The DHL Airways / Astar Air Cargo Controversy and Legislation in the 108th Congress

The DHL Airways / Astar Air Cargo Controversy and Legislation in the 108th Congress

Order Code RL32181
CRS Report for Congress
Received through the CRS Web
The DHL Airways / Astar Air Cargo
Controversy and Legislation
in the 108th Congress
December 29, 2003
Alan M. Robinson
Specialist in Industrial Organization
Resource, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

The DHL Airways / Astar Air Cargo Controversy and
Legislation in the 108th Congress
Summary
DHL Airways and its successor, Astar Air Cargo, provide the U.S. domestic
airlift for the worldwide network of DHL Worldwide Express (DHLWE). After
DHLWE was acquired by the German Post Office (Deutsche Post), FedEx and UPS
challenged the citizenship of DHL Airways and are challenging Astar Air Cargo’s
citizenship. Without designation as a U.S. citizen, Astar Air Cargo could not provide
the service for DHLWE that it now does. This would force DHLWE to find
alternative arrangements for serving its customers within the United States. An
administrative law judge (ALJ) has examined the citizenship question regarding DHL
Airways and Astar Air Cargo beginning in April 2003. The ALJ was appointed
following passage of a provision in the Emergency Wartime Supplemental
Appropriations Act, 2003 (P.L. 108-11) which directed DOT to make the
appointment.
On December 19, 2003, the ALJ issued his recommended decision
and found that Astar Air Cargo, Inc. is indeed a citizen of the United States. A
Department of Transportation (DOT) decision on the matter is to follow.
The subject of the citizenship challenge changed in the midst of the proceeding
because the ownership of DHL Airways changed in July 2003. At that time, a group
of investors (including the president of DHL Airways) purchased DHL Airways and
renamed it Astar Air Cargo. The DOT ruled that only the current ownership structure
of Astar Air Cargo was subject to evaluation by the ALJ.
The Astar Air Cargo citizenship evaluation is significant because only four
carriers, DHLWE, TNT, FedEx, and UPS, transport express shipments (parcels and
documents) worldwide. In order for these carriers to effectively compete in the large
markets for express shipments between the United States and Europe, Latin America,
and Asia, as well as serve points within the United States, they require access to
dedicated air transportation networks and hubs worldwide. The creation of delivery
networks within national borders poses problems for U.S. carriers abroad and for
foreign-owned carriers in the United States. The U.S. carriers, FedEx and UPS, can
provide domestic airlift within the United States because both corporations are
organized as “U.S. citizens” under 49 U.S.C. §40102(a)(15). The foreign express
carriers, DHLWE and TNT, cannot own or control an airline providing domestic
airlift because an airline providing transportation within the United States must meet
the citizenship requirements identified in the aforementioned section of the U.S.
Code and demonstrate that it is under the “actual control” of U.S. citizens. The
passage of a provision in the FAA reauthorization (P.L. 108-176) codified the
requirement that United States air carriers must be effectively controlled by United
States citizens.
Congress has shown a continuing interest in airline citizenship issues, reflecting
a concern that the citizenship evaluation is performed carefully and openly to ensure
fair competition between United States and foreign express carriers. Current “open
skies” negotiations with the European Union could have a significant impact on
express delivery carriers. This report will be updated as warranted.

Contents
Airline Citizenship Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Astar Air Cargo: “Actual Control” Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Equity Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Significant Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Credit Agreements/Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Family Relationships/Business Relationships . . . . . . . . . . . . . . . . . . . 16
Issues Following the Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Figures
Figure 1. Ownership Structure of Astar Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 2. Business Relationships Between Astar Air Cargo, DHLWE, and
Deutsche Post . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 3. DHL Airways Ownership Structure Prior to Deutsche
Post Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

The DHL Airways / Astar Air Cargo
Controversy and Legislation in the 108th
Congress
Four carriers, DHL Worldwide Express (DHLWE), TNT, FedEx, and UPS
transport express shipments (parcels and documents) worldwide. In order for these
carriers to effectively compete in the large markets for express shipments between
the United States and Europe, Latin America, and Asia, as well as serve points within
the United States, they require access to dedicated air transportation networks and
hubs worldwide. Creating delivery networks within national borders poses problems
for U.S. carriers abroad and for foreign-owned carriers in the United States. The U.S.
carriers, FedEx and UPS, can provide domestic airlift within the United States
because both corporations are organized as “U.S. citizens” under 49 U.S.C.
§40102(a)(15). The foreign express carriers, DHLWE and TNT, cannot own or
control an airline providing domestic airlift because an airline providing
transportation within the United States must meet the citizenship requirements
identified in the aforementioned section of the U.S. Code and demonstrate that it is
under the “actual control” of U.S. citizens. Congress has shown a continuing interest
in airline citizenship issues, reflecting a concern that the citizenship evaluation is
performed carefully and openly to ensure fair competition between United States and
foreign express carriers.
The market for express services is unique as nearly all competitors except
FedEx and UPS are subsidiaries of partially or fully government-owned firms that
generate the largest share of their revenue and profits from monopoly mail services.1
Competition with firms owned by government-owned postal monopolies creates the
potential for unfair competition as foreign governments have a financial interest in
success of those firms.2 These competitors of American firms, most of which are
legally sanctioned monopolies, have advantages that U.S. firms do not have.
In providing service overseas, American firms face substantial legal restrictions
that affect their ability to provide international service. For example, citizenship
1 The other global competitor, TNT, is owned by TPG, which also operates the Dutch postal
service and is partially owned by the government of the Netherlands. Large regional
competitors owned by postal operators include the United States Postal Service, subsidiaries
of Royal Mail Group (headquartered in Great Britain and serving all of Europe), Groupe La
Poste (headquartered in France and serving all of Europe), Canada Post and its subsidiary
Purolator Courier (serving Canada and cross-border traffic with the United States), and
Japan Post (serving primarily Japan).
2 The financial interest comes in the form of revenue generated by dividend payments and
proceeds from stock sales. Governments that receive dividends from competitors to FedEx
and UPS include Australia, Germany, and the Netherlands.

