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Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.

Recent events raise substantial questions as to whether DHL Airways, Inc. complies with the ownership and control requirements for U.S. air carriers. Specifically, it appears that foreign nationals, including DHL International, Ltd. (a Bermuda corporation), Deutsche Post, and Lufthansa Cargo AG (both German nationals), control or have the opportunity to control the operations of DHL Airways. In fact, a recent application filed with the Department by DHL Worldwide Express, Inc. shows that non--citizens control DHL Airways. In light of the strong possibility that DHL Airways may be under the control of foreign nationals, Federal Express Corporation requests the Department to conduct a formal investigation into the compliance of DHL Airways with the statutory citizenship requirements applicable to all U.S. air carriers.

The use of DHL Airways to obtain a U.S. air carrier certificate makes the United States a flag of convenience for the true operators of the DHL network. In addition to the legal questions raised by foreign control over a U.S. carrier, the lack of comparable opportunities for U.S. air carriers to control foreign air carriers would give foreign air carriers an unfair competitive advantage over U.S. air carriers. Until the United States negotiates reciprocal flexibility for U.S. air carriers, the citizenship requirements of U.S. law must be respected and enforced vigorously.

Counsel:  FedEx, Thomas Donaldson, 901.434.8586

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.

The irresponsible language of the Complaint foreshadows Federal Express' goal - to effectively preclude competition from Airways and its employees in the United States air express market. Indeed, the Complaint in this docket, the challenge to the foreign air freight forwarder registration of DHL Worldwide Express, Inc., and actions by Federal Express and United Parcel Service Co. attacking Airways in the media, have already adversely affected the competitive position of the carrier by confusing customers and business partners.

Counsel:  Stephen Lachter, 202.862.4321, lachter@starpower.net

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.

DHL Airways' attempt to demonize FedEx for initiating this proceeding is well off the mark. This proceeding is not about eliminating a competitor. Rather, at issue is whether foreign nationals can have access to cabotage rights in the United States while U.S. air carriers are denied that same right in foreign countries. This proceeding is also about whether the DHL network should enjoy the benefits of being a U.S. citizen while avoiding the responsibilities of U.S. citizenship.

Counsel:  FedEx, Thomas Donaldson, 901.434.8586

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.

The second part of Federal Express' Reply is absolutely groundless and also largely irrelevant to Federal Express' original complaint. Federal Express' original complaint alleged that Airways was unfit because it does not comply with the statutory limits on foreign equity investments in U.S. carriers. In its Reply, Federal Express abandons that line of attack (perhaps because Airways' Answer showed it to be meritless) and now charges Airways with being "effectively controlled" by non-U.S. citizens, principally because it participates in the DHL Worldwide Express network. Federal Express also suggests that Airways fails to comply with various other U.S. laws to which all U.S. carriers are subject. Federal Express furnishes not one shred of evidence supporting any of these allegations. Rather, its intent appears to be to engage Airways in a Kafkaesque public debate in which Airways must prove its innocence of a ceaseless string of unsupported charges. Airways is not required to, and will not, accept Federal Express' invitation to engage in this dialogue or prove its continuing fitness in this proceeding. However, Airways cannot permit several of Federal Express' more egregious allegations to go unrefuted.

Federal Express' attempt to pressure the Department to initiate a public hearing does the Department as well as Airways a disservice because it unfairly implies that the Department cannot be trusted to discharge property its carrier fitness review responsibilities using well-established non-public procedures without Federal Express acting as an interested watchdog.

Counsel:  Stephen Lachter, 202.862.4321, lachter@starpower.net

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.

This case is not a continuing fitness case. It is a proceeding to enforce compliance with the requirements of federal law. It was precipitated, in part, by the representation to the Department filed by a DHL entity that: DHL Worldwide Express, Inc. at present, conducts ... direct air carrier operations under the authority of DHL Airways, Inc. Either that statement in support of an application is false and therefore in violation of federal law, or it is a true statement of a more serious violation. According to the same letter, DHL Worldwide Express, Inc. was then, and is now, a non-citizen and cannot lawfully conduct direct air carrier operations under any authority.

Counsel:  Federal Express, Rush O'Keefe, 901-434-8586

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc. and DHL International E.C. and DHL Airways, Inc.

