Luxembourg American Cultural Society

    My Orchids. Cattleya, Trompettes de la Liberté. Photo ET

The LACS' Partner Organization in Luxembourg, the Roots and Leaves Society, recently release a YouTube video featuring the new Roots and Leaves March dedicated to the Luxembourg American Cultural Society.

The March was composed in 2012 by musician Daniel Heuschen and is performed on the video by the Harmonie Municipale Echternach with Heuschen conducting. The Roots and Leaves March video was produced by Georges Calteux and Solange Cousement.

The March celebrates the mission of the LACS which is to preserve the "roots" of Luxembourg heritage/culture throughout the United States and to nurture the "leaves" of continued relationships of family, friendship, cultural exchange, tourism and commerce between Luxembourg and the United States.

Click to enlarge

Cargolux-Qatar Airways: an investigation report

    My Orchids. White Knight Upside Down. Photo ET

Cargolux-Qatar Airways: rapport sur le deal

paperJam has news: the long awaited audit on that memorable transaction with QR needed to be audited independently, according to a Parliamenry decision dated December 19, 2012. On Monday, Mr. Frieden, central figure to the deal will receive the results of that audit he had commissioned from PwC.

Honni soit qui mal y pense.

A verdade em Português !

    My Orchids. Paphiopedilum. Photo ET

As seen in the Brazilian "Economia". 

Luxemburgo pretende acabar com sigilo de paraísos fiscais

After years of resistance, Luxembourg to end secrecy on tax havens

My Orchids. Phalaenopsis. Photo ET

THE ECONOMIC TIMES
What a well researched article!
After years of resistance, Luxembourg to end secrecy on tax havens

Cargolux: Can't you see the agreement there on the table?

    My Orchids. Tripatite. Photo ET

Cargolux:  Can't you see the agreement there on the table?

No doubt, Cargolux has been bleeding money over most of the past years. We know that most of those losses were the result of corporate blunders, such as the price-fixing scandal and the QR fox in the chicken coop. But through all this, Cargolux has also been pretty resilient in those adverse conditions. Which bodes well for the prosperity of the new after-scandal Cargolux.

As for an agreement with the unions, a reality check shows that the deal IS actually on the table. Really, to an outside observer the ongoing drama about disagreement is more of a kabuki theater. Maybe ego related, as it happens normally in a negotiation. So take a deep breath: Fact is that there has been mismanagement in the past, none of the employees' fault. Which leaves less money on the table. And for sure the company can only distribute the wealth it creates. So by now, the government/owner has in fact promised to do a better job in appointing a new Chairman. The unions on their side show a new flexibility in leaving their former line of refusal, and creatively thinking through a proposal where they share the cost of cleaning up the mess. Effectively giving up long held positions. I believe, that's the deal!

The devil is in the detail maybe, but the details here are based on management's projections. Last year's projections of a $60 million loss were 50% wrong. A discussion about what needs to happen in 2013 and 2014 is equally hypothetical and should not go beyond considering a handful of scenarios. Among them the pessimistic one put forward by management, requiring savings of $12.5 million on the salary mass. 

I would boldly also consider the best case scenario: where the new management does a good job, where employees get incentivized by a smooth and fair agreement, and maybe some creative reward programs for innovation proposals. That will add a tiger in the tank. The fleet is one of the newest in the world. Markets should improve as the US seems to overcome 4 years of weakness and the EU discovers that austerity is indeed very austere. There can be bright years ahead.

On that background the detail is actually to be negotiated between the two as a reciprocity: you win, we win, or you lose, we lose. It is all about setting up criteria. What happens then in the real scenario is what settles the issue. It needs to be a scenario that has its rewards, not only risks. And when it comes to risk taking in that case, it is mostly on the employees' side. Indeed management could mess up again. Old hands are still around.  Therefore the solution could even include a pool of CV shares controlled by the employees and based on the concessions to be made, as a guarantee, and everyone has skin in the game. Not to forget obvious avenues such as revisiting the Azerbaijani offer for deeply discounted fuel, that could not be accepted in the past, because Luxembourg fuel is so much better. Just an example of a million here, a million there.

A smooth exit out of the present crisis will make a new investor comfortable enough to get in. I'm actually aware of some good prospects right under our nose. As they are not in the airline cargo business, no cannibalism needs to be feared. And, that would be icing on the cake.

Memorial Day 2013

    My Orchids. Photo ET

Memorial Day 2013

“Boys don’t cry,” my aunt Naomi would say. So when I had to, I used some concealing strategies. That was a long time ago. But I knew Naomi would pop up, the moment I said:”Dear Day.” I had arrived in Wilkes-Barre the day before Memorial Day 1992, to honor the memory of Sgt Day G. Turner, who fell during WW II in Luxembourg. At my hotel I had rehearsed my speech for the following morning, and I had choked up every time, exactly there, when I addressed him with his first name “Dear Day.” I took a deep breath…..