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requirements similar to those imposed by the United States limit access by FedEx and
UPS to overseas markets. American carriers serving foreign express markets must
hire foreign citizen air carriers to provide air transportation beyond the carrier’s
foreign hub. Thus, UPS hires Star Air, a Danish corporate citizen and subsidiary of
the Maersk Corporation, to provide air transportation within the European Union
(EU). UPS can fly shipments from non-EU destinations to its hub in Cologne,
Germany, but cannot operate a network within the EU because it is an American
citizen corporation. FedEx faces the same restriction.
Of the foreign carriers, only DHLWE handles sufficient volumes within the
United States or between the United States and the rest of the world to support a
dedicated United States air network.3 Astar Air Cargo provides (and its predecessor
DHL Airways provided) DHLWE with most of its United States air transportation
network. Its primary operations are centered at the DHLWE hub at the
Cincinnati/Northern Kentucky International Airport. Astar Air Cargo flies 38 planes
(23 Boeing 727s, 9 McDonnell-Douglas DC-8s, and 6 Airbus A300s), serving 31
United States domestic airports and 21 international airports. Its total 2002 revenue
was $300 million, nearly all generated serving DHLWE.4
In 2001, the German Post Office (Deutsche Post) purchased a controlling
interest in DHLWE and subsequently restructured the ownership of DHLWE’s U.S.
operations. As part of the restructuring, the ownership of DHL Airways, the carrier
that provided DHLWE’s U.S. domestic air network, changed, prompting the
citizenship evaluation and challenges to DHL Airways citizenship by FedEx and
UPS. Ownership changed again in July 2003, when DHL Airways was sold to a
group of investors (including the president of DHL Airways) and renamed Astar Air
Cargo. The citizenship evaluation of Astar proceeded with a focus on the current
ownership structure.
After DHLWE was acquired by Deutsche Post, FedEx and UPS initially
challenged the citizenship of DHL Airways and, subsequent to its sale and renaming,
are challenging Astar Air Cargo’s citizenship. A successful challenge to Astar’s
citizenship would not prevent DHLWE from operating in the United States, but
would probably force DHLWE to find alternative airlift capacity to serve customers
within the United States and customers overseas that want to ship to the United
States. Thus, DHLWE would have to contract with a different U.S. citizen air carrier
to provide the air lift that it needs to serve its customers.5
The initial complaints of FedEx and UPS against DHL Airways’ citizenship,
which were considered in an informal proceeding by the U.S. Department of
Transportation (DOT), were denied. In May 2002, the DOT Assistant General
3 TNT has a limited ground operation in New York, Washington, DC, and Chicago and uses
Airborne to deliver elsewhere in the United States.
4 Astar Air Cargo Facts [http://www.astaraircargo.com/about/astarfacts.html] (Page read
December 12, 2003) The referenced revenue figure was for the operations of the airline
under the DHL Airways name.
5 DHL Worldwide Express operates in the United States as a foreign freight forwarder. The
U.S. foreign freight forwarder will be referred to in this report as DHLWE-US.

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Counsel for International Law informed DHL Airways that it met U.S. citizenship
requirements.6 The handling of DHL Airways’ citizenship evaluation raised
congressional concerns and Chairman Don Young of the House Committee on
Transportation and Infrastructure requested that the DOT Inspector General (DOT-
IG) examine the process employed in these proceedings.7 This request led to a DOT-
IG investigation.
The DOT-IG’s findings were communicated in March 2003 by letter to
Chairman Don Young. In that letter, the DOT-IG found that the informal review
process employed by the DOT was not well suited to the evaluation of DHL Airways’
citizenship.
“As it evolved, it [the evaluation] was complex, contentious and
controversial.”8 The DOT-IG went on to note that the more formal process instituted
by the DOT did “not have certain other attributes customarily associated with a
formal process, namely, access to confidential documents, similar to that provided
in the Delta, Northwest, Continental code-share and frequent-flyer program
reciprocity proceeding (“Alliance Carriers”), and verification either in the form of
certification or sworn statements.”9
The DOT-IG concluded that “it is in the best interest of the Department that its
ultimate decision be perceived as impartial and objective. In this regard, options
available to the Department include formal interrogatories under oath, public
proceedings where confidential documents are available to third parties under Rule
12, or use of an administrative law judge (ALJ) to conduct fact-finding on significant
matters in dispute.”10
In April 2003, following publication of the DOT-IG’s letter, Congress passed,
and the President signed, the Emergency Wartime Supplemental Appropriations Act
(P.L. 108-11), which included a provision that required the DOT to employ an ALJ
to handle the specific docket (OST-2002-013089) that DOT had established to
evaluate the citizenship of DHL Airways.11
The same Act contained a provision that added specific revenue and ownership
criteria, beyond the citizenship evaluation by DOT, that affected the eligibility of
certificated air carriers that sought to sell services to the federal government. In
6 U.S. Department of Transportation, Docket OST-2001-8732, In the matter of Registration
of DHL Worldwide Express, Inc., as a Foreign Air Freight Forwarder Under Part 297,
Initiated January 18, 2001 and U.S. Department of Transportation, Docket OST-2001-8736,
In re Compliance with U.S. Citizenship Requirements of DHL Airways, Inc., Third Party
Complaint of Federal Express Corp. Pursuant to 14 C.F.R.302.404, initiated January 19,
2001.
7 “Legislators Press DOT on Citizenship Review,” Aviation Daily, November 22, 2002.
8
U.S. Department of Transportation, Office of the Inspector General, Letter to
Representative Don Young on DOT’s Air Carrier-Citizenship Review Process, March 4,
2003, p. 5.
9 Ibid.
10 Ibid. p. 6.
11 P.L. 108-11, Section 2710.

