My Orchids. Phalaneopsis "Dual Hub". Photo ET
Cargolux
in the new morning calm
If Cargolux flights
were as silent as Cargolux management nowadays, and indeed the Luxembourg
government, there would be no night curfew for CV flights at the Luxembourg
airport. The silence must be golden like the Ming Dynasty, as it coincides with
coming onboard of a Chinese partner. But it might be only circumstance that
silence started cushioning Cargolux since the official date when on April 23rd
Henan Civil Aviation and Investment Co.
Ltd (HNCA) took a 35% ownership in Cargolux Airlines.
That silence appears to
be more of a Darwinian self-protection evolution: a leadership prone to
monumental errors strives to embrace secrecy as a hiding mechanism. After the Qatar
Airways fiasco, it repeated its misjudgments with HNCA, basically copy-cutting
past errors. The HNCA solution was imposed almost surreptitiously, and against
the advice of most of Cargolux’ senior managers. The company (and the
Government) made a bad deal, which still has unforeseeable consequences. Fact
is that out of protest, the COO Peter van de Pas, SVP Marketing and Sales
Robert van de Weg, and the Regional Manager for Asia, Matthew Ma left. Board
and government treated their resignations with benign neglect. Both don’t
understand that a company is defined by its management team. Managers are not exchangeable
at wish in the competitive world. Only in nepotism.
An early sign of the misguided
reorganization was the fall-out around Robert Song, bombarded SVP Asia and
Pacific as a reward for his contribution to the deal it seems. He fell ill just
on the occasion of Chairman Helminger’s visit to Zhengzhou, and of course we
learnt without surprise that Robert Song had resigned. That was the end of most
communication. In the meantime another negligence had been corrected by finally
appointing a new CEO, Dirk Reich. The post had been vacant for way too long. Clients,
competitors and observers have watched sometimes in disbelief the ongoing turmoil
at Cargolux, a series of self-inflicted wounds.
Cargolux has been for
many years a proud Luxembourg achievement, a leader in the industry, a
benchmark for the air freight industry. With key management lost, there goes
the substance of the company’s culture and reputation. The episode of relying
on Mr. Song, then seeing him “resigning” seems to be more of a panicky reaction
to forwarders’ displeasure with the changes in management, as reported by
Cargofacts.com. It is morning again at Cargolux, though a new beginning that
was unnecessary, and that morning was not calm. Only silent.
Obviously we now have a
new Cargolux where the known unknowns are unknown. What is known is that the “old”
Cargolux managed to have an encouraging though modest turnaround. 2013 will be
the benchmark to compare future results. Whereas a loss was predicted, the old Cargolux
managed to run a profit of $8.4 million in 2013, up from a loss of$35.1 million
in 2012, the year of the Qatar Airways adventure. Revenue for the year was up 14.4%
to $1.99 billion, driven by increasing demand. Cargo traffic for the year was
up 19.2% to 5.72 billion RTKs, while cargo volume rose 16.7% to 754,000 tons.
Despite the encouraging progress, the $8.4 million is a very thin margin that
leaves no space for errors. However, now starts an ill-defined, unknown future.
And yet facing the unknowns, Cargolux chose to change several variables at the
same time, basically an unscientific approach, resulting in massive changes in
management, in a confused workforce, in a partnership with questionable revenues
and expensive obligations, and worse, questions about the company in the
marketplace.
The best known unknown
is of course the partnership with HNCA. Luxembourg officials are fascinated by
the new vocabulary such as “dual hub”. Which it is not. There is no dual hub
that would imply some privileges for Cargolux. That’s the case for the main
freight available FROM Zhengzhou, electronics, where Cargolux has no priority as
we have seen from various competing arrangements that HNCA or Zhengzhou Airport
initiated. Those reach from Hahn to Liège airports, and Cargolux didn’t even
know about those arrangements. In the absence of a monopoly, what was the point
of entering into the HNCA agreement?
Now Cargolux has learnt
already how to dance to the new Chinese music. Its inaugural flight was
cancelled because of an unknown “administrative” reason, all the while the
Luxembourg Minister of Transportation was waiting in great pomp for the newly baptized
“City of Zhengzhou” to touch down at Zhengzhou Airport.
It was a vivid demonstration of the realities in the new dual hub environment. A known unknown
is also what the heck Cargolux is going to carry as cargo on four weekly
flights TO Zhengzhou? A dual hub means there is something to do both ways.
There doesn’t seem to be much to carry to Zhengzhou. The fact that there is a
$15 million budget set up to compensate Cargolux for losses on the route, is
only the known official acknowledgement of the unknowns. The first two quarter
results will not yet show the full impact of the new partnership, but show a
direction. That is if Silence doesn’t prevent us from learning the results.
If I understand the
results of a recent effort to survey Cargolux staff, we are going to have open
communications again. Indeed the “potential components of the revitalized
Cargolux spirit” are clear, according to those who answered the survey. Only
about 1 out of 3 answered, the motivated employees I guess. The remaining two
have indeed to be revitalized. As for the key components, 2 out of 3
respondents see leadership as a problem: they appear to be distant, biased, and
aloof. It is followed by poor communication: no or poor information on
strategies, objectives, financial situation. All this is summarized by the most
important component coming in third: respect.
For anyone misjudging
employees’ preoccupations, please note that they do not care for the
environment nor for diversity. Those two components came in last. Though
politically they sound nice in conjunction with dual hub. However employees
long for a bright future of their company. Who would have guessed!?
