CNF Abandons Grounded Airline Unit, Announces Plans to Combine Remaining Businesses
PALO ALTO, Calif. — CNF Inc. Wednesday said its grounded Emery Worldwide Airlines subsidiary won’t resume operations and announced plans to combine Emery Worldwide, Menlo Logistics and Vector SCM operations into a single logistics and transportation business.
Emery Worldwide Airlines grounded its fleet of 37 planes on Aug. 13 after the Federal Aviation Administration cited the air-freight carrier with more than 100 safety violations. In September, CNF (CNF) was fined $1 million by the FAA for alleged violations of maintenance rules and operational standards, and the agency had set out a 31-point plan that the carrier would have needed to take in order to resume operations.
The freight company expects to take a charge of about $200 million in the fourth quarter related to the discontinued airline operations, which it said will reflect the disposal of all aircraft, leases and other costs.
The new business, Menlo Worldwide, will be organized into four divisions: Emery, Menlo Worldwide Logistics, Vector SCM and Menlo Worldwide Technologies. It will have a combined annual revenue of about $3 billion, with 15,000 employees and more than 200 service centers. Headquarters for Menlo Worldwide will be Redwood City, Calif. Vector SCM headquarters will remain in Novi, Mich.
With the formation of Menlo Worldwide, the CNF portfolio now consists of two basic operating companies: Con-Way Transportation Services and Menlo Worldwide.
Emery will continue to provide network service and coverage for its North American overnight business using a fleet of contract air carriers, CNF said.
“By altering the basic business model of Emery in North America, we are taking a major step in CNF’s strategy of reducing assets in a way that will benefit both customers and investors,” Gregory L. Quesnel, CNF’s president and chief executive, said in a prepared statement.
“Emery freight division customers utilizing domestic and international services can rely on Emery to offer its extensive services as usual with no interruptions,” Mr. Quesnel said.
Meanwhile, CNF named John Williford president and chief executive of the new Menlo Worldwide. Mr. Williford recently served as the chief executive of Menlo Logistics. Chutta Ratnathicam, currently CEO of Emery Worldwide, will return to his former position as CNF’s chief financial officer, the company said.
John Rocheleau, most recently vice president, controller and treasurer for Menlo Logistics, will join Menlo Worldwide as vice president of finance.
