Arbitrators rule in favour of ABX Air over DHL

OHIO's Air Transport Services Group (ATSG) has announced that arbitrators have ruled that its subsidiary, ABX Air, was entitled to full reimbursement of its general overhead expense from its principal customer DHL during 2007.

Arbitrators ruled that ABX Air began earning more than 10 per cent of its total revenues from non-DHL customers effective as of January 1, and directed DHL and ABX Air to commence negotiating in good faith to determine a reasonable allocation of ABX Air's overhead expenses related to its provision of non-DHL services, a company statement said.

In November 2007, ABX Air and DHL agreed to arbitrate provisions of their ACMI and hub service agreements that cover the allocation of ABX Air's overhead expenses between DHL and its third-party operations.

The dispute centred on a claim by DHL that certain ABX Air expenses beginning in the second quarter of 2007 were no longer eligible for reimbursement in full by DHL, because ABX Air's revenues from other customers had exceeded a 10 per cent threshold of its total revenues.

DHL also claimed that ABX Air's costs in maintaining its public company status and certain professional fees incurred by ABX Air, with respect to an unsolicited indication of interest from another airline, were not recoverable under the agreements.

"We are very pleased that the arbitrators upheld our position on the principal matter before them, which was whether fuel expenses reimbursed to ABX Air without mark-up by DHL should be included in ABX Air's revenues for the purpose of determining an overhead allocation," said ATSG chief executive Joe Hete.

"They ruled that DHL failed to demonstrate that ABX Air had incorrectly treated the reimbursement for its fuel expenditures as revenue under generally accepted accounting principles, and therefore ABX Air's revenues from sources other than DHL did not exceed 10 per cent of its total revenues during the second quarter of 2007. As a result, there is no requirement for ABX Air to allocate a portion of its overhead expenses to its non-DHL businesses during 2007."

But arbitrators did conclude that ATSG's revenues attributable to non-DHL services, including those associated with ABX's affiliates, such as the Cargo Holdings International companies acquired by ATSG on December 31, are to be included for purposes of triggering an allocation of overhead expenses under the agreements.