to Federal Express. However, the Postal Service settled with Emery to pay up to $125 million for early termination of the contract.