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particular, it restricted the federal government from purchasing air transportation
services from any carrier that “receives 50 percent or more of its operating revenue
over the most recent 3-year period from a person not a citizen of the United States
and such person, directly or indirectly, either owns a voting interest in the air carrier
or is owned by an agency or instrumentality of a foreign state.”12 Currently the only
air carriers whose eligibility is affected are Astar Air Cargo and ABX Air, the
primary contractors to DHLWE-US.13
The DOT transferred the complaint to an ALJ on April 17, 2003.14 The ALJ has
held at least eight days of public hearings and received thousands of pages of
documents and hearing transcripts. On December 19, 2003, the ALJ concluded that
Astar Air Cargo is a citizen of the United States. Following the ALJ ruling, parties
can file petitions to DOT for discretionary review of the ALJ decision.
Airline Citizenship Criteria
In order for Astar Air Cargo to be deemed a citizen, it must meet statutory
ownership requirements, as well as demonstrate that it is under the “actual control”
of U.S. citizens. The Astar Air Cargo ownership, operating contracts, and ownership
financing differs from what existed when the DOT proceeding started and the carrier
operated as DHL Airways. The DOT has ruled that only the current Astar Air Cargo
ownership structure is subject to review.15
The statutory ownership requirements are as follows: the carrier must (1) be
incorporated in the United States; (2) have a president and two thirds of the board of
directors and other managing officers who are U.S. citizens; and (3) ensure that no
less than 75% of its voting stock is owned or controlled by U.S. citizens.16 In his
review of the DOT proceeding to consider DHL’s reorganization (including the
change in ownership, management, and operations), the DOT-IG concluded “there
is little or no dispute that DHL Airways currently meets these three prerequisites.”17
12 Ibid.
13 DHLWE-US is used here to note that the contract is with the U.S.-based foreign freight
forwarder of DHLWE, the international express carrier. ABX Air, the air operations portion
of Airborne Express, was created in August 2003 as a condition of the merger between DHL
and Airborne Express. In its most recent 10-Q filing, ABX Air noted, “In the event that
FedEx and UPS are successful in their challenge to the citizenship of Astar, a similar
challenge will likely be made regarding the citizenship of ABX.” ABX Air, Inc., Quarterly
Report 10-Q, for the quarter ended Sept. 30, 2003. November 14, 2003. p. 22.
14 U.S. Department of Transportation, “Order Instituting Formal De Novo Review,” Docket
OST-2002-13089, April 17, 2003.
15 U.S. Department of Transportation, Order 2003-7-36, In the matter of the citizenship of
DHL Airways, Inc. under 49 U.S.C. Sec. 40102(a)(15), Docket OST-2002-13089, July 30,
2003.
16 49 U.S.C. §. 40102(a)(15).
17 U.S. Department of Transportation, Office of the Inspector General, Letter to Chairman
(continued...)

CRS-5
After the DOT-IG concluded his investigation of DOT’s handling of the DHL
citizenship review in March 2003, and after
P.L. 108-11 had become law, DHL Airways
was sold to an investor group that included
Figure 1
the president of DHL Airways, John
Ownership Structure of
Dasberg,
and
two
American
citizen
Astar Air Cargo
partners.18
DHL Airways was renamed
U.S
Astar Air Cargo and the ownership change
Shareholders
Richard Blum
became official in July 2003. The current
John Dasberg
ownership structure is illustrated in Figure
Michael R. Klein
1.
Although there is little dispute over
100%
100%
whether Astar Air Cargo meets the statutory
owned
voting
ownership requirements, the dispute centers
on whether DHLWE is in a position to
exercise “actual control” over Astar Air
Cargo.
According to the DOT-IG, “the
Astar
Department of Transportation, and the Civil
Air Cargo
Aeronautics Board (CAB) before it, quite
correctly,
have
interpreted
these
Source: John H. Dasburg, Testimony in
requirements to mean that U.S. citizens be
Docket No. OST-2002-23089, p. 6,10.
in control of a carrier, both in form and in
fact. To this end, the Department looks at
the totality of the circumstances to determine whether the carrier is, in fact, under the
‘actual control’ of U.S. citizens.”19
In response to DOT’s handling of the DHL Airways/Astar Air Cargo case,
Congress, in recently enacted Federal Aviation Administration Reauthorization
legislation, codified the requirement that United States air carriers be effectively
controlled by United States citizens (P.L. 108- 176; H.R. 2115, Sec. 807).20 The
17 (...continued)
Don Young on DOT’s Air Carrier-Citizenship Review Process (DOT-IG Letter to Chairman
Young). March 4, 2003, p. 3.
18 The other two partners are Richard C. Blum, chairman of San Francisco-based Blum
Capital Partners LP, a private equity firm, and Michael R. Klein, a Washington, D.C.
business executive and lawyer who is a partner in the law firm Wilmer, Cutler, and
Pickering.
Armbruster, William, “DHL Airways Acquisition Finalized,” Journal of
Commerce Online, July 15, 2003 (page read December 8, 2003 using Factiva).
19 U.S. DOT. IG Letter to Chairman Don Young, March 4, 2003. p. 3.
20 Sec. 807 of P.L. 108-176 (Vision 100 – Century of Aviation Reauthorization Act)
(Conference report H.Rept. 108-334) was introduced as S.Amdt. 920 to S. 824, the Aviation
Investment and Revitalization Vision Act, by Senator Ted Stevens and approved by the
Senate on June 12, 2003.

CRS-6
statutory basis for the decision of the ALJ was the U.S. Code as amended by this
legislation.21
The question of “actual control” of Astar Air Cargo is the main issue in dispute.
The DOT-IG noted seven factors that are most commonly cited to determine actual
control.22
(1) Control via Super-Majority or Disproportionate Voting Rights - minority
foreign owners may not have disproportionate influence with their voting
rights.
(2) Negative Control/Power to Veto - minority foreign owners cannot possess
veto rights over major corporate decisions.
(3) Buy-Out Clauses - a foreign entity may not be entitled to exercise buy-out
clauses that, if exercised, would jeopardize the air carrier’s financial or
operational ability to continue in business.
(4) Equity Ownership - the maximum total foreign-equity ownership of an air
carrier typically permitted by the Department may be up to 49%.23
(5) Significant Contracts - contracts with foreign entities may not be used to
control the U.S. air carrier.
(6) Credit Agreement/Debt - debt-instrument clauses or bankruptcy
agreements cannot allow a foreign entity to control the air carrier.
(7) Family Relationships/Business Relationships - a foreign citizen may not
exert control over another carrier through a U.S. citizen family member or
business associate.24
The DOT-IG noted that the first three factors were not cited by the UPS and
FedEx in their initial petition. The arguments relating to the remaining factors were
presented to DOT by FedEx and UPS during its initial evaluation of DHL Airways
and to the ALJ in his evaluation of ASTAR Air Cargo.25 The issues associated with
these latter four factors, as argued by the parties and addressed by the ALJ, are
discussed below.
21 Burton S. Kolko, Recommended Decision of Administrative Law Judge in Docket No.
OST-2002-13089 (ALJ Decision), United States Department of Transportation, Office of
Hearings, December 19, 2003, p. 35.
22 DOT-IG Letter to Chairman Young, pp. 8-9.
23 Foreign individuals and entities cannot own more than 25% of voting shares.
24 DOT-IG Letter to Chairman Young, pp. 8-9.
25 As the sale of DHL Airways to the Astar Air Cargo investors was completed before the
ALJ held hearings, his evaluation was restricted to Astar Air Cargo.

