Cathay Pacific Sues World Fuel Over Claim of Tainted Fuel

Cathay Pacific Airways Ltd. sued World Fuel Services Corp. (INT)’s Singapore unit over claims tainted fuel led to an emergency landing by one of its Airbus SAS A330 jets, hurting the Hong Kong carrier’s reputation and passengers.

Cathay, Asia’s biggest international carrier, is seeking unspecified damages from World Fuel for supplying tainted fuel to two of its aircraft, according to the lawsuit filed in Singapore’s High Court. The first closed hearing was held yesterday.

The A330, on a route from Surabaya, Indonesia, where it was fueled, to Hong Kong, suffered “serious engine problems,” forcing the emergency landing on April 13, 2010, while another plane, on the same route, had engine pressure fluctuations a day earlier, according to the complaint.

Hong Kong’s airport, Asia’s third-busiest, shut a runway for more than two hours, 35 flights were delayed and at least eight passengers were injured in the Cathay plane’s emergency landing. The incident prompted a probe by Hong Kong’s civil aviation authority, which found “fuel contamination to be a cause of the accident,” and recommended airports have safety oversight requirements on fuel quality control.

“The parties are seeking to resolve the matter on an amicable basis,” Cathay Pacific said in an e-mailed statement today. Glenn Klevitz, director of corporate finance at Miami- based World Fuel, said the company doesn’t comment on pending litigation.

Breached Contract

World Fuel’s Singapore unit, which has supplied jet fuel to Cathay since May 2003, breached the contract by supplying defective fuel, was negligent and failed in its duty of care to the airline, according to the complaint.

“The cause of such problems experienced by the two aircraft was the fuel supplied,” Cathay said in its complaint. The fuel was contaminated and wasn’t of “merchantable quality.”

Cathay is seeking compensation from World Fuel including for damage to the aircraft, costs for storage, alternative fuel arrangements, loss from flight delays and cancellations and loss of use of aircraft. The carrier is also seeking damages from World Fuel for loss of reputation and goodwill and costs related to the emergency landing, according to court papers.

Tires on the A330 burst into flames after the plane landed at quicker speed than normal in the April 2010 incident because its Rolls-Royce Group Plc engines failed to respond, Hong Kong’s Civil Aviation Department found. The flight was carrying 309 passengers and 13 crew, according to the report. The other aircraft, affected on a flight a day earlier, managed to land safely, according to the complaint.

The Hong Kong-based carrier said earlier this month it expects “disappointing” first-half earnings as it cuts fares amid competition and contends with fuel prices that have risen 40 percent in two years. The airline has suspended hiring ground staff, offered cabin crew voluntary unpaid leave and pared growth.

The case is Cathay Pacific Airways Ltd. (293) v. World Fuel Services (Singapore) Pte S296/2012. Singapore High Court.

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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