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

Publication Date: December 2003

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Transportation

Type:

Abstract:

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.