UPS and Fedex lock horns with DHL

US parcel giants UPS and Federal Express have scored the first hit in a bitter dogfight with German-owned DHL over its $1bn bid for domestic package delivery operator Airborne Express.

Intense lobbying by UPS and FedEx has added a single but significant sentence to Senate legislation intended to approve $80bn of funding for the war with Iraq.

The amendment means that any company receiving more than 50% of its operating revenue from a foreign entity or ‘not effectively controlled by citizens of the United States’ cannot carry military cargo.

In a swift response, Airborne attacked its two rivals, who are still smarting after failing to ground DHL’s acquisition by Deutsche Post, the German post office that has spent billions of dollars building a global logistics empire.

In a statement, Airborne said: ‘We believe this amendment is clearly influenced by UPS and FedEx, who are attempting to prevent competition by redefining the decades-old citizenship require- ments for ownership of air carriers.

‘The structure of the proposed DHL and Airborne transaction is transparent and clearly meets all current regulatory requirements. ABX Air will be a totally independent company and will be 100% owned by public shareholders.’

Under the deal with DHL, Airborne’s airline-related business will be separated and become an independent public company, called ABX Air, to be owned by Airborne’s current shareholders.

DHL will acquire the remaining non-airline related activities for $1.05bn. Both the new company and ABX Air will enter in a service agreement.

The Airborne statement added: ‘Given UPS and FedEx’s 79% stranglehold on the US express delivery market, their opposition to this transaction is entirely predictable and it is no surprise that they would attempt to protect their duopoly in any way they can.

‘Their attempts to delay our transaction will limit opportunities for American workers and deny choice to American consumers.’

Airborne has an 18.8% share in the US market for overnight delivery, and it delivered 356m domestic parcels last year.

The offending last-minute amendment was introduced without debate by Senate Appropriations Committee chairman Ted Stevens.

FedEx and UPS have already filed separate proposals with the US Department of Transportation, arguing that the DHL bid for Airborne may contravene a 25% limit on foreign control of US domestic airlines.

The Senate action must still be approved in negotiations this week to resolve differences with Congress.

The Washington Post quoted sources saying that the amendments ‘could complicate if not scuttle plans’ by DHL and its parent Deutsche Post.

The newspaper added: ‘While the amendment applies only to military cargo, it sends a signal to the Department of Transportation that Congress favours stricter enforcement of rules governing foreign control of US air carriers.’

Copyright 2003 Lloyds List. Source: Financial Times Information Limited – Europe Intelligence Wire.

Copyright © 2003 Financial Times Information Services Limited. All rights reserved.

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