U.S. DOT says Astar not under foreign influence
Express carriers UPS and FedEx lost a long-running battle to exclude Astar Air Cargo from operating in the United States when the Department of Transportation said Thursday it would let stand an administrative law judge's ruling that Astar legitimately meets U.S. corporate citizenship requirements.
Judge Burton Kolko recommended in December that Astar should be allowed to continue operating as a U.S. domestic flag carrier because evidence did not support allegations the company is indirectly controlled by foreign interests. Kolko said Astar makes is own financial and operational decisions.
U.S. law limits foreign ownership to 25 percent of the voting stock of an airline, and requires U.S. citizens to hold two-thirds of the company's board and executive positions.
UPS and FedEx pressed for the DOT investigation to determine whether Astar, previously known as DHL Airways, was owned and controlled by express carrier DHL Worldwide Express, and its parent, German postal service and logistics conglomerate Deutsche Post. UPS and FedEx say it is unfair to allow DHL access to the U.S. aviation market when the German government is helping to subsidize Deutsche Post's competitiveness with the delivery companies.
The vast majority of Astar's business comes from DHL Worldwide Express, but Kolko determined that Astar's reliance on DHL as a customer did not give the Brussels, Belgium-based express operator leverage to control the company to meet its needs. Kolko said contracts between the two companies protected Astar from the potential threat of termination if the airline did not conform to DHL's wishes on how to operate the company.
The public inquiry about the nationality of DHL Airways materially changed when DHL and an American investor sold DHL Airways to Astar Chief Executive John Dasburg and two American partners last summer. FedEx and UPS argued that aside from the nationality issue, the Dasburg group got a sweetheart deal for the airline from DHL and that Astar would be under pressure to follow DHL's directions out of fear of losing its dominant customer.
FedEx and UPS asked the DOT to review Kolko’s decision because they argued the judge used an incorrect legal standard and denied them the ability to submit certain types of evidence.
“We have determined that there is no reason for us to take review of the ALJ’s decision. Judge Kolko thoroughly analyzed the evidence presented by the parties and applied the correct legal standards for determining citizenship,” Michael Reynolds, deputy assistant secretary for aviation and international affairs, wrote in his decision declining further review.
This is the second time the DOT has denied a petition from FedEx and UPS regarding the fitness of DHL/Astar to operate in the United States. Secretary Norman Mineta conducted an informal review of DHL’s ownership status in 2001 and determined that DHL was a legal U.S.-flag carrier. FedEx and UPS re-filed complaints and got Congress to order a formal review after Deutsche Post gained majority control of DHL International in 2002.