US Astar fears more trouble from competitors
Astar Air Cargo fears “more mischief” from its competitors even if a US Department of Transportation (DoT) inquiry backs its claim to be entirely independent of former owner DHL.
US law prohibits foreign interests from holding more than a 25% stake in a US airline. Integrators FedEx and UPS claim that Astar, formed in July when DHL sold its remaining stake to a group of US investors led by former DHL Airways CEO John Dasburg, is still under the effective control of Deutsche Post.
Astar vigorously refutes this and is claiming the moral high ground after an expert witness for FedEx was forced to admit to the DoT hearing that DHL would be powerless to prevent Astar ‘s owners from selling the airline on if they chose to do so at a future date.
Prof Jeffrey Gordon had claimed in written testimony that wet-lease agreements between Astar and DHL Worldwide Express, representing 90% of Astar ‘s business, tied the hands of its new owners.
He admitted under crossexamination that this was not the case, Astar has alleged. And this development “shot a huge hole in the UPS/FedEx duopoly’s claims”.
Ray Lutz, VP of business development and strategy, told IFW: “It is clear that Astar is in control of its own destiny. But there is no sign that UPS and FedEx will back off. They have been persistent through this in portraying Astar as sonething it is not.” Judge Burton Kolko will finish taking evidence by the end of next week, and will make his recommendations to the DoT by 1 December. Lutz said: “We won’t see the answer until early 2004, and these guys may get up to more mischief.
“They will do whatever they can do to inhibit competition.
If they can’t get the outcome they seek through the DoT, presumably they will go to legislative means.” He said it was Astar ‘s stated objective to grow either internally or through acquisition.
A new series of Boeing 727s would both replace older equipment and fulfil new ACMI agreements. Astar would develop alongside DHL as its main customer and the 90% dependency was unlikely to reduce unless other business grew by “thousands of percent”.
FedEx will call more witnesses this week. Spokeswoman Kristin Krause said: “Our contention has always been that Deutsche Post could take back control at any moment. Astar may have grand ambitions of expanding its service, but we’ve seen nothing. We remain confident the judge will rule in our favour.”
The merger of DHL and Airborne could provide a ” shortterm windfall” for UPS and FedEx, US market analyst Bear Stearns has predicted.
The combined company will have to expand geographic reach and service levels to become a viable competitor. But shippers are reported to be unconvinced by current performance, and believe that employee morale and other merger issues could distract management.