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Astar Air Cargo: “Actual Control” Issues
Astar Air Cargo has substantial business relationships (see the dotted lines in
Figure 2) that tie it with both DHLWE’s United States subsidiary, DHLWE-US, and
its ultimate parent company, Deutsche Post.
The details of these business
relationships, the process through which existing management were hired, and the
manner in which the current owners made their purchase, create the appearance of
an “actual control” issue and form the focus of the evidence presented to the ALJ on
Figure 2
Business Relationships Between Astar Air
Cargo, DHLWE, and Deutsche Post
Deutsche
U.S.
Post AG
Shareholders
100%
owned
DHLWE
100%
100%
100%
owned
owned
voting
DHL Holdings
(U.S.) Inc.
Loan
100%
Guarantee
owned
DHLWE- US
Astar
Air Cargo
ACMI Agrememt
(Service Contract)
Sources: Deutsche Post, Slide presentation
entitled, Analysts’ Conference, April 8, 2002, p.26,
and John H. Dasburg, Testimony in Docket No.
OST-2002-23089, pp. 6,10.
the factual issues subject to dispute.26
Equity Ownership. FedEx and UPS have taken the position that the shifting
ownership structure of DHL Airways from what existed at the time that Deutsche
26 DOT-IG Letter to Chairman Young, pp. 6-11.

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Post gained control of the majority of DHLWE indicates that DHLWE had control
over the ultimate owners of DHL Airways and, subsequently, Astar Air Cargo.
As it was consolidating ownership of DHLWE, Deutsche Post faced the
problem of restructuring DHLWE’s United States operations to rationalize
ownership, to coordinate operations with its international network, and to continue
to have access to the airlift that DHL Airways provided to meet customer demand in
the United States and abroad.27
Complicating this challenge, Deutsche Post
documents indicate that it was concerned that DHL Airways may not have met U.S.
statutory ownership requirements even before Deutsche Post purchased the majority
of DHLWE shares.28 (See Figure 3)
Figure 3
DHL Airways Ownership Structure Prior to
Deutsche Post Purchase
DHL Worldwide
Express BV
(DHLWE-Intl.)
48%
77%
owned
voting
52%
23%
owned
voting
DHL Worldwide
Express Inc.
(DHLWE-US)
100%
owned
DHL
Airways Inc.
Source: Deutsche Post, Slide presentation entitled,
Analysts’ Conference, April 8, 2002, p.26
To meet the statutory requirement and continue to have access to the services
provided by DHL Airways, Deutsche Post sold an ownership stake in DHL Airways
to William Robinson, a United States citizen and one of the founders of DHL
International. Following the sale of a stake to Robinson, DHL Airways apparently
27 Prior to Deutsche Post’s purchase of DHLWE, DHL Airways, like many of DHLWE’s
local operating entities, was owned by both the corporation and citizens of the countries
within which DHLWE operated.
28 Deutsche Post. Slide presentation entitled Analysts’ Conference, April 8, 2002, p. 26

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met the statutory ownership criteria, with Robinson owning 55% of the total shares
and 75% of the voting shares in DHL Airways.
In his letter to Chairman Dan Young, the DOT-IG recommended that DOT
address whether the allegation that Deutsche Post owned a majority stake in DHL
Airways prior to the reorganization of DHLWE was true (see Figure 3) and, if so,
whether that has any legal significance given the later ownership structure.29
In its brief, FedEx/UPS30 argued that Deutsche Post and DHLWE orchestrated
the transitions that ultimately resulted in the creation of Astar Air Cargo.31 Astar Air
Cargo argued that only the Astar Air Cargo’s ownership and management structure
was relevant, given the direction of DOT to the ALJ to evaluate only the Astar Air
Cargo ownership structure and not any structure that preceded it. Astar Air Cargo
maintains that its structure meets the specific statutory requirements regarding
citizenship of owners and management.32
As to the FedEx/UPS charge of
orchestration by DHLWE, Astar Air Cargo argued that its current owners’ decision
to purchase the airline was made independently and was not part of a Deutsche Post-
directed plan to restructure DHL Airways to meet U.S. citizenship requirements.33
In his decision, the ALJ rejected the arguments of FedEx/UPS. He stated that
he found no merit in the “contention that a continuum of control exists.”34 He noted
that some questions about control over DHL Airways may have existed from
provisions in the agreements between DHL Airways and DHLWE but they had been
terminated with the sale of DHL Airways and had no relevance to the current control
of Astar Air Cargo.35
Significant Contracts. Astar Air Cargo provides service to DHLWE-US
using an Aircraft, Crew, Maintenance, and Insurance agreement (ACMI agreement).
ACMI agreements are common in the airline industry. For example, FedEx has two
ACMI agreements with Air T, Inc. (Air T) subsidiaries Mountain Air Cargo, Inc. and
CSA Air, Inc. that employ small planes to deliver FedEx shipments to smaller
markets. Both DHLWE-US and UPS purchase dedicated air transportation services
using small planes to serve small markets in the United States from Ameriflight.
Because UPS does not have the right to operate flights within the EU, it employs Star
29 Department of Transportation, Office of the Inspector General, Letter to Representative.
Don Young on DOT’s Air Carrier-Citizenship Review Process, March 4, 2003, pp. 8.
30 FedEx and UPS filed joint briefs with the ALJ. Therefore when the actions of the parties
jointly are referred to, “FedEx/UPS” will be used.
31 Post Hearing Brief of FedEx Express and UPS in the matter of the citizenship of DHL
Airways N/K/A Astar Air Cargo, Inc. (FedEx/UPS Brief), Docket OST-2002-13089,
November 10, 2003, pp. 22-29.
32 John H Dasburg, Testimony, presented in Docket No. OST-2002-13089, pp. 5-6.
33 Astar Air Cargo, Inc.’s Post Hearing Brief in the matter of DHL Airways, Inc., (Astar
Brief), docket No. OST-2002-13089, October 31, 2003, pp.16-21.
34 ALJ Decision, p. 12.
35 Ibid.