Because the two pleadings are based on the same factual misunderstanding, and to avoid further cluttering the dockets with additional and unnecessary pleadings, DHL Airways, Inc., files this Answer in both dockets to reiterate its strong opposition to the ceaseless efforts of Federal Express to impugn Airways' fitness. For reasons explained here and elsewhere, Airways urges that the Department reject and/or deny these latest Federal Express Motions, Comments, Petitions, and Requests of Federal Express.

For reasons unknown to Airways, Federal Express has embarked upon a campaign to attack Airways before the Department at every turn. Airways can only speculate what additional surprises Federal Express has in store as it continues its unprincipled attack on a small competitor and on freight competition in the domestic market. The Department should not sanction this continued abuse of process and should accordingly dismiss Federal Express' complaints, petitions and requests in these two dockets.

Counsel:  Stephen Lachter, 202.862.4321, lachter@starpower.net

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.

Federal Express Corporation files this comment to supplement the information in the docket and highlight the factual and legal issues that remain unanswered even though DHL Airways has filed three Answers in this proceeding. In all three Answers, DHL Airways has avoided responding directly to the issues FedEx has raised. Rather, DHL Airways has sought to avoid public scrutiny, which has produced more questions than answers.

To make matters worse, not one of the three Answers identifies who owns and controls DHL Airways' parent entity, DHL Holdings (U.S.A.). Recent press accounts add to the confusion. According to one account, "DHL declined to identify the U.S. citizen who would own 75 percent of the voting shares in the airline but said that it was one of the three founders." However, DHL itself announced the death of its last living founder three years ago. In light of the press account above, FedEx is quite curious to learn how DHL-Holdings (U.S.A.), a newly renamed company, can be owned and controlled by a deceased U.S. citizen.

As FedEx has stressed, at the heart of this proceeding is whether the Department will allow foreign nationals to have access to cabotage rights in the United States while U.S. air carriers are denied access to cabotage in foreign countries. Recent events make it clear that the DHL worldwide network is structured in a way to gain that access without awaiting fundamental reform. The DHL network can take on the citizenship of various countries in order to operate aircraft around the world under different flags of convenience. The latest example of the unfair advantage DHL holds over U.S. carriers is its decision to establish a U.K.-flag carrier with a hub in England." In so doing, the yet unnamed DHL U.K.-citizen air carrier will operate flights between points in the E.U. for the benefit of DHL Airways and all other members of the DHL worldwide network. If it works, it will give DHL Airways an advantage over FedEx, which has long sought bilateral rights to provide fifth-freedom services from the U.K.

Counsel:  Federal Express, Rush O'Keefe, 901.434.8586

Compliance with U.S. Citizenship Requirements of DHL Airways, Inc.

On February 5 and 14, 2001, respectively, DHL Airways filed answers opposing the two complaints and requesting that they be dismissed. In its answers, DHL Airways states that it is and will remain in compliance with all citizenship requirements and that there is no basis for the institution of an enforcement proceeding. The carrier states that it has provided the Department with information and documents concerning its corporate reorganization to demonstrate that all citizenship and continuing fitness standards have been met. It further argues that the application of the Department's continuing fitness procedures to the issues raised by FedEx and UPS is far more appropriate than would be their consideration in an enforcement proceeding. Therefore, it urges that the complaints be dismissed. FedEx and DHL Airways filed further responsive pleadings reiterating their positions.

Pursuant to 49 U.S.C. 41102, DHL Airways and other companies may hold certificates to engage in air transportation only if they are found to be citizens of the United States as defined in 49 U.S.C. 40102(a)(15). That section requires that the president and two-thirds of the Board of Directors and other managing officers be U.S. citizens and that at least 75 percent of the outstanding voting stock be owned by U.S. citizens. In addition to meeting these specific numerical standards, the Department has also long interpreted the statute to mean that, as a factual matter, the carrier must actually be controlled by U.S. citizens.

We dismiss the complaints of FedEx and UPS, and we do so without reaching their merits. The Department has for some time been conducting a review of the citizenship of DHL Airways that deals directly with the issues raised by the complaints within the context of an informal continuing fitness review proceeding. That review predates the complaints in these dockets and it would be inappropriate to now begin dealing with the matter in an enforcement context. The material presented here by FedEx and UPS will, however, be considered in the context of that informal review. The Department's consideration of this matter is consistent with its long-standing policy to review citizenship questions of cooperating air carriers informally as part of its monitoring of carrier continuing fitness rather than through an enforcement proceeding or other formal proceeding, particularly where the continuing fitness review is already underway. DOT Orders 93-7-25 and 91-12-51. Therefore, the matter at issue in these pleadings is properly the subject of that informal review and institution of a formal enforcement proceeding as requested at this time would not be appropriate or in the public interest.

