That's ASTAR to You

That's ASTAR to You

Copyright 2003, Traffic World, Inc.

The sale of DHL Airways to an investor group led by Chairman and CEO John Dasburg is complete. The Miami-based company, which announced the $57 million sale's completion after the close of markets on July 14, is now called ASTAR Air Cargo.

Company officials had set a target closing date of June 30, before postponing the close for two weeks. In addition to Dasburg, who is the former president and CEO of Northwest Airlines and former chairman, CEO and president of Burger King, two other investors now jointly own the airline. Richard C. Blum is chairman of San Francisco-based Blum Capital Partners L.P., and Michael R. Klein is a Washington, D.C.-based business executive and lawyer. He is a partner at Wilmer, Cutler & Pickering, a Washington-based international law firm. Both Blum and Klein serve on a variety of corporate boards.

The trio, known collectively as BD Air Partners, secured financing through the Boeing Capital Corp. Concurrent with announcing the sale's completion, ASTAR announced it intends to buy or lease at least 10 Boeing 727-100 aircraft from a Boeing Capital affiliate. The airline already leases four planes from the lessor.

ASTAR, like DHL Airways, will fly primarily for DHL Worldwide Express, a fully owned subsidiary of Germany-based Deutsche Post World Net. The two companies signed an 11-year service agreement.

"It is great day for ASTAR Air Cargo," Dasburg said in a statement. "We are pleased to expand our partnerships with two of the most respected companies in the world and we believe that these key customer and vendor relationships will provide significant benefits for all involved."

The Dasburg group bought the company from Idaho resident William Robinson, who had 55 percent equity and 75 percent of the voting rights in DHL Airways, and from DHL Holdings, a Delaware-incorporated wholly owned subsidiary of Deutsche Post World Net. When he became CEO, Dasburg assumed a 5 percent ownership stake in the airline.

The ownership change came as the discovery period wound down in a case pending before a Department of Transportation administrative law judge regarding the corporate citizenship of DHL Airways. DOT Chief Administrative Law Judge Ronnie A. Yoder has emphasized that the review he is conducting is focusing on the "current" ownership status of the airline and that the sale, while related, will not impede or change that review.

The DOT review comes at the behest of competitors United Parcel Service and FedEx, which contend the airline is effectively controlled by foreign interests - namely Deutsche Post - and that the latest change in ownership does nothing to alter that fact.

Discovery in that case ended on July 18 and a hearing is scheduled for Aug. 19. Yoder then has until Oct. 31 to issue his recommendation about ASTAR's citizenship to DOT officials.

Morgan Keegan transportation analyst Art Hatfield said he does not expect the ownership change to have a major bearing on the case but that it could serve to bolster ASTAR's argument that it is a corporate U.S. citizen. "I don't think the company's going to change a whole heck of a lot," Hatfield said. "FedEx and UPS need to remember that there's no law saying a company can't have a foreign company as its majority customer."

Keegan said he would not be surprised if ASTAR now seeks to broaden its customer base so it is less dependent on DHL Worldwide Express for its business. "DHL can take their business elsewhere at any point in time if they want to," Keegan said. "They're going to go out there and try to grow their business. John Dasburg is a guy who's run a big airline."

UPS spokesman David Bolger said the UPS-FedEx legal team plans to continue with the case it has spent months laying out against the airline's citizenship. "They are still run by or effectively controlled by the German government through Deutsche Post," Bolger said.

Bolger said UPS's legal team is looking forward to gleaning information about ASTAR under its new ownership structure through documents Yoder has said he will require the company to file in the citizenship case. The May announcement that the Dasburg group would buy DHL Airways came during a hearing before Yoder in Washington when DHL Airways attorney Sanford Litvack mentioned the sale in the middle of the proceedings.

Last week, the two sides in the case still were waiting for resolution regarding whether Deutsche Post World Net CEO Klaus Zumwinkel and DHL Worldwide Express CEO Uwe Doerken would be called for depositions. Questions involve whether the foreign-dwelling executives could be required to be deposed and whether the two have a direct connection to the airline. They are represented in the citizenship case by Wilmer, Cutler and Pickering, the same law firm for which Klein, a commercial real estate attorney, works.

Yoder denied DHL Airways' request to depose top executives for FedEx and UPS.

In a separate transaction, DHL Worldwide Express is working to close a deal to buy Seattle-based Airborne Express. Airborne shareholders will meet Aug. 14 in Seattle and are expected to approve the $1.05 billion deal. As planned, that acquisition would result in Airborne's air assets and operations being spun off into a separate company called ABX Air.