TNT Express today announced a vital agreement to dispose of its European airline operations toIrish-based ASL Aviation to enable the €5.16 billion takeover by UPS to go ahead, although the deal
still faces major objections from the European Commission.The Dutch company has agreed a conditional 100% sale of Liege-based TNT Airways and its smallerSpanish airline Pan Air Lineas Areas to ASL. The sale, for an undisclosed price, is conditional onand will become effective immediately prior to completion of the proposed UPS-TNT Express merger,which is expected in early 2013, TNT said.
The change of ownership and control would ensure service continuity of the TNT Expressoperations after the completion of the proposed merger, in compliance with EU airline ownership andcontrol rules, TNT stressed. Under EU law, an airline operating intra-EU routes must be more than50% owned and effected controlled by an EU state or company.
ASL Aviation Group is a holding company for several airlines, including Irish-based AirContractors, a long-standing subcontracted capacity provider for DHL Express, and French-basedEurope Airpost, which flies cargo routes for La Poste and since this year also for DHL. ASL, withrevenues of some €410 million in 2011, is owned by Compagnie Maritime Belge N.V. (51%), theAntwerp-based maritime group, and 3P Air Freighters Ltd (49%), a private equity fund managed byPetercam.
Under the terms of the deal, ASL Aviation Group has entered into a service contract that willmaintain service continuity. The group will take over all flights performed by TNT Express’airlines as soon as the UPS takeover of TNT Express is completed.
A TNT Express spokesman explained to CEP-Research: “This means that the transfer of ownershipand control of the airlines will take place a fraction of a second before completion of theproposed UPS-TNT Express merger. Immediately upon the transfer of ownership, the network will beflown as it is today.”
At present, TNT Express’ European flights are operated by about 38 planes, comprising TNTAirways and Pan Air-owned planes as well as sub-contracted planes. According to TNT Airways websiteinformation, its fleet comprises 3 B777s, 4 B747s and 18 BAe 146 jets, along with 3 B767s, 2 A300s,3 B757s and 12 B737s that are operated by diverse other airlines.
Regarding jobs, TNT Express said that almost all airline employees will stay with the airlinesexcept for about 45 people with non-airline related jobs who will transfer to the TNT Express’Liège hub. TNT Airways employs 296 air crew and 227 ground staff while Madrid-based Pan Air has 61air crew and 117 ground staff.
As part of the transaction, ASL Aviation Group has committed to comply with applicable laws andregulations to respect all individual employee rights, covenants and benefits as exist undercurrent ownership. “There are agreements in place to provide ongoing airline services to theUPS-TNT Express group, so no redundancies will result from the change of ownership,” the TNTspokesman explained.
Looking further ahead, the spokesman confirmed that TNT Airways and Pan Air “will be re-namedover time”. TNT stated that “ASL Aviation Group will become a key third-party provider of thecombined UPS-TNT Express group and will be invited to bid for all of the combined group’soutsourced air business in Europe when this becomes open to tender.”
At present, Danish cargo airline Star Air, a subsidiary of Maersk Group, is a major provider ofoutsourced air capacity for UPS in Europe, operating a fleet of 11 B767 freighters for the USexpress operator and other cargo companies.
Regarding the Liege hub, TNT Express stressed that it does not expect the airlines’ ownershiptransfer to impact activities at TNT Express’ hub in Liège for at least one year followingcompletion of the proposed UPS-TNT Express merger and noted that ASL intends to maintain the TNTAirways headquarters in Liège. In addition, UPS “recognises the significant value of TNT Express’operations, assets and people in Liège and will develop longer-term plans for the hub, withinvolvement of employees’ representatives, the Walloon Region and Liège Airport”, it added.
The 75,000 sqm Euro Hub, with around 1,500 employees, sorts some 90,000 parcels (400 tonnes) anight, with about 70% of TNT’s worldwide shipments transiting through Liege. The facility opened in1998 with an initial investment of €62 million and has been subsequently expanded with a further€80 million of investments over the last decade. TNT is understood to have an agreement coveringLiege airport that runs until 2038.
UPS is currently in the midst of a $200 million expansion of its 30,000 sqm European air hub atCologne. This will increase sorting capacity by 70% from the present 110,000 to 190,000 packagesper hour upon completion at the end of 2013. UPS employs around 2,300 people at the Cologne airhub, with a further 200 jobs expected once the expansion is completed. Some 72 flights, bothintercontinental and intra-European, operate every night to and from the UPS hub.
Commenting on the agreement, Bernard Bot, interim CEO of TNT Express, said: “We are grateful tothe employees of TNT Airways and Pan Air for their outstanding contribution to TNT Express. We havefound a new ownership and control structure that secures the future of the airlines, ensuresservice continuity and safeguards jobs in Liège. This is an important step towards completion ofthe proposed UPS-TNT Express merger and a positive outcome for the airline employees.”
Hugh Flynn, Group Chief Executive of ASL Aviation Group, said: “I look forward to working withthe highly skilled and dedicated TNT airlines team as we build the airlines for the future.Additionally, the transaction provides ASL with new opportunities for development and growth”.
ASL commented in a statement: “This transaction represents a unique opportunity for ASL to be ina position to provide services to the major integrators and assert itself as the neutral providerof airline services to the major express integrators in Europe.” CNB noted in a brief statementthat “from the moment of change of ownership and control the newly-acquired business willcontribute positively to the results of ASL”.
Niky Terzakis, Managing Director of TNT Airways, said: “ASL Aviation Group is a substantial andexperienced airline group that intends to continue developing from a base in Liège.”
