Airline Without a Country?

Airline Without a Country?

Copyright 2003, Traffic World, Inc.

DHL Airways announced last week that it plans to change its name when its previously announced sale goes through. The news came at a legal proceeding at the Department of Transportion headquarters to determine whether DHL Airways is a U.S. corporate citizen.

The Miami-based company will be called AStar Air Cargo Inc. after the deal, scheduled to close on or around June 30, said Sanford Litvack, an attorney representing DHL Airways. The change may be mostly in name only as DHL Worldwide Express is expected to remain DHL Airways'' largest customer and planes and other company property likely will continue to carry the DHL logo, Litvack said.

"We believe that there is confusion between our company, which is a U.S.-owned and managed airline, and DHL Worldwide Express," Litvack said. "In addition, (new DHL Airways Chairman and CEO) Mr. (John) Dasburg ... intends to grow the business substantially, which would include businesses other than what we have traditionally done with DHL Worldwide Express."

Litvack said the company wants to be seen as more than "the house airline of DHL Worldwide Express." At press time, DHL Airways planned to file more information about the $57 million sale. The rebranding commenced immediately following the May 27 announcement, with plans for the change to be completed by the sale''s close.

Litvack was one of 14 attorneys who attended the second prehearing conference May 27 in the DOT proceeding to review DHL Airways'' corporate citizenship. He announced at the first conference April 29 that Dasburg and a group of investors planned to buy the airline.

At the conference, DOT Administrative Law Judge Ronnie Yoder laid out how the case will proceed. Attorneys for FedEx and United Parcel Service sat across a table from DHL Airways attorneys as both sides answered sharp questions from Yoder. From the bench, he probed the information each side wants included in the case, usually siding with UPS and FedEx when they wanted DHL Airways to provide more information for the docket.

Yoder also decided that the burden of proof in the case lies on DHL Airways rather than on the UPS-FedEx side, which also includes Alaska-based Lynden Air Freight. The decision means it is up to DHL Airways to prove it is a U.S. corporate citizen rather than up to its competitors to prove it is not a citizen.

UPS and FedEx contend that DHL Airways violates domestic ownership requirements because it is partly owned by German postal company Deutsche Post World Net and because foreign interests substantially control the company. DOT staff previously found that DHL Airways is a citizen, but the new administrative law judge review sheds more public sunlight on the matter.

DHL Airways counters that it is a U.S. citizen. Majority owner William A. Robinson of Idaho and minority owner DHL Holdings plan to sell their ownership stake to Dasburg and other investors. After that sale Dasburg will have a 40 percent ownership stake, with San Francisco-based Blum Capital Partners Chairman Richard C. Blum holding another 40 percent and Washington business executive and lawyer Michael R. Klein holding the remaining 20 percent.

DHL Airways attorneys asked Yoder to consider the citizenship of the company as it will stand once the Dasburg purchase goes through. "We know that (the deal) is going to close," Litvack said. "And we ought to focus on life as it will be in 30 days rather than life as it was two years ago."

But, in a nod to the arguments of FedEx and UPS, Yoder declined to put the case on hold for a month. Yoder told Litvack that "current citizenship," not "current ownership" is what is at stake in the case. Citizenship, Yoder said, encompasses control of the airline as well as ownership structure. "We aren''t examining the Dasburg group," he said. "We are examining DHLA. And we are examining it with a great many surrounding circumstances."

UPS spokesman David Bolger said the name change will not change his company''s position on the citizenship of DHL Airways. "It''ll be interesting to see how this company changes over the course of the hearing," Bolger said. "There''s the ownership issue and the control issue. It''s a two-pronged test."

After resolving what information will be included in the discovery phase of the judicial review, the next step is for DHL Airways to supply the information to the case''s docket. A public hearing in the case is scheduled for Aug. 19 at DOT headquarters. Yoder has an Oct. 31 deadline by which to issue a recommendation to DOT on whether the company is a citizen.