Breaking News

Glaxo to Pay $488.7 Million Fine to End China Corruption Probe
Tweet TWEET

Unsafe Buses Run Until Fatal Crashes After U.S. Inaction

When executives of Sky Express Inc. met with U.S. bus-safety regulators for an audit in March, the problems were clear even in the rough English of records translated from Chinese.

One driver worked 11 consecutive days without a rest period, according to audit documents obtained under the Freedom of Information Act. Four of 10 drivers couldn’t understand enough English to identify their employer. An insulin-dependent driver made a 938-mile run without medical clearance. All those infractions violated U.S. law.

Inspectors rated the carrier “unsatisfactory,” meaning it had to close in 45 days unless it could prove it fixed the problems. It didn’t, the documents show. Fifty-four days later, on May 31, one of its buses crashed outside Doswell, Virginia. Four people were killed.

The Federal Motor Carrier Safety Administration’s failure to close Sky Express has been repeated throughout its 12-year history and is linked to a growing number of crashes, some of them fatal, Deborah Hersman, chairman of the National Transportation Safety Board, said in an interview.

“We’ve seen it in too many accidents,” Hersman said. “They have a fatal accident that’s very public, and ka-boom, they go in within a week and they put them out of service. If they were bad before, that’s when they need to be caught.”

When the FMCSA, which regulates all intercity bus services, ordered Sky Express off the road after the accident, the agency cited the same violations behind the “unsatisfactory” rating that let the company stay in business, documents show.

Asked whether the agency should have shut down Sky Express immediately after the inspection, FMCSA Administrator Anne Ferro said in an interview, “I wish we had.”

Rapid Growth

Fatal crashes have surged as intercity bus travel becomes the fastest-growing U.S. mode of commercial transportation. In 2011, 28 people have died in eight fatal crashes, including three in an 11-week period involving carriers operating out of, or carrying passengers between, Chinatown neighborhoods in East Coast cities.

Led by Firstgroup Plc (FGP)’s Bolt Bus and Stagecoach Group Plc (SGC)’s Megabus, as well as so-called Chinatown lines such as Sky Express, U.S. bus departures increased 24 percent last year, according to Joseph Schwieterman, professor of public service at DePaul University in Chicago. There were 723 million trips on U.S. motor coaches, including intercity, commuter and charter buses, in 2009, the most recent full year for which information is available, according to the American Bus Association.

Cutting Costs

While Sky Express’s official address in FMCSA records was a Charlotte, North Carolina, home owned by Jenny Han, its corporate secretary, most operations were run out of an office on Chrystie Street in Manhattan’s Chinatown, according to the FMCSA’s compliance review. Han also owned Fusion 108, a Chinese restaurant in Huntersville, North Carolina, where Sky Express’s safety audit was conducted, according to audit records.

With some companies, the lowest fares are possible only by cutting costs to a degree that it becomes difficult to operate safely, said Jackie Gillan, president of Washington-based Advocates for Highway and Auto Safety.

“Whether they were paying a lot of money for the ticket or a little money for the ticket, whether they boarded the bus at a bus terminal or in front of a store, it doesn’t matter,” Gillan said. “The public deserves more.”

U.S. Transportation Secretary Ray LaHood said the day after the Sky Express crash he was “extremely disappointed” the company hadn’t been shut down. He said in a speech Sept. 23 that he will push Congress for more authority to shut down unsafe carriers immediately.

Imminent Hazard

The FMCSA, however, can already declare a company an “imminent hazard” and close it, Hersman said. That power can be invoked when the agency finds a company’s method of operating “substantially increases the likelihood of serious injury or death if not discontinued immediately,” according to FMCSA rules.

FMCSA safety audits too often focus on paperwork and don’t examine buses or maintenance facilities, said Peter Pantuso, chief executive officer of the American Bus Association, a Washington-based trade group whose members include Firstgroup and Stagecoach.

Sky Express had received special attention from regulators before. The company received an “unsatisfactory” rating in 2009, agency records show. The company satisfied the agency that it had corrected the issues and was allowed to stay in business. A 2010 audit resulted in a “satisfactory” rating.

Sky Express

In this year’s follow-up, regulators discovered the company had expanded from 10 drivers and 11 coaches to 53 drivers and 31 coaches in less than a year.

Sky Express charged customers $30 for a one-way trip between Durham, North Carolina, and New York, compared with $55 to $126 for a Greyhound ticket. The company stayed profitable by keeping expenses low. A driver on the nine-hour trip would make $75, according to audit documents.

Inspectors began probing more deeply after it took the company three attempts over eight days to produce a correct driver roster, audit records show. Regulators tallied 26 violations, including six deemed critical and one deemed acute.

U.S. law requires commercial drivers to be conversant enough in English to communicate with passengers and read traffic signs. When an inspector asked a driver heading from Charlotte to New York on March 31 how long he’d been driving or whether he had done a pre-trip inspection of the bus, he couldn’t answer, the safety inspector wrote. The only English words the driver recognized were “log book,” according to an interview summary by agent Timothy Switzer.

Good Faith

Agency officials reviewed a Sky Express appeal that arrived May 11. They rejected it within a day, meaning the carrier should have been closed on May 28, pending a follow-up review. Still, regulators granted Sky Express 10 extra days to come into compliance based on a “good-faith effort,” according to a May 12 memo by Chris Hartley of the agency’s North Carolina division and a May 13 letter to Sky Express by Darrell Ruban, an agency field administrator.

