US cargo airline ABX Air announced on Friday that it has notified its principal customer, DHL, thatit considers DHL in default under terms of the two principal commercial agreements between the
companies, and that ABX Air is reviewing its options while continuing to maintain full service toDHL and its customers. DHL USA rejected the claims.ABX Air said in a Form 8-K filing with the Securities and Exchange Commission on November 9that DHL has withheld payments to ABX Air otherwise due for reimbursement of legitimate expensesunder the ACMI Service Agreement and the Hub and Line-Haul Services Agreement, which govern thebusiness relationship between the companies.
The dispute centers on a claim by DHL that certain ABX Air expenses are no longer eligiblefor reimbursement in full by DHL under the agreements, because ABX Air’s revenues from othercustomers have exceeded a 10% threshold of ABX Air’s total revenues, ABX Air said.
ABX Air’s position is that DHL has improperly excluded from its calculation certain ABX Airrevenues that stem from reimbursements for fuel expenses that ABX Air incurred on behalf of DHL.When such fuel-related revenues are properly included in the calculation, ABX Air’s revenues fromother customers have not exceeded the 10% threshold in the agreement.
Joe Hete, president and CEO of ABX Air, said: “As the events described in our 8-K filingindicate, our decision to declare DHL in default of our ACMI and Hub Services commercial agreementswas taken only after intensive efforts on our part to resolve this issue directly with DHL, or tocontinue normal operations under explicit language in the agreements for working together whiledisputed matters are resolved through arbitration.” But ABX Air would continue to provide DHL with “ dedicated, efficient, and high-quality air and ground logistics services” despite the dispute, hestressed.
Hete added: “We are aware of the disclosures yesterday by the management of DHL’s parentcompany, Deutsche Post World Net, that growth in DHL’s U.S. network has slowed considerably inrecent months, and that DHL’s U.S. operations are “the critical issue” for that company. While weare eager to support DHL in its efforts to build market share, growth, and profitability in theU.S., that process cannot be furthered at the expense of the shareholders of ABX Air.”
In response, DHL USA issued a statement saying that the two companies had been in acontractual dispute for several months about DHL’s responsibility for certain overhead expensesunder the ACMI and Hub Services agreements. “DHL wholly rejects the assertion that the company isin default of these agreements,” the statement said. “Under our contracts, when ABX derivesmore than 10% of its total revenue from non DHL sources, ABX must pay for overhead related to suchrevenue. DHL believes that ABX has exceeded the 10% threshold,” it stated.
