Thursday, May 1, 2003

DHL will have American owner, lawyers tell judge

By James Pilcher
The Cincinnati Enquirer

The battle over the citizenship of local airline DHL Airways has gotten even more confusing, with company officials saying the airline's chairman and chief executive planned to become the sole owner.

In a hearing before an administrative law judge in Washington Tuesday, DHL Airways attorneys said the airline's recently hired chairman and CEO, John H. Dasburg, was in the process of buying the entire airline, including the 25 percent currently controlled by Brussels-based DHL Worldwide Express and its parent, Deutsche Post.

DHL Airways carries the domestic shipments of DHL Worldwide Express, which operates its U.S. hub at the Cincinnati/Northern Kentucky International Airport. It currently operates 36 planes and has about 1,000 employees, including about 500 pilots.

DHL Worldwide Express is also in the process of buying the ground assets of Seattle-based Airborne Express, which has its main domestic hub in Wilmington, about 50 miles north of Cincinnati. That deal is worth just over $1 billion.

DHL Airways officials Wednesday confirmed that Dasburg, the former president and CEO of Northwest Airlines and most recently the president and CEO of Burger King, was "in negotiations" to buy the airline. They said he was representing an investment group that was made up entirely of U.S. citizens. Dasburg received 5 percent of the airline when he was hired in March.

Airline spokesman Ray Lutz would not disclose terms of the proposed deal. In addition to buying DHL's share, Dasburg would buy the 75 percent voting stake controlled by investor William Robinson.

"From the beginning, he expressed an interest in buying more, and he viewed this as an entrepreneurial opportunity," said Lutz, who added that the airline is moving its corporate headquarters from Chicago to Miami.

Tuesday's hearing before administrative law judge Ronnie A. Yoderwas required under a last-minute insertion by Sen. Ted Stevens, R-Alaska, into this month's appropriations law that covered the war with Iraq as well as aid to the airline industry.

U.S. shipping giants UPS and Federal Express have tried to get DHL Airways' operating certificate rescinded for at least two years, saying foreign-owned DHL Worldwide Express effectively controlled the carrier.

The law requires that a U.S. carrier can have a foreign interest own no more than 25 percent of a U.S. airline's voting stock and no more than 50 percent of the equity. In addition, two-thirds of the board and the chairman must be U.S. citizens, and the carrier must be "effectively controlled" by U.S. citizens.

And that last clause is what is at issue in the ongoing hearing. UPS and FedEx argue that since DHL Airways derives more than 90 percent of its revenue from DHL Worldwide Express, it is "effectively controlled" by the foreign company.

A ruling against DHL in this case could put the proposed merger with Airborne into question. Airborne's subsidiary airline ABX Air Inc. would be spun off into a separate company, but it would still derive most of its revenue from the new, larger DHL.


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