*FedEx, UPS Ask U.S. to Ground DHL Airways' Flights

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Deutsche Post AG yesterday rejected claims by U.S. rivals FedEx Corp. and United Parcel Service that its stake in express carrier DHL Airways Inc., the U.S. air and freight-forwarding operations of DHL Worldwide Express Inc., violates U.S. transport and competition law.

DHL Worldwide Express is composed of DHL Airways Inc., which serves all locations in the United States and its territories; and DHL International Ltd., its agents and affiliated companies, which serve all locations outside the United States and its territories.

Competitors FedEx, Memphis, TN, and UPS, Atlanta, joined forces earlier this month to ask the federal government to suspend the flights and the freight-forwarding operations of DHL Airways, Redwood City, CA. The carriers want the government to withdraw DHL Airways' flight certificate on the grounds that Deutsche Post controls the carrier in violation of airline ownership rules.

The requests were made in filings to the U.S. Department of Transportation.

In its filing, UPS said Deutsche Post -- in which the German government retains a 67 percent stake -- is getting unfair access to the United States.

"We talked about the fact that [the] DOT approved a foreign air freight forwarder license for DHL Worldwide Express late last year, and we are asking DOT to revoke that license," said Tad Segal, a UPS spokesman in Washington.

"Unlike private companies, DHL Worldwide Express is owned and controlled by the German government, so on public interest grounds, it is inappropriate to have a foreign government-owned entity having direct access to the U.S. market."

FedEx alleges that DHL International and Deutsche Post have taken control of DHL Airways Inc., violating rules that prohibit more than 25 percent foreign ownership of a U.S. air carrier.

A spokesman for Deutsche Post, however, said DHL International owns 23 percent of DHL Airways Inc., and Deutsche Post owns about 51 percent of DHL International. He said it is therefore impossible to argue that its stake in DHL Airways exceeded 25 percent, he said.

Deutsche Post said it would counter UPS' and FedEx's moves to halt the freight carrier's flights.

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