Aunt Naomi and my childhood had invaded my mind. There was no television in those days. Neighbors would spend evenings together, under starry skies during summer, at the fireplace in winter. There would be my mother Marie, my father Nicolas, my five sisters Naomi, Cecile-Liliane, Lucie, Irene and Nicole. There would be my  cousins Josephine and Leo. And our neighbor Nicolas, his son Nicolas, his grand-son Nicolas, our other neighbor Nicolas and his neighbor Nicolas. How come my name was not Nicolas? My original birth certificate has a stamp “Deutsches Reich” on it, together with an eagle and a swastika. My name Egide was changed  by court order into its Latin form “Aegidius” to sound more German. My sisters’ names were suspiciously too French to translate and were changed into Erika, Monika and so on. My father was an outspoken anti Nazi. He had defeated a German attempt to enlist our town’s cultural society into the German SA. Then he went into hiding. My oldest sibling, Jean-Pierre, who became Hans Peter, had refused to join the Hitler Youth. At age 17, he was kicked out of high school and was drafted and sent to the Russian front. A cousin who had deserted, was dragged through town and shot. My sister Naomi (then Monika), got her marching order to join a Krupp ammunition factory in Essen as a slave laborer in the RAD, the forced labor department.
On September 10, 1944, while the family was fearing deportation for its anti-German leanings, a light aviation plane with a white star on a blue field on its wings flew over. Of course at an age of 7 months, I didn’t realize that I had chosen miserable times to be in this world. But later, during those long evenings, I heard the stories a hundred times. I was able to finish the adults’ sentences. There were all of a sudden GI’s around, all for sure much taller than 6 feet. They carried rifles, chewing gum, chocolate and a dictionary. They had medications. My mother’s sore throat went away and never came back.
Then all of a sudden the battle of the Bulge broke loose. A whole squad was in and around our house. “We take the boy,” my first baby sitters ever would say, while my mother tried to improve on the few combat rations. I know she also would bake pancakes. There was Kelly, who had written “Kelly loves Nelly” on a pre-war 5 Francs note. There was Fritz who had organized an impromptu patrol, because he had heard suspicious noises. When the patrol came back, they had identified the noises as not really coming from Germans, but from squealing pigs at a neighboring farm. That was such a relief: confusing Germans with pigs in those times was the most hilarious possible thing to happen. Kelly was killed in action two weeks later. Those old stories rushed through my head, but this now was Wilkes Barre, PA, and I was the Consul General of Luxembourg and I had to deliver a speech and choked up.

SSGT Day G. Turner

So I tried to get past the critical “Dear Day.” … The silence seemed endless. I was trapped in an unmanly situation. I couldn’t hide. A TV camera was whirring. In the front row, Sgt Day’s five sisters, were almost silently sobbing, when I said “Dear Day”. There was the Governor, the Mayor, the veterans. I had to say something, fill the silence: “I’m sorry, it is…a little overwhelming” When I got to the facts, that helped. “Dear Day: I know now that in the early December days of 1944, up there in the small Ardennes village of Dahl you commanded your 9-man squad. It turned out to become a critical mission. You were effectively going to defeat a German force so overwhelming in numbers and weaponry that the outcome was a miracle. The enemy was supported by artillery, mortar, and rocket fire. You had to withdraw into a nearby house, but you were determined to defend it to the last man. After hours of fighting, 5 of your men were wounded and 1 was killed. You would not give up, even boldly flinging a can of flaming oil at the first wave of attackers. They dispersed, they got into the house and you fought them room to room in some fierce hand-to-hand encounters. You hurled hand grenade for hand grenade, bayoneted 2 who rushed a doorway and you fought on with the enemy's weapons when your own ammunition was expended. The savage fight raged for 4 hours. Finally, when only 3 of your men were left unwounded, the enemy surrendered. Twenty-five prisoners were taken, 11 enemy dead and a great number of wounded were counted.

Sgt. Turner, Sir:
Your heroic leadership, determination and courage freed me when I was a baby. You earned the Congressional Medal of Honor, but I never even could thank you. I’m frustrated and inconsolable that one month later the enemy took you away from us.

Now, 17 years after honoring you in Wilkes Barre, dear Day, I just want to follow up on that speech. I wanted to tell you that things are fine. Certainly better than the prospects I had the year I was born. But then you came along and made the ultimate sacrifice for us. As you may know, I’m now a grandfather of three little Americans. I’ll tell them about you. And one day, when they are old enough, I’ll take them to the American Military Cemetery in Luxembourg. We’ll walk down the alley from General Patton’s grave, among the sea of 5,000 crosses and David’s Stars. Then we turn left at Plot E, Row 10, Grave 72 that says: Day G. Turner, SSGT 319 INF 80 DIV, Pennsylvania Feb 8 1945, Medal of Honor. You’ll recognize us: Morganne, Emilie and Alexander will carry Forget-Me-Nots.