CRS-10
Air, a Danish citizen airline and a subsidiary of the Maersk Corporation, to provide
airlift within the EU. These contracts provide examples of the ACMI contracts that
are typically used by express carriers when it is more economical to contract for air
service or when airline citizenship restrictions prevent the express carrier from flying
the planes themselves.
Under the 11-year ACMI agreement between DHLWE-US and Astar Air Cargo,
Astar is responsible for providing air lift (aircraft and crew) between points and on
a schedule agreed to by DHLWE-US.
This contract provides the air lift that
DHLWE-US needs to link its ground operations within the United States and
overseas and ensure that time-definite delivery commitments are met. Because
Deutsche Post, DHLWE, and DHLWE-US are foreign entities, they are required by
U.S. law to contract with a U.S. citizen carrier to offer domestic airlift. If Astar Air
Cargo is deemed to be a U.S. citizen carrier, DHLWE can continue to use their
services. Otherwise it will need to find alternative airlift capacity from one or more
U.S. citizen carriers capable of meeting its needs.36 Regardless of who provides the
airlift, the air network needs of DHLWE would be identical.
The details of the Astar Air Cargo ACMI agreement have been a central focus
of the proceeding before the ALJ as contracts specify in detail the actions of all
parties and by their nature could limit the actions of parties to such a degree as to
create a situation that would prevent independent action of the contractor, in this case
Astar Air Cargo. The FedEx/UPS critique of Astar Air Cargo’s ACMI contract has
focused on the following six issues:
! Astar Air Cargo generates 90% of its revenue from this relationship
and is considered to be financially dependent on DHLWE-US
business. UPS and FedEx argue that this dependence will grow as
Astar Air Cargo, which now generates 85-90% of its remaining
business from the Federal government, loses its remaining business
with the U.S. military as a result of the Emergency Wartime
36 Contracting out the air lift required for a freight forwarder’s network has a precedent
following closure of Emery Air Freight’s (now Menlo Forwarding) subsidiary airline.
Emery then contracted with Ryan Air International to provide the dedicated air lift that it
required. In addition to Astar Air Cargo, DHLWE-US currently contracts with both
Northwest
Airlines
and
Ameriflight
to
serve
routes
out
of
DHLWE-US’s
Cincinnati/Northern Kentucky hub. Other carriers are currently operating aircraft, which
could conceivably replace Astar Air Cargo, should it be deemed not to be a U.S. citizen.
These alternatives include Kitty Hawk Cargo and Ryan International Airlines, among others.

CRS-11
Supplemental Appropriations Act.37 Based on hearing testimony,
ASTAR was recently forced to return one of its two non-dedicated
aircraft to the lessor when its contract for military cargo was
terminated because it could not replace the lost cargo.38 FedEx and
UPS further argue that the market for domestic air cargo services is
so weak that finding non-governmental customers would be
exceptionally difficult.39
FedEx/UPS contend that Astar’s reliance on DHLWE for 90% of its
revenue provides evidence that Astar Air Cargo is under the control
of a foreign entity. In support of that contention, they cite the 50%
test established in section 2710 of the Emergency Wartime
Supplemental Appropriations Act:
an air carrier shall not be considered to be effectively
controlled by citizens of the United States if the air carrier
receives 50 percent or more of its operating revenue over
the most recent 3-year period from a person not a citizen
of the United States and such person, directly or indirectly,
either owns a voting interest in the air carrier or is owned
by an agency or instrumentality of a foreign state...40
FedEx/UPS conclude, that “ASTAR’s concession that DHL has
provided over 50% of ASTAR’s revenues since its 2001
reorganization should be enough, in and of itself, to justify a finding
that DHL controls it.”41
The ALJ agreed that Astar Air Cargo hardly exists apart from
DHLWE’s need for its services. However, he disagreed with the
contention that DHLWE could credibly threaten Astar Air Cargo with
the loss of its business. Without a credible threat, he did not believe
that the predominant customer had the ability to control the supplier.42
! The ACMI agreement limits ASTAR Air Cargo’s ability to sell
services to third parties using the equipment dedicated to DHLWE-
US and restricts how it prices air transportation services to third
parties using non-dedicated aircraft. Astar Air Cargo is prohibited
from selling services using dedicated aircraft to express delivery
companies with “annual revenues in excess of $5 billion (other than
the United States Postal Service or any affiliate of [DHL]
37 FedEx/UPS Brief, pp. 30-32.
38 Ibid., p. 70.
39 Ibid. pp.65.
40 P.L. 108-11.
41 FedEx/UPS Brief, pp. 29-30.
42 ALJ Decision, p. 24.

CRS-12
Worldwide).”43 This effectively prohibits Astar Air Cargo from
using the aircraft dedicated for the use of DHLWE-US for
transportation needs of its direct competitors: FedEx, UPS, or TNT.
With respect to pricing, FedEx/UPS state “the ACMI Agreement
requires ASTAR to price such services ‘at the incremental cost and
expense thereof.’”44
FedEx/UPS argue that these restrictions
effectively allow DHL to control the price at which Astar Air Cargo
may offer services to third parties.45 Astar Air Cargo counters that
these provisions do not apply to business outside of air
transportation services and does nothing more than set a price floor
on business that Astar solicits from other customers, which protects
DHLWE-US from cross-subsidizing Astar’s third-party business.
FedEx/UPS note that there is no evidence that Astar intends to enter
any other line of business and, furthermore, points to its financing
agreement with Boeing that expressly prohibits Astar from engaging
in other lines of business.46 As to the cross-subsidy argument,
FedEx/UPS counter that to the extent that “the ACMI agreement was
intended to prevent Astar from using its own profits to support third-
party business...DHL not only may dictate price, but may tell
ASTAR how it may spend its profits, thus providing influence over
ASTAR’s most fundamental policy decisions.”47
The ALJ rejected FedEx/UPS’s arguments relating to limitations on
seeking outside business. “That the carrier may procure and develop
meaningful air freight business independent of DHLWE demonstrates
in itself that DHLWE does not control it. Control rests in the hands
of Astar [Air Cargo] because it maintains the power of choice to
pursue the business model it crafts.”48
! Astar Air Cargo relies on DHLWE-US to provide ground services
that are necessary to meet its commitments to DHLWE-US. These
ground services include loading and unloading cargo from aircraft
and delivery vans, loading and unloading cargo from the cabin and
belly of the aircraft, and driving and operating various transport
vehicles and ground service equipment necessary to transport
containers between airplanes and load and off-load cargo. FedEx
and UPS argue that Astar Air Cargo’s reliance on DHLWE-US for
the provision of ground services precludes it from seeking business
from other customers because it does not have ground support other
43 ACMI Service Agreement between DHL Worldwide Express, Inc. and Astar Air Cargo
(ACMI Agreement), Inc., Section 4.1(a)(ii).
44 ACMI Agreement, Section 4.2.
45 FedEx/UPS Brief, p. 61.
46 Ibid., p. 64.
47 Ibid., p. 63.
48 ALJ Decision, p. 25.

