Cargolux
Board Meeting, October 11, 2012. Great news: there are no news.
Observers
of the Cargolux Saga today got No News, but got to see plenty of clues of what
the future holds. Those are that today no decision was made on the selection of
a CEO. No decision was made regarding future orientations and strategies,
mostly regarding the survival of MRO operations in Luxembourg. Oh, and someone
leaked that QA, according to Mr. al Bakr, might back out of its Cargolux
participation, if ... not sure if what happens or doesn't happen. Though that
could be a forgone decision.
Given
the now well known opacity around Cargolux and Luxembourg governmental
practices in general, today's silence and non-action speak volumes.
I
would refer to some prior conclusions about Cargolux' Modus Operandi seen in the recent 15 months,
after QA joint the company, as laid out in my blog from last week in French:
There
you find 3 phases, identified and already in the works.
The
first phase was the "moving in together", characterized by a very
short period for QA to assert itself in the new household and to domineer. That
was the "Shock and Awe" phase, with the Boeing hickup.
The
second phase seamlessly flowed out of phase I, and took away clients, profits,
duplicated routes, questioned long established choices and solutions, replaced
or chased away the old guard and floated questions threatening employment and
strategies. The "Numbing" phase. It went on today with no decisions,
no action, continuing uncertainty. Actually if spectacular or anticipated decisions
had been taken, confirming many fears, it would probably have awakened the numbness
too much. So it was artful strategic delaying, while waiting until after a
calming down period. Time out for the unions.
The
third phase, also coming seamlessly out of phase II is more complex, and more
difficult to gauge, most of all because the covenants in the existing contracts
are not known. So what are the intentions for the future? First of all, I would
advise anyone to never try to interpret the other party's intentions, but to analyze
its POSSIBILITIES. Of course everyone will show the best intentions, but eventually
when reality kicks in, it might be wonderful, or it might be horrendous. So asking
the real questions, not just wishful thinking, tells us what the possibilities
are. And basically the main question is: why did QA buy? There are many possible
answers. The covenants in the contracts would tell us a lot. But in the absence
of those, the possible answers why QA bought are:
·
It
wanted to increase profits. Cargolux was profitable at the moment of acquiring
35% of the company, but CV lost clients to QA since. So increasing profits as a
shareholder of a profitable company was not the reason. However poaching is one.
Done.
·
It
wanted to acquire know-how and expertise. QA had the time to analyze and
investigate all of Cargolux, finances, operations, contracts, you name it, they
saw it. Done.
·
It
wanted to expand its services. QA duplicated Cargolux' North American routes.
They called it synergies. Or was it surgeries? Done.
·
It
wanted to enter markets. Cargolux clients were so relieved to leave Cargolux
for the cheaper newcomer. What a coincidence. Done.
·
The
QA deal did not provide new capital to CV. It just helped some shareholders to
run away, and maintain CV in a chronic state of weakness and inferiority in the
partnership. Done.
·
If
we knew the covenants, they would probably show an elaborate setup to corner CV
and the other shareholders, with all options open to QA to dictate the
outcomes. Including to quit, and leave the exhausted partner on the ground, or
to stay, because of other emerging advantages: Luxembourg government subsidies,
mutual leases or other deals on 747 and 777, maintenance in Doha and any other
hidden agenda.
But
those are only the possibilities and usually one or the other can be expected
to happen. I rarely have seen almost all of them happening all together. The
perfect storm.
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