The agency indicated Sky Express was close to receiving a rating upgrade on May 26 that would have kept the company on the road indefinitely, according to George Gray, a former North Carolina highway patrol official who was working for Sky Express as a consultant.

Sky Express’s problems were “70 percent to 80 percent” paperwork, Gray said in an interview. Executives were making rapid progress coming into compliance, he said.

No Different

The week before the crash, Sky Express spent four days with FMCSA officials in Charlotte to go over changes the carrier had made. Regulators using a computer program to score the company’s safety practices indicated they would upgrade the unsatisfactory rating, Gray said.

“Had that crash not occurred, they would be operating today,” Gray said. “They were no different than a lot of companies out there right now operating under a conditional rating.”

The FMCSA sent a settlement agreement to Sky Express on May 31, the day of the accident, the records show. It was confined to how much the company would pay to settle proposed fines, Ferro said. The agency had agreed to a lower amount based on progress Sky Express was making, Gray said.

“These claims are false,” Ferro said in an e-mail. “Sky Express was not on the verge of receiving an upgraded safety rating or a reduced fine for safety violations.”

Reincarnated Carriers

A company that had as many violations as Sky Express and wasn’t operating from its registered address should have raised more urgent concerns than it did, as people familiar with the bus industry can distinguish a company making an honest mistake from one trying to skirt the rules, Pantuso said.

“Instead of negotiating to keep them open, why wasn’t the negotiation to quickly shut them down?” Pantuso said.

A woman who identified herself as Han, the Sky Express corporate secretary, declined to answer questions. “We have already closed the business,” she said in a phone interview.

The FMCSA used the 10-day extension, in part, to make sure its case against Sky Express would hold up in court, Ferro said.

Preventing rogue carriers from restarting has been a struggle for the agency for years. In a June 3 order shutting down Sky Express, the FMCSA accused the carrier of repainting buses and selling tickets online to operate under a new name.

The agency has been pushing for changes to U.S. law since May, seeking greater powers to catch so-called reincarnated carriers and raise the fine for operating without authority to $25,000 per violation from $2,000 a day.

Similar Problems

Still, the agency’s current rules required it to shut down Sky Express three days before the accident, under a Government Accountability Office interpretation discussed with agency officials in 2007. LaHood ordered the agency after the accident to stop extending 45-day shutdown periods.

“We agree with GAO’s assessment that extending the appeals period for bus companies undergoing compliance reviews is not in the best interest of safety,” Ferro said in an e-mail. “That practice has been permanently ended.”

The GAO, the Transportation Department’s inspector general and the NTSB have noted a pattern in reports and testimony of the agency not using all its powers.

Hurricane Rita Accident

Since 2002, there have been at least five fatal accidents involving intercity bus companies that had accumulated enough safety violations to be shut down, according to separate NTSB crash investigations. The board has faulted the way FMCSA identifies audit targets, how it inspects new companies and lack of follow-through with companies prior to fatal crashes.

“When there are serious safety violations, this agency typically tries to accommodate the motor carrier and not the safety of the motoring public,” Gillan said.

A company involved in a 2005 crash in Wilmer, Texas, that killed 23 nursing-home residents evacuating Hurricane Rita had been cited by state authorities in 2002 for having unqualified buses, poor maintenance and a bus that wasn’t registered to operate in the U.S.

In February 2004, FMCSA gave company a “satisfactory” rating even as it recorded similar violations. The agency shut down the company after the crash as an imminent hazard, citing many of the same practices it deemed acceptable a year earlier, the NTSB said.

‘Plenty of Indicators’

“They had plenty of indicators that they needed to look more deeply at this carrier,” Hersman said. “We were certainly frustrated and disappointed that over 20 people lost their lives. We felt like they should have identified the issues earlier.”

The GAO, in a 2007 report, said the agency rarely imposed the maximum fines called for by U.S. law because companies with serious safety violations weren’t judged to meet the regulator’s threshold of having a “pattern of violations.”

FMCSA’s enforcement wasn’t “as effective as possible in deterring unsafe practices and, as a result, additional accidents could occur,” said the GAO, which acts as Congress’s investigative arm.

The bus agency has stepped up oversight of passenger coaches through roadside inspections nationwide, shutting down more carriers and increasingly shutting down unsafe operators, Ferro said in an interview. It doesn’t take a crash to close down a company, she said.

Cracking Down

Eight companies have been shut down this year as imminent hazards, compared with one last year, Ferro said. Another 30 companies have been shut down for unsatisfactory ratings following a 45-day waiting period, and eight more are pending. That compares with 12 for all of last year, Ferro said. Only four of the companies shut down this year were closed after fatal crashes, she said.

Congress is considering proposals made after this spring’s accidents to beef up the FMCSA’s authority to shut down unsafe companies and make it harder for companies to reincarnate under new names after being closed.

Besides greater power to close down unsafe carriers immediately, LaHood is seeking tougher screening of new companies before they’re given permission to operate and making it easier to revoke commercial drivers’ licenses for drug and alcohol offenses.

‘Very Tough Lesson’

The department also has asked Congress to overturn restrictions imposed in 2005 that prevent it from carrying out inspections while buses are en route.

Upgrading the agency’s computerized screening system later this year will enable the FMCSA to better target problem carriers and get them off the road more quickly, Ferro said. Bus companies with unsatisfactory ratings will have to meet higher safety standards to be allowed to operate, she said.

“Our team lives these tragedies,” Ferro said. “The Sky Express crash has been a very tough lesson for us. We have gone back and will continue to go back, to analyze the policies, procedures and systems that have been in place to see what it is that is driving an outcome like the one on Sky Express.”

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.