By:  Samuel Podberesky

Compliance with U.S. Citizenship Requirements of DHL Airways, Inc.

Although it has not made public its action, the Department has apparently approved the DHL corporate reorganization that prompted the original complaints filed in this docket by Federal Express Corporation and United Parcel Service Co. The Department's reliance on informal and non-public procedures in this case, and its failure to disclose either its decision or its analysis make it impossible for other regulated carriers to know how the laws that govern their right to do business are being administered. In fact, recently uncovered public filings and statements by the DHL network before other government agencies raise very serious questions about whether and how DHL Airways, Inc. can meet its burden of showing that it is free from the foreign influence and control of the DHL network and its majority owner Deutsche Post. In turn, these public filings and statements by DHL raise equally serious questions about the informal procedures requested by DHL Airways and utilized by the Department in this case. These questions can now only be resolved through transparent and public proceedings. Accordingly, the Department should reconsider or review in a public proceeding its approval of the citizenship of DHL Airways in light of the conflicting representations DHL Airways has made to other agencies.

The DHL network's own statements suggest that it has adopted a duplicitous strategy. It maintains to the Department that its U.S. operations are owned by U.S. citizens by reason of the stock held by its employees. It maintains elsewhere that its U.S. operations are an integral, wholly-owned component of its foreign network, by reason of the fact that its network owns the only shares that are truly outstanding. This strategy makes a mockery of federal law. Therefore, the Department has an obligation to resolve these questions in a public proceeding. FedEx Express therefore respectfully requests that the Department reconsider its approval of DHL Airways' corporate structure or, if appropriate, that it take review of a staff action approving that structure.

Counsel:  FedEx, Thomas Donaldson, 901.434.8586

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.  and Petition of United Parcel Service Co. to Institute a Public Inquiry Into The Citizenship and Foreign Control of DHL Airways, Inc

As Federal Express well knows, however, Airways cannot allow to stand unchallenged the litany of misstatements, unsubstantiated allegations and outright distortions that Federal Express is using in its campaign to undermine the Department's decision to review Airways' restructuring in an informal proceeding. Airways, therefore, intends to file a substantive response to the Federal Express pleading. Fundamental fairness and due process of law require that Airways be afforded adequate time to prepare its response to Federal Express's trumped-up charges. Airways therefore requests that the Department establish September 6, 2002, or four days after the end-of summer Labor Day holiday, as the due date for filing such response. Airways considers this to be a reasonable request, given the unauthorized and voluminous nature of the Federal Express pleading and the fact that such response will have to be prepared during the peak of the summer vacation season.

Counsel:  Lachter Clements, Stephen Lachter, 202.862.4321, lachter@starpower.net

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.  

Federal Express Corporation does not oppose the request of DHL Airways, Inc., filed August 13, to set September 6, 2002 as the date on which DHL Airways can file its substantive reply to the Petition for Reconsideration or Petition for Review of Staff Action of FedEx Express. FedEx Express, however, disagrees with DHL Airways' assertion that its Petition was untimely. Unlike DHL Airways, FedEx Express had no notice of the Department's approval of DHL Airways' corporate reorganization. Similarly, DHL Airways' suggestion that the filing is too long is without merit. The petition itself is only 17 pages. In a public proceeding, the attached documents would have been part of the record of the decision. Further, DHL cannot legitimately complain that reviewing its own documents is a burden.

Counsel:  FedEx, Thomas Donaldson, 901.434.8586

Compliance with U.S.- Citizenship Requirements of DHL Airways, Inc.  and Petition of United Parcel Service Co. to Institute a Public Inquiry Into The Citizenship and Foreign Control of DHL Airways, Inc

We find that consolidation of these filings in Docket OST-2002-13089 will enable the Department and the parties to address these similar issues and information more efficiently. Thus, we find that the principle of administrative efficiency supports the consolidation of the two proceedings into one coordinated docket. The consolidation will not in any way prejudice any decision, substantive or procedural, made concerning these filings.  We grant the August 13, 2002 request of DHL Airways for an extension of time and give interested parties until September 6, 2002 to answer the petitions of FedEx and UPS in Docket OST-2002-13089.

By:  Read C. Van de Water

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