More good news for Cargolux

Wing Wave by the Red Barron, Stuka instructor. Defying aerodynamics

More good news for Cargolux

It sounds like good news: 10,000 tonnes lifted from and to Zhengzhou. The occasion was euphoric and celebratory, and a big event took place in a hangar at Findel airport.

Usually such an event requires a light tone, more suitable for my sister blog peckvillchen.blogspot.com. But it is in Luxembourgish and only Mr. Bausch and the Chinese Ambassador would understand.

Both were there, Mr. Bausch being the one recognizable easily, wearing a Tibetan scarf. Which signals that Global Warming just reversed into Global Cooling. The other guest then obviously was the Chinese Ambassador, who ignored the provocation of the Tibetan scarf.

For the occasion, a big screen had been printed, which signals also that Cargolux is trying to master new communication skills: You name it, we print it. However, I found the event a bit awkward. It coincided with a number of other little announcements, such as the “Dangerous Goods Awareness Award”.

That sounds a bit trivial, and out of proportion, like announcing ceremoniously my Jet Blue Badges. If you get on a Jet Blue flight, you can earn such a badge, and share the news with your friends on social media! I earned so far: the “True Believer Badge”, the “FLL, NY”, and the “Boston Badge”, or even more beautiful, my “Eat your cake & fly”, the “Happy Legs”, and the “High Five” badges.

I nominate Mr. Bausch first of all for the “Cargolux is a private company Badge”, and the “Cancelled Zhengzhou flight Badge”. And CV for the “First USD in Profits Badge”, when we get there. Because, when a venture is a success, no one is going to ask: “How much did it cost?”

N.B. The picture above shows the new skills available at CV: close combat air support training, as demonstrated in Seattle. The Red Baron, famous for bone-rattling short landings and 7g turns is supposed to be at the helm here.

Cargolux, the good news

My Orchids. Cattleya "Looking Good" Photo ET

Cargolux, the good news

Cargolux followed its wing wave with a release of interesting numbers: records breaking tonnage, revenue and block hours. The good news is, business is there.

A probable help for the new records is the increase in the number of aircraft. The report doesn’t say though if the results show a profit, which in light of the Zhengzhou flights started by mid-year, expected to be unprofitable for a while, would be interesting to know.

The airline made a net profit of $8.4 million in 2013 on revenue of $1.99 billion, which is a very thin margin indeed.

Luxembourg’s tax evasion, tax avoidance, tax optimization, tax minimization, tax rulings history.

My Ochids. Phalaneopsis "Tax Joy". Photo ET

Luxembourg’s tax evasion, tax avoidance, tax optimization, tax minimization, tax rulings history.

Luxembourg in legalistic terms will no longer be a tax evasion center in a couple of years. Which practically means that the announced death of such a haven puts it out of business the day you announce its death. The Mom and Pop tax evasion, the elderly couple and the Belgian dentist driving into Luxembourg with a bag of cash is over. From time to time you just hear the sad story of the elderly couple trying to repatriate their undeclared cash by hiding it in their underwear, well knowing that the tax evasion loophole closed on them, and that the customs agents are vigilant. Those who make it home safely with their cash are lucky, those who run into a customs control at least had hope until the trap closed, but they’ll survive and keep some of the cash after fines. Victims of the unscrupulous players like those clients of Landsbanki and Madoff unfortunately can save the trip. There is nothing to take home. That is a summary of the sad fallout of those tax schemes.

These days as the story goes, Luxembourg’s efforts to shed the stigma of the tax haven are defeated by yet another tax haven bis, the one of the financial engineering, the Double Irish, the Dutch Sandwich and mostly the Luxembourg Tax Rulings. Luxembourg’s position on tax rulings can be explained as being perfectly legal, at least considering the variations in constructions that typically are used. Even other countries do it, but those are only amateurs. And though the tax ruling practice can be explained legally, no one is willing to buy the schemes. They just look too unfair to the public, and you cannot win that argument. President Obama, who has still high standing in Europe, likes to light a fire under Ugland House, a building in the Caymans where 18,000 companies are domiciled for tax evasion/avoidance/optimization. Though many countries use all kinds of tax incentives, these practices, concentrated in their vast numbers in a few jurisdictions cannot survive without severe changes, which will be imposed through OECD agreements: here comes BEPS, Base Erosion and Profit Shifting. The name says it all. It will be the end of corporate tax strategies and the end of gaps and international loopholes.

Though warning signs were plenty, Luxembourg did not prepare for those inevitable changes. A negligence given that close to 40% of the State budget is generated by its financial center. A negligence also given the present storm around this issue and the new President of the European Commission for whom "the chickens come home to roost", as in this NYT article: 

Jean-Claude Juncker, Top E.U. Official, Faces Rising Furor Over Luxembourg Tax Revelations

Luxembourg is only the 16th most prosperous country.

My Orchids. Phalaneopsis "Pale Performance". Photo ET

Luxembourg is only the 16^th most prosperous country.

Unbeknownst to us, comes along another international evaluation of countries’ performances. This time it is alarming, because the “Legatum 2014 Prosperity Index” would like to see us number 16 only. It cannot be. It is the ultimate offense.

Dear Legatumators: We are number one for GNP per capita, we are the richest, we are number one in aid to the “developing” world, giving 1% of GNP. We have the biggest funds and the mostest banks. We are the biggest of the small countries. We'll get the most expensive Tramway. What are you talking about? Our feelings are hurt! Where did you go wrong?

Ah, OK, I see. You went fishing for variables that pull us down, such as entrepreneurship, education, governance and social capital. Next year we’ll be prepared. We got a new government.