Europe Pushes to Shed Stigma of a Tax Haven

  My Orchids. Blushing over a Stigma. Photo ET

ARTICLE

Europe Pushes to Shed Stigma of a Tax Haven 

Luxembourg will join a Europe-wide effort to share records on bank accounts held by foreigners. 

By ANDREW HIGGINS The New York Times, The International Herald Tribune

An excellent excursion into the meanders of tax havens. Unless, as of yesterday, Luxembourg tries a Houdini out of its commitment to embrace automatic information. But that only beats the clock by a bit.

Cargolux: The great looping

    My Orchids. Looping Beauty. Photo ET

Cargolux: The great looping

Over the last years, Cargolux as a company had a flight plan that is adequately described as a looping.

That looping puts a Luxembourg socio-economic feature, the Tripartite upside down. The Tripartite has for years been an instrument of social peace that gathers three parties around the negotiation table, government, employers and unions, all in search of a consensus in employment and labor related affairs. One pre-eminent feature is to avoid too much conflict through automatic triggers for wage increases, where wages are tied to the cost of living. The great looping that occurs now at Cargolux upsets that applecart in the unions’ favor. But actually it was the government that as the owner, employer and Tripartite partner upset the applecart first, through consistent mismanagement. Here is the visual on that great looping:

The plunge

Management, is it through arrogance, incompetence, sheer stupidity (your choice), or should anyone use the C-word, starts the great plunge beginning the looping by engaging in criminal activity through the well-known price fixing scandal that ended up costing Cargolux about $250 million in fines, and the CEO and a top manager to go to jail in the US. Note the de facto control of the Luxembourg government at the Board level at the time and ever since, and actually even more today than ever before.

The free fall

Then came the sale of 35% of CV to the lowest bidder, QR for $117.5 million, a pittance. Of course the unbelievable deal left so much freedom of action to QR that they cannibalized CV’s clients by under-bidding tariffs by 30-40%. What an irony when the former CEO of CV is sitting in a US jail for price-fixing. The loss of clients, of opportunity, and of trade secrets are enormous. The belated reversal of the impossible deal thanks to employees’ pressure and outrage cannot erase the losses and damage done to the company.

The collapse

The collapse, when it comes to corporate leadership, is the cancellation of CWA, the nuclear option taken by Management to force cuts on wages. I say nuclear, because this action clearly passed the threshold of what has been a political “do not touch” tradition. Remarkably this was the action of the government as the majority shareholder of the company, an act of war dutifully executed by a mercenary. The Tripartite had died in a proxy war where two sides, the government and the employer (both the same: the government!) unilaterally delivered the first shot. The nosedive just accelerated, after destroying credibility, after criminal activity, after a corporate blunder selling to QR, now let’s do everything we can to destroy the morale of the employees who had shown their commitment and enthusiasm over 40 years!

The climb

During several uninspired months, where thankfully no irreversible decisions were taken, nothing helped more than a number of small successes such as the reversal of the QR deal, the reduction of expected losses by half, the addition of new destinations, an Exim bank financing etc. But one event may become a historic event: the unions beat back the government’s arrogant decision to cancel the CWA by giving it a proposal that puts the situation upside down, which hopefully signals the end of the looping.

The government is in no good position to ignore a reasonable proposal that the unions gave in an ultimatum form. It basically says without saying it: you, management, for years have run this company to where it is. Employees have no fault in the mismanagement we have seen. And yet we are willing to do our share to re-establish the company as its former self. You should be embarrassed even to ask for anything more.

The historic event is that the Tripartite ends up in a new shape after all this. The government in its bold move of canceling the CWA inadvertently opened a new concept for future debates: reciprocity. Concessions in the future will come with reciprocal concessions in return. As in the Cargolux case, concessions now on the salary mass will need equivalent concessions from the shareholder when the good years return. The Tripartite is no longer on autopilot.

Cargolux having a lift

     My Orchids. Photo ET

Cargolux having a lift

Cargolux has been on autopilot recently. Not that the ride wasn't choppy, but at least there wasn't too much of negative interference from the still unexplained deal with Qatar airways. The Luxembourg government had the Parliament vote themselves a shocking exemption from scrutiny and answering questions.

