That didn't temper the celebrating at DHL at all last month as the carrier claimed as complete a victory as it could have hoped for before the U.S. Department of Transportation. Despite heavy lobbying from UPS, the DOT summarily dismissed UPS's challenge to a freight forwarding license that had been granted to DHL.

The seemingly innocuous license is actually a key part of a restructuring exercise at DHL, which is being rearranged by Deutsche Post to meet legal requirements on ownership of domestic operations while allowing DHL's owners at the German post office to invest in expanding the business. UPS attacked the ploy as patently unfair given Deutsche Post's monopoly foundation in Germany.

Trading Away

DOT certainly took note of UPS's arguments on trade, but the department came down on the other side, recognizing that withrawing a forwarding license held by countless other non-U.S. businesses would put the U.S. on very shaky ground in international trade relations.

"The United States trades in aviation services with many nations that permit governmental entities to own and control their national carriers," the DOT said in slamming the door tightly on the UPS argument. "While we strongly prefer private enterprise, and we are encouraged with the progress that has been made toward privatization in the industry, we must also respect the different views of other nations so as to ensure our airlines' access to the world's aviation markets."

The DOT didn't slam the door as tightly on a parallel complaint by FedEx against the U.S. citizenship of DHL's American unit, San Francisco-based DHL Airways, saying the question would be addressed in an ongoing review of the carrier's fitness as an airline. But the DOT didn't provide much hope for that complaint in its order and the latest organizing actions at DHL's American headquarters appear to be aimed at sealing the company off from any further challenges.

According to a DHL spokesman, DHL is now structured this way in the United States: ground operations are performed by the DHL Worldwide Express U.S. forwarding business, which is owned by DHL Worldwide Express Holdings; DHL Holdings' chairman and chief executive is John Fellows, the former TNT International Express executive; DHL Holdings is 100 percent owned by DHL International, the Brussels-based unit that runs the global DHL network and is controlled by Deutsche Post; DHL Holdings has a minority stake in DHL Airways, which operates DHL's airline operations in the United States and is headed by Joseph O'Gorman, the chairman and chief executive officer.

O'Gorman is not the majority owner of DHL Airways, however, and DHL would not disclose the name of that majority owner, saying only that the person is a U.S. citizen.

Forced Markets

The complexity of the structure is nothing, however, compared to the complications DHL faces in expanding in the United States. Although the company was founded in San Francisco, DHL has a miniscule part of the domestic market while UPS and FedEx hold a combined 80 percent of the express business.

At a recent investment analyst conference in New York, Deutsche Post World Net Chief Financial Officer Edgar Ernst said the company hopes to introduce a parcel delivery service in the United States this year through DHL.

But at last month's Cargo Network Services meeting in Miami, DHL International Chairman and CEO Uwe Dorken sounded less certain about U.S. domestic business. "We don't have any finalized decision today about whether we would enter the U.S. domestic market," he said.

There is plenty of speculation, particularly on Wall Street, about whether DHL might move in one quick swoop with an acquisition, with Airborne Express the most likely target. Airborne has about 10 percent of the U.S. express market and just entered the ground market itself, but the Seattle-based integrator has seen its share of the market fall after two years of anemic returns and some analysts think it could carry just as many problems as it solves.

... Briefly

United Parcel Service will end the passenger charter operation it started nearly five years ago when it reconfigured five 727-100s into convertibles. UPS says the "asset utilization test" was profitable but faced growing competition from charter operators with larger aircraft. … United Airlines expanded its international guaranteed cargo service, TD.Guaranteed, to include domestic shipping. … Miami-based DC-8 freighter flier Fine Air filed its reorganization plan with a U.S. Bankruptcy Court and said it would be prepared to expand its operations once it emerges from bankruptcy. ... Northwest Airlines will begin scheduled 747-200 freighter service July 16 from Asia to the Greater Cincinnati/Northern Kentucky International Airport. ... Iowa-based Trucker CRST International started a "Major Airport Xpress" service aimed at air forwarders and others with expedited logistics needs. … Air charter company Active Aero will handle door-to-door, on-demand air freight charter management for all North American locations for auto components supplier Delphi Automation Systems. … Mechanics at Northwest Airlines approved a contract that calls for a 24.4 percent wage increase over three years, averting a potential strike. … Regional passenger carrier Comair sharply cut back its staff, spending and aircraft amid suggestions that an ongoing pilot strike could threaten the carrier's existence. … Target Logistics reported a loss of $609,265 in the first quarter on $22.8 million in revenue, a 10 percent improvement over last year. … American Trans Air named Vista Air Cargo its cargo sales agent in Miami. ... Alpine Air Express, a regional cargo airline, started service between Denver and Boise, Idaho, with the U.S. Postal Service as its main customer. … The Lynxs Group is developing a 450,000-square-foot cargo center at the Jackson, Miss., International Airport. … Cargo traffic at Orlando International Airport was up 4 percent in 2000 over 1999. ... Cargo at Florida's Tampa International Airport fell 6 percent in 2000, including a 25 percent drop in December, while mail was down 10 percent for the year. ... Aeronavali will convert three more MD-11 passenger planes to freighters for FedEx under a license from Boeing. ... Freight at Oakland International Airport was up 3.5 percent in 2000 while mail was down 11 percent from 1999.