Do you remember the fallout between an airline and an aircraft manufacturer over quality issues and safety concerns? No, we aren’t talking Qatar Airways versus Airbus here, but Air Astana versus Embraer. The dispute came to light last July and got only limited publicity. AirInsight, which published about it like Reuters, has learned that the case is still pending and that the New York State Court hasn’t even dealt with its substance yet. The next session is scheduled only for coming July. Legal case Air Astana and Embraer over the E2 still pending. As AirInsight reported last July, the airline of Kazakhstan filed a case against Embraer over “multiple in-flight software and mechanical failures that critically undermine the aircrafts’ airworthiness”. We are talking about the E190-E2 here, of which Air Astana has five since taking delivery of the first in December 2018. After numerous hydraulic pump system failures, notably the so-called Alternating Current Motor Pump 3, frequent (false) firing warnings, uncommanded pitch maneuvers, and incorrect warnings from the EICAS system of the anti-icing and bleed-air valve system, the airline voluntarily grounded its E2-fleet in December 2020. In July 2021, the plaintiff represented by its attorney Michael Lacovara, said that the “E2 was not airworthy or (that) should have been known to Embraer. (…) Embraer knew about the flaws in the AMSC and was actively working on a software update to address them. But it had not warned Air Astana or other E2 customers about the flaw, or its potential implications.” He also stated: “Embraer subsequently sought to mask the gravity of its failings.” The airline demanded action from Embraer and requested $12 million for losses, costs, and compensation, as Air Astana had to source aircraft elsewhere. Interestingly, the carrier didn’t sue AerCap, from which it has leased the E190-E2s, stating that the lessor had assigned all warranties of the E2 to the airline, although it includes a limitation that obliges Embraer to only replace or repair defective parts. Embraer made clear to Air Astana that it had no intention to pay compensation and denied that the technical issues constituted an immediate safety issue. In a media statement, the airframer said that it “denies it has breached any obligations to Air Astana and will vigorously defend against all claims asserted.” The issues with the hydraulic pump have been part of an Airworthiness Directive by the Brazilian regulatory agency ANAC since May 2021, requesting frequent inspections and replacement every 300 hours. Case is pending for procedural reasons This was July 2021 and since then all have gone silent. Air Astana has gradually returned the E2s back to service and these were all operational last week, until the social and political unrest in Kazakhstan in which the President ordered the shooting of civilians forced the airline to suspend services for a couple of days. AirInsight asked attorney Michael Lacovara about the status of the case, but he replied: “I am not authorized to comment on the status of the litigation, other than to say that it remains pending.” The case is pending for procedural reasons now, more specifically how documents should be exchanged. Last July, Lacovara’s law firm Latham & Watkins sent the summons and complaint to Embraer’s legal counsel in New York, which forwarded them to its general counsel in Brazil. From the start, the airframer indicated that service had to be effected under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the “Hague Service Convention”). The Hague Service Convention is an international treaty from 1965, established to speed up how legal disputes in different countries can be settled. “It provides for the channels of transmission to be used when a judicial or extrajudicial document is to be transmitted from one Contracting Party to the Convention to another Contracting Party for service in the latter. The Convention establishes a main channel of transmission via a designated Central Authority, as well as alternative channels of transmission”, the Hague Conference on Private International Law says on its website. Embraer did receive documents directly or indirectly by mail and post, but since September has claimed that this procedure contravenes the Hague Service Convention. The convention was signed by Brazil on the strict condition that all services should be requested only through the government and its Central Authority, not through direct contact. Embraer insists that the convention must be applied in the correct way before it will respond: “Embraer has not been properly served pursuant to the Hague Service Convention and Plaintiff has not demonstrated that Hague service would be impracticable.” During an online session of the New York State Court on December 9, the court ruled that the plaintiff has now until June 30 to complete the service in the correct way of the Hague Service Convention, but also said that Embraer’s counsel is urged to work together with the plaintiff’s counsel “to consensually resolve this dispute and avoid unnecessary burdens and delays and the consumption of judicial resources that may otherwise have to be expended on this issue.” The next conference is scheduled for July 12, which