Employees saved the day

Where we are today can be credited to a large part to a groundswell  coming from Cargolux' employees. CV today is better off than a year ago. It led to a reversal of the QR mistake and some handyman work around shareholders and Board. It all looks quite preliminary, waiting for the real thing to happen. That real thing seems to be the priority for some: find a "strategic partner", possibly for the self-centered reasons that some shareholder wants to get out of there. (We saw that with BIP before). So here is what is on the table:

The unbelievable agreement with QR was reversed, thanks to the wisdom of  ... Cargolux employees. $117.5 were returned by QR, however the lasting damage that was done to Cargolux in that abusive and imposed marriage was not repaired, the loss of clients to QR and the disclosure of Cargolux' insider knowledge. It is not sure if collateral advantages for QR were cancelled also, e.g. the use of Luxembourg sovereign rights that came with the agreement.

The shareholders are challenged

The remaining shareholders had to jump in for a capital increase. Virtually all shareholders  by now are government controlled. A situation that generally would not be desirable, because it reeks of governmental corporatism. However given the strategic value of Cargolux activities at the Luxembourg airport, its direct impact on Luxair and the airport as whole, there is no other option than to keep it flying. It cannot escape government ownership and oversight. Which  is now under the helm of Paul Helminger who seems to be Luxembourg's man, not Qatar's. He knows Cargolux from his career and negotiating landing rights and has been hardened by the ups and downs of Computerland established at the airport, and which he managed during its presence in Luxembourg.

Then there is the question of a new CEO. The fact that there isn't one speaks highly of the potential Cargolux has. On autopilot, 2012 results were much better than forecast. True there is a loss, but half the forecast. Imagine how much a motivating CEO could have contributed. There is Mr. Forson of course as an interim. That is difficult for two reasons. As a recognized favorite of Qatar, there is that lingering image haunting him. In other major airlines, he would have been probably walked out the door by security the day of the breakup with QR, because of his perceived allegiance to QR. That has not happened, and he has shown his usefulness to the Board, mostly by denouncing the CWA. That's pretty much unusual in Luxembourg, and one kamikaze was needed to get the blame and hide that in fact the one who killed the CWA was the Luxembourg government, through its handpicked Board.

The next steps

Which brings us to the urgency (or not) to sell government owned shares to a strategic partner. Though normally allergic to government involvement, I see no reason to hurry up. First of all, CV is better off than a year ago. I would also fight and possibly ignore any objection from instances such as the European Commission. In a Europe where all rules are bent when it comes to budgetary deficits and where other coercions are put up, Luxembourg should have a free hand to save an essential tool of its infrastructure and the key policy of pursuing logistics as a future. The absurdity of the European limitations on the freedom of the Luxembourg government to act is shown by the fact that Qatar, or a Sovereign Fund which is basically the same owner, can without any problem own 90% of BIL and 100% of KBL. If worse comes to worse, just create a Luxembourg Sovereign Fund, with some competent management, and let that one own the shares. Actually, that Fund should have been created years and years ago when times were so good, instead of buying votes.

As for government ownership, I would plead for a restructuring of the company's setup. For reasons of guaranteeing future Luxembourg control, for strategic reasons, I would suggest a structure similar to the one underlying SES. At the time SES was set up so to keep control in the Luxembourg government's hands even as a minority shareholder, because the company was built on the sovereign right to claim orbital positions and register frequencies, another strategic issue. It still remains a problem whom to choose as a "strategic partner". Hopefully the QR experience has taught people how damaging a strategic partner can be.

Get some vision

Last but not least is, drop the ill advised decision to denounce the CWA. First of all, management is not in a position of power. It has messed up Cargolux with extremely bad and incompetent decisions over the last years. Should we list up again the costly fines for management's criminal behavior of price fixing? Isn't it ironic that the Luxembourg government not only is one of the losing shareholders, did not sanction anyone, but still bends over backwards to obtain an early release for those convicted and incarcerated in the US? All the while kneeling on the employees' interests by canceling the CWA? What about that brilliant move that was to bring new clients and new routes  to Cargolux by selling a critical stake to the lowest bidder, QR? Really, there is nothing else to say than sorry for what we did to the company.

Then as reasonable people sit around a table and settle this. If I were an employee, I would not expect anyone asking me to make a concession, if it is not based on reciprocity. Sacrifices? Yes, but not  without compensation in the future, sharing profits. Without dealing fairly with employees' emotions, no great results can be achieved. So 2012 wasn't so bad under stress? Or was it flawed previsions? Imagine what a really motivated team could have achieved.  Knowing that fuel costs will be the substantial part of costs, and that as of this moment they tend to be lower, this might have the biggest impact on writing black numbers by the end of the year. Though hope is not a strategy.

The challenge lies squarely with management, as at the professional level, Cargolux seems to get by, even after de-motivating employees. There have now to be people showing direction, get back to the well known flexibility and the possibility to shift capacities around on a moment's notice and positioning beautiful assets and crews worldwide so to optimize results. You name it, we fly it, when you need it.

Didn't Oliver Wyman espouse the one type of aircraft lately?