DHL Airways sells off to investor group for USD57 million

DHL Worldwide Express has agreed to sell its DHL Airways unit to an investor group led by John Dasburg, chairman and chief executive of the U.S. airline, for $57 million. (5/22/2003)

News of the sale comes as DHL Worldwide, a unit of German mail and logistics conglomerate Deutsche Post World Net, is looking to establish itself as a player in the U.S. package delivery market.

The deal, which is expected to close by June 30 subject to approval by the U.S. Department of Transportation, is unlikely to silence claims by rivals FedEx Corp. and United Parcel Service that the airline does not comply with U.S. ownership laws. A DOT administrative law judge will hold a pre-hearing conference May 27 on a complaint by UPS and FedEx that Deutsche Post controls DHL Airways.

DHL submitted details of the proposed transaction to DOT, but a DOT spokesman declined to comment on how it might affect the case before Administrative Law Judge Ronnie L. Yoder. "He's independent. We don't speak for him," the DOT spokesman said.

A law enacted in April ordered DOT to appoint an administrative law judge to hear the case.

To support their case against DHL, FedEx and UPS will likely point to the disclosure that DHL Airways expects to enter into a new 11-year agreement to provide air cargo services for DHL Worldwide upon completion of the sale.

DHL, in a further move to establish DHL Airways as an independent entity, said it would rename the airline in the near future. Dasburg, who became chairman and chief executive of the carrier on April 1, already owns 5 percent of the airline. He is joined in the investment group by Richard C. Blum, chairman of San Francisco-based Blum Capital Partners, L.P., a private equity firm, and Michael R. Klein, a Washington executive and lawyer. Klein is co-founder and chairman of the board of CoStar Group Inc. The prospective owners plan to operate the airline as a privately held company.

Most of the outstanding shares in DHL Airways are held by William A. Robinson, described as a private investor based in Idaho. DHL Holdings (USA) Inc. controls the remaining shares. A spokesman for DHL said he could not specify how the $57 million will be divided between Robinson and DHL Holdings. DHL has said in the past that Robinson owns 55 percent of the equity and 75 percent of the voting stock, in compliance with the U.S. ownership law. In a statement, the airline said the transaction would solidify the airline's U.S. control and management, while putting it on a new path toward becoming a global air-cargo leader.

According to Dasburg, the company will continue to focus on its core wholesale, overnight small package business, while at the same time seeking to expand its charter, Department of Defense, and Postal Service business. It is targeting growth through internal expansion and future acquisitions. The airline said it plans to improve utilization of its existing fleet of 40 aircraft for additional charter opportunities.

In a statement, Dasburg emphasized that DHL Airways is an American company. "DHL Airways is all-American owned and all-American managed. It employs nearly 1,000 Americans," he said, noting that DHL Airways was actively engaged in providing service to the U.S. Department of Defense during the war in Iraq. It currently serves the U.S. military with missions to Guantanamo Bay, Cuba, Roosevelt Roads, Puerto Rico, Ramstein Air Force Base, Germany, and other military bases around the world.

DHL Airways' hub is at Cincinnati/Northern Kentucky International Airport. It recently moved its headquarters to Miami -close to the Americas headquarters of DHL Worldwide Express in Fort Lauderdale.

MEMPHIS COMMERCIAL APPEAL (TN) 22nd May 2003
DHL DEAL AIMS TO SETTLE ISSUE OF GERMAN CONTROL

DHL Airways chairman and CEO John Dasburg and an investment group reached an agreement Wednesday to acquire all of the outstanding shares of the air cargo operation for $57 million.

The deal is designed to silence questions about whether DHL Airways is owned by Americans and not the German postal service, Deutsche Post.

Still, critics say it doesn't answer whether Germans or Americans essentially control the company.

"DHL Airways is all-American owned and all-American managed," said Dasburg, who owns 5 percent of DHL Airways, the U.S. operation of DHL Worldwide Express, the express delivery arm of the German postal service.

In April, DHL said Dasburg – who once led Northwest Airlines – was looking to purchase Airways.

Under the agreement, Dasburg and the investment group will acquire the remaining shares of Airways from DHL Holding Co., which owns 25 percent of the airline, and William A. Robinson, an Idaho private investor and major stakeholder.

June 30 is the target date to complete the acquisition, which is subject to approval by the Department of Transportation.

Once completed, DHL Airways will become a private company that's still based in Miami. Although a name change will occur in the near future, no immediate changes are expected. The cargo carrier will still maintain a hub in Cincinnati.

But critics, principally FedEx Corp. and United Parcel Service Inc., say the central issue remains whether Deutsche Post exerts control over the U.S. airline, which is against federal law.

"We just see it as a personnel move," said FedEx spokesman Kristin Krause.

UPS spokesman David Bolger agreed, "Nothing has changed with this new ownership switch."

FedEx and UPS are challenging the control issue before the DOT; while pre-trial hearings have taken place, the actual hearing is slated for August.

UPS and FedEx fear that the state-run postal service can use that monopoly status to fund its expansion in the U.S. express market, a move DHL views as critical to its growth.

DHL Airways also said Wednesday that it would enter a new 11-year agreement to provide air cargo services for DHL Worldwide Express once Dasburg buys the company.

While that's likely to raise the control issue again, Satish Jindel, principal of SJ Consulting Group in Pittsburgh, said DHL could say that FedEx and UPS use similar agreements to operate in other countries.

But Bolger said, "It's entirely dissimilar" since those partners can choose to work with other companies.

DHL is likely to be Airways' primary customer, although Dasburg said other customers and lines of business would be pursued.

But lost in the mix is what will happen to DHL's proposed $1.05 billion acquisition of Airborne Inc.'s ground operations, announced in March.

Both companies are reportedly "vigorously working" toward completing their planned regulatory filings, but a DOT spokesman said Wednesday nothing has been submitted yet.

When asked about it, DHL spokesman Matthew Triaca said, "I wouldn't say it's off, but when or where or how that transaction might look we can't really speculate."

– Richard Thompson: 529-2346

Copyright 2003 The Commercial Appeal, Memphis, TN