CRS-13
than that which DHLWE-US provides to offer other customers.49
Astar Air Cargo counters that it is a common industry practice to use
third-parties to provide ground services and that Astar Air Cargo
trains all DHLWE-US employees that perform the ground services
for it.50 According to the ACMI Agreement, the use by Astar of
DHLWE equipment and facilities is subject to two important
conditions: (1) ASTAR must “reasonably” determine that it needs
DHL’s equipment or facilities; and (2) it can use that equipment and
facilities unless they “are fully utilized such that they are not
available for use by ASTAR.”51
FedEx and UPS claim that
“ASTAR’s ability to serve third parties depends on the availability
of DHL resources and DHL’s willingness to provide them.”52
The ALJ rejected FedEx/UPS’s argument because Astar Air Cargo
has complete control over whom it hires to perform the ground
operations that DHLWE now performs. In particular, he notes that
there is no contractual obligation to hire DHLWE employees and the
decision to use DHLWE employees was Astar Air Cargo’s.53
! The cost-plus nature of the contract and attendant audit rights are
said to grant DHLWE-US “a controlling influence over ASTAR’s
management or policies.”54 This argument focuses on the nature of
cost-plus contracts. Under such contracts, the customer has an
interest in ensuring that he is not overcharged for services rendered.
As such, the customer, here DHLWE-US, is granted audit rights to
review the books of the supplier, in this case Astar Air Cargo. The
argument contends that “the audit process is intrusive and likely to
raise fundamental, second-guessing type questions by the persons
conducting the audit” and that people possessing audit rights in cost-
plus contracts “have a substantial ability to influence the audited
person’s activities.”55 Astar Air Cargo counters by arguing that the
audit provisions in the cost-plus contract are limited, standard in
cost-plus contracts, and subject to third party arbitration in the case
of dispute.56
The ALJ sided with Astar Air Cargo in regards to
ACMI’s cost-plus and audit provisions.57
49 FedEx/UPS Brief, pp. 76-80.
50 Astar Brief, pp. 44-45.
51 ACMI Agreement, Section 4.3.
52 FedEx/UPS Brief, p. 80.
53 ALJ Decision, p. 30.
54 Ibid., p. 56.
55 Ibid.
56 Astar Brief, pp. 45-46.
57 ALJ Decision, p. 31.

CRS-14
! The ACMI agreement appears to impose significant barriers for
Astar Air Cargo’s current owners that may prevent them from selling
more than half of their interests in the company. These barriers
come from contract provisions that require consultation with
DHLWE-US on certain types of ownership changes and DHLWE-
US’s ability to change significant provisions of the ACMI agreement
that would adversely affect Astar Air Cargo upon change of
ownership.58 These contract provisions may result from DHLWE-
US’s interest in ensuring that Astar Air Cargo is not sold to an entity
that would result in a question of citizenship or that entity being
under the control of one of DHLWE-US’s direct competitors.
FedEx/UPS contend that these restrictions, regardless of their
rationale, create a situation that gives DHLWE control over the
ability of Astar Air Cargo owners to sell the stake in the company.
Astar Air Cargo counters that its owners have a wide range of
options for selling shares in the company without triggering the
consultation provision and the potential for financial risks to Astar
Air Cargo’s new owners. These options include selling the equity
in Astar Air Cargo while retaining at least 50% of the voting rights,
selling the equity and voting power in a dispersed offering to the
public or private investors, so long as no individual or group owned
more than 50% of the voting rights, and selling their interest in the
holding company that owns the stock in Astar Air Cargo, as the
ACMI agreement contains no provisions restricting sale of the
holding company.59 The ALJ concluded that the “change of control”
provisions only restrict a fraction of Astar Air Cargo owners rights
to transfer their ownership stakes, and he did not view those
provisions as reflecting significant control by DHLWE over Astar
Air Cargo.60
! Control requires that the owners bear substantial residual risk, or
risks associated with the possibility of liquidation. The contractual
relationship between Deutsche Post/DHLWE and Astar Air Cargo
may be so favorable toward Astar that it removes all residual risks
of ownership for the three United States investors of an Astar Air
Cargo. The parties disagree as to the risk that the three Astar Air
Cargo investors bear.
FedEx/UPS maintain that “In most
transactions, the risk of loss transfers from seller to buyer at closing.
The evidence shows that DHL transferred none of its risk to the
Dasburg group on July 14, 2003. Instead, and consistent with its
58 Section 13.1(h) of the ACMI Agreement requires that DHLWE-US be notified by Astar
Air Cargo prior to the change in control. Sections 6.1 and 10.5 of the ACMI Agreement
both allow DHLWE-US to modify the agreement in ways that would financially hurt the
new owners and Section 13.1(i) increases the on-time performance requirement.
59 Astar Brief, pp. 49-52.
60 ALJ Decision, p. 23.

CRS-15
treatment of ASTAR as a cost center, DP/DHL assumed all risks.”61
The parties differ in regard to the liquidation value of Astar Air
Cargo assets, the costs associated with liquidation, and the financial
commitments that DHLWE-US would have to Astar Air Cargo and
its creditors if Astar Air Cargo was forced to shut down. Astar Air
Cargo also challenges the premise that a favorable contract that
minimizes risk to Astar Air Cargo investors would represent the
potential for control.
The ALJ did not address the role that residual risk has on the question
of control directly. Instead he addressed the impact that contractual
terms that eliminated the risk associated with DHLWE pulling its
business away from Astar Air Cargo would have on control. He
concluded that these terms put Astar Air Cargo in a better position as
they reduced DHLWE ability to control Astar Air Cargo by trying to
put it out of business.62
In summary, the ALJ rejected most of FedEx/UPS’s arguments relating to the
ACMI agreement.
Credit Agreements/Debt. This third citizenship evaluation factor centers
on contentions that the methods that Astar Air Cargo investors used to finance its
purchase and working capital could create a situation that places Astar Air Cargo
under foreign control.
In regard to financing, Astar Air Cargo investors borrowed $50 million from
Boeing Capital for the purchase of DHL Airways. This loan is secured by the
required ACMI agreement payments that Astar Air Cargo receives from DHLWE-US
and those payments are guaranteed by DHLWE-US’s ultimate corporate parent,
Deutsche Post. Furthermore, to ensure repayment, the principal on the note is paid
directly to Boeing through a lock-box arrangement.63
FedEx/UPS contend that the financial guarantee makes the financing of the
purchase of Astar Air Cargo dependent on DHLWE-US and Deutsche Post.64 They
argue that “the record contains no evidence that the Dasburg group could have
obtained the financing without DP/DHL [Deutsche Post/DHLWE]. With a DP
guaranty in hand, it is irrelevant as to whom actually found Boeing. The financing
was predicated on the DP credit and Boeing made sure it was not exposed to Astar
performance risk.”65
61 FedEx/UPS Brief, p. 51.
62 ALJ Decision, p. 28.
63 Presumably the principal payment is only a portion of the ACMI payment from DHLWE-
US and Astar Air Cargo.
64 FedEx/UPS Brief, pp. 45-49.
65 FedEx/UPS Brief, pp. 46-47.

