Cargolux, Shearman&Sterling, and Chambre des Salariés CSL

My Orchids. Phalaneopsis Target. Photo ET

Cargolux, Shearman & Sterling, and Chambre des Salariés CSL

I'm aware of the two opinions about the pending CV/HNCA deal. The first, dated 7 November by Shearman &Sterling, the second dated 20 December by Chambre des Salariés. Both have similar reservations, concluding that the "agreement" is very lopsided. Both unfortunately confirm my own analysis of what is visible. Both are wondering if they have seen ALL the information.

Looking at the big picture, the agreement will achieve the following: HNCA will gain a share of CV, gain 200,000 tons of traffic, gain a new airline, and other logistical know how. CV can only hope to have no losses of capital and employment, and gives away know how and effort. That is lopsided and very cheap access for HNCA, unless there is a "yes" to the following unanswered question: is there a secret part to the "agreement" serving other purposes than CV? In which case, where are we with the trumpeted commitment to an ever more transparent government? Yes, as taxpayers, we have a right to know. Not only mysterious suggestions about the hidden benefits. List them, until we strike a balance in the "agreement".

1. Let 1,000 questions be asked

 It is very disappointing to see the "agreement" in such a sorry state. Even at the elementary level of language. Even after the botched alliance with Qatar Airways, nothing seems to have been learned. There are dozens if not hundreds of questions to be answered, and some of the visions sound like a pie in the sky.  The target for CV three years from now to move 200,000 tons annually in and out of CGO lets me wonder about who did the underlying projections, including the weekly need for aircraft in those rotations? Not to forget the loss of opportunity for those aircraft, that obviously would be pulled back from now commercially more viable routes.

2. State corporatism at its finest

I'm perplexed to discover that "negotiations" were done by the government alone, without CV's management or other shareholders being present. How can the government, that's not a majority shareholder, commit the other shareholders into other binding agreements, when its proclaimed purpose was to sell its shares? For sure, most of the shareholders won't protest too much, as they are represented by people who owe their positions by the grace of the same government, but not all: Luxair has private investors. And employees have to contemplate this perceived unlawfulness in awe.

3. What about levels of engagement?

In doing its solo "negotiation" beyond the immediate wish to sell its shares, shouldn't the government have negotiated with the Chinese Central government too? There is a logic to the level of representation around the table, there could have been shortcuts, as HNCA's economic development plan is in the context of China's 12th five year plan. CV's interest would have been to have broad rights in China with a priority to serve other existing and commercially viable hubs. Positive cash flow will be of the essence for the indebted CV, not the mere compensation of losses through a limited, ill-defined Fund.

4. Never use an argument that you knew not to be true

Not to miss: the CSL report's Annex about what constitutes illicit governmental aid. It addresses the Luxembourg government's claim that it has to sell its CV stake, given European law. Which obligation, it appears to me, is not present in CV's case, though the government has long argued to the contrary. Not many will believe this. In addition, I would make the case that European obligations under European treaties are not always respected, and many violations by our neighbors have been met with willful blindness in the past. After the Qatar Airways mishap, there was room for leniency towards Luxembourg at the least.  

5. Conclusion

Now the deal is done. Let's negotiate the deal. Fire, aim, ready!

There is a very small statistical chance that we have hit the target. Now we have to try harder and move the target, so we can see it.