US review of air ownership case to be secret

A government case testing U.S. airline ownership limits that was prompted by complaints from UPS UPS.N and FedEx FDX.N has become so bitter and entangled that a judge is taking the matter behind closed doors, officials said on Monday.

Transportation Department Administrative Law Judge Ronnie Yoder has ordered that the Aug. 19 hearing on the ownership structure of Astar Air Cargo, formerly DHL Airways, be conducted in secret.

A preconference hearing to set out a schedule for evidence and testimony for the upcoming proceeding will be held on Wednesday and will be open to the public, according to Yoder’s order issued late on Friday.

FedEx and UPS complained for years that DHL Airways was controlled by German Postal giant Deutsche Post DPWGn.DE and its Brussels-based affiliate DHL Worldwide in violation of the law restricting the foreign ownership of U.S. airlines.

This spring, Congress ordered the Transportation Department to review the matter. But in July, DHL was sold to a group of U.S. investors for $57 million and renamed Astar, which is based in Miami.

The sale has complicated the review, especially Yoder’s demand that executives from Astar and DHL Airways testify. Those companies have turned over thousands of pages of documents they are now fighting to get back or keep confidential.

The question before Yoder now is whether the sale made the review moot or whether Astar’s history as DHL Airways is relevant even though it is a new company.

The Transportation Department has ordered Yoder to focus on Astar only, but he has sought a clearer road map from policy makers on what that means and has closed the main proceeding to the public until he gets one.

A Transportation Department spokesman said the agency would respond to Yoder “soon” but did not give a more specific time frame.

FedEx and UPS still contend the sale is not relevant and the government should conduct a broad review to determine if Deutsche Post or DHL Worldwide have a controlling interest in Astar.

For instance, they want a close examination of the Astar deal for any possible financing links to Deutsche Post or its affiliates. They also want the government to look at DHL Worldwide’s commitment to be an Astar customer.

Astar believes Yoder will opt for a wider review absent any instruction from the Transportation Department to do otherwise, satisfying UPS and FedEx.

“Congress directed a hearing – but it intended a fair hearing, not the Kangaroo court over which (Yoder) will preside absent DOT action,” Astar lawyers said in documents filed with the Transportation Department.

UPS spokesman David Bolger said Astar does not want an open hearing and a public airing of its finances and operations. “They don’t want a hearing at all. They’re attacking the judge and the process and making it as difficult as possible.”