Corporate governance expert: Astar under de facto control of DHL

Corporate governance expert: Astar under de facto control of DHL    Jeffrey Gordon, a Columbia Law School professor specializing in mergers and acquisitions, testified Thursday that the new owners of Astar Air Cargo received such a 'bonanza rate of return' from express delivery company DHL Worldwide Express on their recent investment in since re-named DHL Airways that DHL has 'significant leverage' over Astar's operations.
   Gordon was called as an expert witness by FedEx Corp and UPS on the third day of a hearing into whether Astar should have its operating certificate pulled because foreign entities — DHL Worldwide Express and its parent, the German postal and logistics conglomerate Deutsche Post — have hidden arrangements to direct the management of Astar. FedEx and UPS claim DHL Airways and Astar violate U.S. foreign ownership restrictions for airlines and that allowing Astar to continue to operate gives Deutsche Post a competitive advantage in the U.S. market because its services are subsidized by the German government.
   Gordon said it would almost be impossible for Astar to find other customers quick enough if DHL decided to terminate its long-term lease arrangement for Astar aircraft and transportation service, which would immediately put the company in jeopardy of defaulting on its loans to creditors.
   FedEx and UPS suffered another setback when Administrative Law Judge Burton Kolko ruled that any evidence related to former DHL Airways investor William Robinson's stock sale is irrelevant in determining whether Astar is owned or controlled by non-U.S. companies. By narrowly framing the case, Kolko is making it more difficult for FedEx/UPS to prove Astar is not independent because the two U.S. logistics integrators allege that Astar adopted the same business model that Airways had with Worldwide Express and that one needs to see the historical transition to understand the current relationship.
   Gordon cited the cost-plus contracts DHL Worldwide Express had with Airways as a similar to the current arrangement that ensures Astar's costs are covered and makes the airline dependent on its benefactor for survival.