CNF EXPECTS POOR RESULTS FROM EMERY

CNF EXPECTS POOR RESULTS FROM EMERY    CNF Inc., the parent company of integrated air freight forwarder Emery Worldwide, expects third-quarter earnings to fall below expectations due to weak air freight demand in the U.S. domestic market and higher aircraft operating costs.
   CNF said Emery will likely earn less than $10 million before one-time    charges due to terminated aircraft leases — less than half the $22.6 million it reported in 1999. Full results will be released on Oct. 18.
   Emery’s domestic and international business suffered, said Gregory L. Quesnel, CNF president and chief executive officer. A slowdown in domestic demand for heavyweight air freight services was compounded by higher than normal fuel and maintenance costs for Emery’s North American freighter fleet. Emery was hurt in international markets by tight capacity, which has led to higher air freight rates and lower margins.
   The earnings announcement comes shortly after Roger Piazza announced he was stepping down as chief executive officer at Emery, replaced by Chutta Ratnathicam, Emery’s former chief financial officer. It also falls in line with poor results reported recently by Emery’s chief U.S. competitor BAX Global, the integrated air freight subsidiary of The Pittston Co. Pittston has blamed BAX’s poor earnings on weak demand and high operating costs, as well.
   CNF did have some good news to report. It has won a court case against the U.S. Postal Service concerning the company’s contract to handle Priority Mail in the eastern United States. CNF argued successfully that the USPS was not paying the company enough to perform the Priority Mail contract.
   A federal court has order the USPS to increase the provisional rate paid to Emery for transportation and sortation for year 2000 and 1999. Based on the rate adjustments through Sept. 1, CNF expects to receive $102.1 million.
   The Priority Mail contract has proven to be a huge fiasco for both CNF and the USPS. Dissolution of the relationships has helped fuel rumors that talks between the USPS and FedEx Corp. could include a deal for FedEx to takeover Priority Mail delivery.
   CNF said that it has recorded no profit from the USPS contract since the second quarter last year. Beginning in the third quarter of 1999, the USPS began paying rates below the cost of operating the contract, CNF said. As of June 30, CNF had recognized $173.4 million in unbilled revenue.
   CNF said it is still in negotiations to settle all contract issues in dispute. “The company plans vigorous pursuit of the full compensation it believes it is entitled to under the contract,” it said.