# CE2004088EN.01042901.xml

| 8.4.2004 | EN | Official Journal of the European Union | CE 88/429 |
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8.4.2004

EN

Official Journal of the European Union

CE 88/429

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(2004/C 88 E/0435)

WRITTEN QUESTION E-2676/03

by Ulrich Stockmann (PSE) to the Commission

(10 September 2003)

Subject:   US market access for DHL Airways

Subject:

Since the takeover of the international express service provider DHL by Deutsche Post World Net, UPS and FedEx have employed various means to exclude DHL from the American market. UPS and FedEx control the US parcels market, in a kind of duopoly, with a market share of 80 %, while DHL's market share in the US stands at 0,9 %. The legal and political means that UPS and FedEx have employed to partition of the US market from foreign competitors is the rule that airlines can only be considered US carriers if 75 % of their voting rights and 51 % of their capital shares are in the hands of US citizens. Both of these requirements are met by DHL Airways and have been since DHL was bought by Deutsche Post AG, when DHL's land-based and airborne operations were split into two companies, leaving DHL International with only a 25 % stake in DHL Airways. The US Department of Transportation (DoT) has confirmed this, rejecting numerous complaints brought by UPS and FedEx. On 16 April 2003, however, an amendment was made to the war budget so that airlines that are not effectively controlled by US citizens, or 50 % of whose turnover derives from foreign companies, or that belong to a foreign state, cannot be awarded military contracts from the budget appropriations that have now been released. This amendment affects only DHL Airways and therefore blatantly discriminates against one single company, given that the US State Department and the Pentagon are major customers of DHL Airways. The anti-competitive actions of FedEx/UPS are in stark contrast to UPS's unrestricted business opportunities in Europe: while UPS's market share alone in the US is around 64 % and DHL's is only 0,9 %, Deutsche Post (including DHL) holds a 23 % share of the more competitive German market and UPS an 8 % share.

Is the Commission aware of this situation? How does it intend to combat this discrimination? What steps does the Commission plan to take, particularly in the context of the negotiations on an ‘open skies’ agreement between the US and the EU, to guarantee market access to the US and to achieve full reciprocity?

Answer given by Mr Lamy on behalf of the Commission

(14 October 2003)

(14 October 2003)

The Commission is following closely any developments concerning United States market access for European companies.

The question concerns market access for express service provider DHL in the United States. Recent legislation in the United States sets a new restriction on ownership requirement for air carriers in order to benefit from military contracts. More specifically Section 2710 of the Emergency Wartime Supplemental Appropriations Act of April 2003 states that: ‘None of the funds in this Act or any other Act may be obligated or expended to pay for transportation described ... to be performed by any air carrier that is not effectively controlled by citizens of the United States ... an air carrier shall not be considered to be effectively controlled by citizens of the United States if the air carrier receives 50 percent or more of its operating revenue over the most recent three year period from a person not a citizen of the United States and such person, directly or indirectly, either owns a voting interest in the air carrier or is owned by an agency or instrumentality of a foreign state.’

In the view of the Commission these provisions went right against European interests and in particular those of DHL. DHL needs the services of United States cargo airlines for the air transport part of its delivery services. Since these airlines derive a huge share of their operating revenues from DHL, they would be excluded from the military contracts under the Wartime Supplemental Appropriations Act.

However, the Commission also notes that Section 2710 gives a possibility for the Secretary of Defense to waive the restriction: ... ‘That when the Secretary of Defense decides that no air carrier holding a certificate under section 41102 is capable of providing, and willing to provide, such transportation, the Secretary of Defense may make a contract to provide the transportation with an air carrier not having a certificate’. As far as the Commission knows, DHL is currently providing mail delivery services for the Department of Defense to both Iraq and Afghanistan.

In any case, it should be noted that DHL has sold its 25 % stake in DHL Airways to United States investors. DHL Airways has been renamed into AStar Air Cargo and is now 100 % owned by United States citizens.

The Commission is aware that United States cargo airlines are entitled to operate intra-Union flights while Union cargo airlines are not entitled to operate domestic flights in the United States. This imbalance will be addressed in the upcoming negotiations on a Union-United States open aviation area. The negotiations aim at opening up the United States domestic market to Union airlines and vice versa. A key element in this will be the removal of the special restrictions which currently apply to foreign ownership and control of airlines.

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