CRS-16
Astar Air Cargo argues that the loans were procured by the investors, the
payment guarantees and the loan were obtained independently, and that there is no
evidence that the guarantee can be withdrawn and only withdrawal of the guarantee
can create a situation in which the guarantor, Deutsche Post, could have control over
Astor Air Cargo.66
In examining the guarantee, the ALJ found that while the guarantee undoubtedly
made Boeing Capital’s decision easier, the evidence does not show that Boeing
Capital would not have agreed to finance the purchase on presumably favorable terms
without the guarantee. He notes that the guarantee raises eyebrows but does not
show control of Astar Air Cargo by Deutsche Post.67
Also in regard to financing, Astar Air Cargo negotiated that all receivables
associated with equipment maintenance costs that were booked by DHL Airways,
including receivables from DHLWE-US, should remain with Astar Air Cargo and not
with DHLWE-US. This receivable is booked as an asset on Astar Air Cargo’s books.
This asset, valued at $61 million, provides Boeing Capital additional assurance that
its loan will be repaid. The parties disagree whether DHLWE’s agreement to leave
the asset with Astar Air Cargo resulted in DHLWE creating the environment in
which Astar Air Cargo could get a loan, and therefore resulted in DHLWE
controlling Astar Air Cargo’s ability to get credit. The ALJ concluded that the
receivable was a legitimate expense owed DHL Airways/Astar Air Cargo for
“services already rendered and was not something Deutsche Post or its subsidiaries
can legally refuse to pay.”68
Family Relationships/Business Relationships. The final citizenship
evaluation factor focuses on questions relating to the relationship between the current
management and ownership team of Astar Air Cargo and DHLWE-US, DHLWE,
and Deutsche Post. Astar Air Cargo’s president, John Dasburg and its third investor,
Michael Klein, have connections that, at a minimum, raise questions about the
potential for control.69
John Dasburg, the president of Astar Air Cargo, was originally hired by DHL
Airways at the time that DHLWE-US was a minority owner of DHL Airways and
had a member on the board of DHL Airways. The hiring process began shortly after
the death of the previous president of DHL Airways. During the hiring process Mr.
Dasburg met with John Fellows, DHLWE-US’s chief executive; Uwe Dörkin,
DHLWE CEO; and Klaus Zumwinkel, Deutsche Post president. Both Mr. Fellows
and Mr. Dörkin were decision makers in the Dasburg hiring, as would be expected
given DHLWE-US’s ownership stake in DHL Airways and position on the DHL
Airways board. FedEx/UPS contend that both the hiring process and the subsequent
negotiation for the sale of DHL Airways to a group headed by an individual hired
with input from Deutsche Post, DHLWE, and DHLWE-US indicates a business
66 Astar Brief, pp. 54-55.
67 ALJ Decision, p. 17.
68 ALJ Decision, p. 16.
69 FedEx/UPS Brief, pp. 22-29 and 75-76.

CRS-17
relationship that creates the opportunity for DHLWE-US and Deutsche Post to
control the purchasers of Astar Air Cargo.70 In response, Astar Air Cargo argued that
neither the hiring process nor the purchase negotiating process created a situation in
which DHLWE or Deutsche Post controlled the actions of Astar Air Cargo.
Furthermore, Astar notes that Dasburg was employed by DHL Airways for a total of
3½ months prior to the purchase of Astar Air Cargo, which would not indicate that
Dasburg has strong ties or commitments to DHLWE-US, DHLWE, or Deutsche
Post.71 In regards to Dasburg, the ALJ concludes that his actions were independent
of DHLWE or Deutsche Post. He notes that Dasburg took the job with DHL Airways
clearly intending to buy the company and that his credentials lent credibility to Astar
Air Cargo both as a U.S. citizen carrier and as a carrier that would be capable of
meeting the exacting service standards that DHLWE would require.72
With respect to Michael Klein, a potential conflict is alleged to occur because
he is a partner in the law firm of Wilmer, Cutler, & Pickering, which represents
Astar, various DHL entities, and Deutsche Post.73 FedEx/UPS contend that Klein’s
partnership in Wilmer, Cutler, & Pickering, a firm that generates fees from DHLWE-
US, DHLWE, Deutsche Post and firms with connections to the German government
(Lufthansa and Deutsche Telekom), creates a situation in which influence or pressure
could be exerted on behalf of Deutsche Post or the German Government. In the view
of FedEx/UPS, “Deutsche Post can assert influence over Astar through means as
simple, and untraceable, as a water cooler conversation between Klein and another
Wilmer Cutler & Pickering partner, be it someone on the other side of the ethical
wall or member of the firm’s management responding to pressure from the
Germans.”74 In response, Astar Air Cargo asserts that there is no evidence that
control could be exercised through Klein’s law firm. Finally, Astar Air Cargo notes
that Wilmer, Cutler & Pickering has set up appropriate procedures to separate Mr.
Klein from any influence from other partners dealing with Deutsche Post, or DHL
entities.75
The ALJ stated that he could not rely on nonlegal or self regulatory safeguards
as they exist primarily for the client’s benefit and can be modified, changed or
ignored without the Department [DOT] – or anyone else’s – knowledge.76 However,
he concluded that the internal conflicts within Wilmer, Cutler, & Pickering, and the
“whatever it might suggest in terms of appearances of impropriety does not show that
Klein or Astar, is actually controlled by the foreign entities.”77 The ALJ concluded
that the evidence, presented before him, offered “no reason to suspect that because
70 FedEx/UPS Brief, pp. 22-29.
71 Astar Brief, p. 57.
72 ALJ Decision, p. 5 and p. 15.
73 FedEx/UPS Brief, pp. 75-76.
74 Ibid., p.75.
75 Astar Brief, p. 57.
76 ALJ Decision, p. 32.
77 Ibid.