means that nothing will happen before that. How the spat developed Public court filings with the NY State Court give an insight on the actual issue and on what happened until Air Astana decided to file its plaintiff on July 2 last year. After the Kazakh airline voluntarily suspended the services of its five E190-E2s on December 15, 2020, there was a lively exchange between both parties. The Aviation Administration of Kazakhstan established a commission to review the safety of the type, but Embraer questioned its impartiality. In an email to the airline, Embraer CEO Commercial Aviation, Arjan Meijer, stated in March that the E2 "was, is, and continues to be airworthy and safe to operate. Air Astana CEO Peter Foster denied this in his reply three weeks later: “Our flight crews have had to deal with severely degraded safety levels, systems design that allows a cascade-of multiple failures and unexpectedly complex recovery actions. It was only due to the skill and airmanship of our crews that a catastrophe was averted in each incident. We have provided Embraer will full details of these incidents, in all instances, substantive changes have been made to E2 systems and/or operating procedures related to the incidents experienced by Air Astana. The fact that you have had to make these changes is a clear acknowledgment by Embraer of basic design defects which posed a substantial risk to the safety of our crews and passengers.” Foster notified Meijer that the initial financial claim stood at $8.0 million. In an email on June 30, Meijer writes to Foster: “Embraer has given and is giving serious attention to all the matters affecting Air Astana, which were thoroughly discussed internally. In this regard, we reject any assertions of Embraer's lack of dedication to safety or any allegation of Embraer’s willful misconduct or gross negligence in regard to aircraft design and our Customer Support. If required we are ready to defend our commitment to safety in all levels and in court.” Meijer offered the help to Air Astana, which at the time – like many airlines – was struggling from the first wave of the Covid crisis: “Embraer is willing to work even more closely with Air Astana to find solutions that could minimize the negative impacts and support your business recovery. Exactly for that reason, we have some flexibility to propose some additional commercial values to Air Astana, to help you with this recovery and beyond and help us avoid substantial expenditures in time and money to both companies in the threatened litigation. Please let me know if you are interested in a meeting to look in this other direction.” "Embraer will not pay frivolous claims" That same day, Embraer’s General Counsel said in an email to attorney Lacovara: “Embraer firmly and strongly rejects any allegation regarding willful misconduct and gross negligence relating to Embraer aircraft design or customer support. Our Engineering and Air Safety Departments have responded in detail to these issues and will continue to support our customers fully to assure product safety and, hopefully, customer satisfaction. No other compensation is due to Air Astana. If Air Astana or Aercap in good faith has any concerns regarding the warranty remedy—its scope, duration, or extent—we would be willing to discuss these concerns on a without prejudice basis. We cannot prevent you or Air Astana from filing a Complaint but please take note Embraer will not pay frivolous claims to prevent you from doing so.” At the same time, Embraer still kept the door open to Air Astana: “Notwithstanding our stated position above, Embraer executives will reach out directly to Air Astana for the continuing assistance to Air Astana in this time of business recovery in view of the worst crisis the aviation industry has ever seen.” Three days later on the afternoon of Friday, July 2, Embraer received an email with 429 pages from Michael Lacovara, including the papers that he had filed on behalf of Air Astana at the New York State Court. The gloves were off. No other E2- operator has questioned its airworthiness What makes this case interesting is that no other airline has publicly questioned the airworthiness of the Embraer E2 or disputed its safety in court like Air Astana is trying to do. A bit like the Qatar Airways case versus Airbus over the paint quality issues, in which the airline has summoned the airframer for the London High Court but is alone in this. When AirInsight contacted E2-operators last year to hear from them, not all replied, but those who did stated to have “full confidence in the process and its E2 aircraft”, as one airline said. Another replied that it “strictly follows the approved maintenance plan, as well as all the recommendations of the manufacturer and national and international aeronautical authorities for maintaining their airworthiness.” But maybe the most significant is that Air Astana has resumed E2-operations since the summer of 2021 when it started its legal procedure and hasn’t publicly reported any other technical issues. AirInsight asked both Air Astana and Embraer about the status of the procedure, but haven’t heard from either of them. We are aware that internet connections in Kazakhstan have been blocked for the past few days.
