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?
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