CRS-18
of common representation Klein and his group have not been (and are not)
completely separate and independent of Deutsche Post, DHLH and DHLWE.”78
In deciding in Astar Air Cargo’s favor in nearly all of the specific issues as well
as the overall question of “actual control,” the ALJ focused on two questions. First,
what is the nature of the relationship between Astar Air Cargo and DHLWE? He
noted that even though DHLWE is a demanding client with the specific requirement
that Astar Air Cargo’s services mesh smoothly with DHLWE’s other operations, and
Astar Air Cargo has little other business, the relationship is simply that Astar Air
Cargo is a provider of services and DHLWE is its client. The ALJ concluded that
the provision of a service by Astar Air Cargo that produced a portion of the activity
necessary to provide a seamless integrated network for package delivery need not
result in “actual control.”79
The second question is, “who has the power to direct or dominate ASTAR [Air
Cargo]?”80 The ALJ’s response is “and the answer is ASTAR.”81 He concludes that
“an examination of the question in fact shows that ASTAR is, so to speak, its own
person; it is functionally independent of DHLWE. Neither DHLWE nor the DHL
network can be said to be in actual control of ASTAR in any relevant or meaningful
sense.”82
Issues Following the Proceeding
Following the ALJ decision, the DOT will accept petitions from parties for
discretionary review of the ALJ decision. The DOT will issue a final ruling shortly
thereafter.
The Astar Air Cargo decision may have implications for negotiations between
the United States and the European Union (EU) on opening aviation markets in the
United States and Europe.83 American cargo carriers are interested in greater access
to European markets, just as European carriers are interested in access to the U. S.
market. The underlying public policy issue in this instance is significantly broader
than the DHL/Astar citizenship case.
At present, the United States and the EU are engaged in negotiations that seek
to replace existing bilateral agreements with EU member states with a single,
comprehensive agreement for an “Open Aviation Area” between the United States
and the EU. Negotiations will cover rules governing market access (routes, capacity,
78 Ibid. DHLH is DHL Holdings, the U.S. holding company for all DHLWE’s interests in
the United States.
79 Ibid., p. 33.
80 Ibid.
81 Ibid.
82 Ibid., p. 32.
83 Don Phillips, “U.S., EU. to Hold Talks on Opening Aviation Markets,” The Washington
Post, June 25, 2003, P. A7.

CRS-19
frequency), the setting of air fares, and the effective application of competition. Of
critical importance to airlines on both sides of the Atlantic are discussions over how
or whether to open each side’s internal/domestic market to airlines of the other side.
Both sides are interested in the removal of restrictions that apply to foreign
ownership and control.84 In the United States, removal of such restrictions would
require Congressional action.
An Open Aviation Area may be important for creating the conditions to allow
fair and open competition between U.S. and foreign-owned global express carriers.
American carriers believe that open skies could provide them with substantial
benefits.85 As demand for high-quality, global express services expand, carriers
desire the ability to offer global integrated air networks both in home markets and
overseas. As discussed, under U.S. law carriers providing transportation to meet this
demand within the United States must be corporate citizens. Most other countries
have similar requirements. In the absence of an Open Aviation Agreement, it is
unlikely that either the United States or the EU will unilaterally relax restrictions on
ownership and control. Recent congressional action clearly indicates a concern that
foreign-owned companies not be allowed to exploit loopholes in U.S. law and
regulation.
The Astar Air Cargo case also illuminates the importance of access to air
markets for U.S. express carriers in other parts of the world where they compete with
the European express carriers DHL and TNT. For example, improving access for
U.S. carriers in Asia will go beyond improving their ability to serve express
customers between Asia and the United States. These changes also improve the
American carriers’ competitive position to handle shipments within Asia and
between Asia and Europe. This is illustrated by the impact that the expansion of air
cargo market access granted FedEx and UPS in Hong Kong had on the service that
they offered between Europe and Asia. The new service authority granted these
companies allowed them connect their substantial Asian networks to their European
hubs in Paris and Cologne respectively.86 UPS, for example, with its expanded
authority to handle cargo from Hong Kong to Cologne, can link its Asian hubs in
Hong Kong, the Phillippines, and Singapore to Europe using UPS owned or leased
aircraft and UPS employee crews. FedEx can do the same with the flights that it was
granted. Both carriers also expanded service between Hong Kong and their hubs in
the Phillippines. Neither of the global, Europe-headquartered, express carriers has
the same capabilities.
Open skies agreements with smaller countries can also have a significant impact
for U.S. cargo carriers in their ability to compete with DHL and TNT. Both UPS and
FedEx have announced intentions to expand operations in Thailand following the
84 Adrian Schofield, “Negotiators Must Not Draw Out U.S./EU Talks, Byerly Says,”
Aviation Daily, November 7, 2003, p. 1.
85 Angela Greiling Keane, “Early Cargo Harvest?” Traffic World, October 20, 2003, p. 31.
86 “DOT Selects U.S.-Hong Kong All Cargo Carriers,” Journal of Commerce Online,
September 12, 2001 as viewed on Factiva, December 22, 2003.

CRS-20
signing of an open skies agreement between Thailand and the United States.87
Initially, UPS plans to expand the number of flights between Thailand and its hub in
the Phillippines and is studying the potential of Thailand as a hub bridging Indochina
(Vietnam, Laos and Cambodia) and the Indian subcontinent.88
FedEx’s plans in
Thailand appear to be moving in a similar direction.89 The EU would need to
negotiate a similar agreement with Thailand in order for DHL and TNT to do the
same without using the services of contracted air lift.
Intense competition for business in fast growing Asia-to-Europe and Asia-to-
North America traffic lanes requires the provision of seamless service in more places
than ever before. As all express carriers expand their business outside of their home
markets in the United States or the EU, the interest in open skies agreements will
increase. Congressional action may be required to modify or remove those
restrictions in the United States in conjunction with future open skies agreements.
87 “UPS Sees Hub Role for Bangkok, Thailand,” Bangkok Post, October 31, 2003 as viewed
using Factiva December 22, 2002 and Srisamorn Phoosuphanusorn, “FedEx to Expand in
Thailand As Open Skies Pact Takes Hold,” Bangkok Post, October 22, 2003 as viewed using
Factiva, December 22, 2002
88 “UPS Sees Hub Role for Bangkok, Thailand,” Bangkok Post, October 31, 2003 as viewed
using Factiva, December 22, 2002
89 Srisamorn Phoosuphanusorn, “FedEx to Expand in Thailand As Open Skies Pact Takes
Hold,” Bangkok Post, October 22, 2003 as viewed using Factiva, December 22, 2002