Cargolux in Xinhua

My Orchids. Henan Beauty. Photo ET

Cargolux in Xinhua

The quintessential of the story. But what is done is done.

Wednesday, January 15, 2014, 20:36

China firm, Europe's largest cargo airline tie up

By Xinhua

ZHENGZHOU - A company in central China's Henan Province has invested in Luxembourg's Cargolux Airlines International to introduce a new freight service between China and Europe, local authorities announced on Wednesday.

Henan Civil Aviation Development & Investment Co. Ltd purchased 35 percent of the stocks in Cargolux.

Francois Bausch, head of Luxembourg's department of sustainable development and primary industries, signed an equity acquisition agreement with a representative of the company, after his meeting with Xie Fuzhan, governor of Henan, on Tuesday.

According to the agreement, Cargolux will open a new freight service route between Zhengzhou City in Henan and Luxembourg, and build an air cargo network that links Asia and Europe.

Cargolux Airlines International is the largest cargo airline in Europe, and the ninth largest in the world.

Cargolux in a Chinese deal

My Orchids. Cattleya. Photo ET

Cargolux in a Chinese deal

 Cargoforwarder summarizes the latest newsquite accurately. In a nutshell, the new government has made the decision to go ahead with the planned deal with HNCA. It also gave the employees most of the guarantees they wanted, though not yet in writing. One sticky point was remaining for OGBL, the largest union: the 35% ownership for HNCA comes with an effective veto right in the decision making, and the union sees there the potential for irreparable harm.

This is indeed a matter of trust, that usually doesn't come as a free gift, but is something that builds gradually. Before that, one has to get the legal ducks in a row.

So by now the decision to go ahead is more of a political decision than a commercial one at this stage. Alarms went off when in the background of the agreement, TNT emerged as a competitor with a piece of the local market, several months ahead of CV's flights. It went against the assumption that in the local Henan economic practice, that should not have happened. Is it therefore that another piece of the market, the X-Box has been allocated to CV? It helps to complain, isn't it?

Two more things:

- the contract is expected to be signed by February - March. So, tell me again, what was the rush attempting to get this signed even before the elections? The delay is welcome, because the legal counsel has a list of details to iron out.

-this one makes me chuckle: one reason for the pressure to rush this, was the argument that the government could not hold on to its shares, because of the nasty looks from Brussels. The government however will stay on as a 10% shareholder. So either the former government lied, and there was no need at all for it to get out of CV. Or Brussels still has that nasty look, but the new government has decided that it doesn't care. In that case, good for them! What is good for Fortis-BIL is good for Cargolux.

Selling Cargolux for a Song

My Orchids. Cattleya Hwa Yuan Bay "She Shu". Photo ET

Selling Cargolux for a Song

In the No-man's-land between the former leaving government and the new government in the making, Luxembourg is about to make a strategic decision about the future of one of its jewels, Cargolux. Press reports indicate that a deal is on the table, and should be accepted this week.

Whereas all shareholders of the company are government controlled, no one seems to bother that the outgoing government is a caretaker government, and should not rush ahead with last minute strategic decisions. And technically, the incoming government doesn't yet exist until December 4th, and has no power whatsoever to make any decisions yet.

Both, old and new governments should explain that rush to an agreement. 

Ready, Fire, Aim

The old government went through a crisis last year because of its ill-conceived sale of 35% of CV to Qatar Airways. What seems to be the new deal with the Chinese Province of Henan is basically similar, in its rough outline, except that HNCA flies no planes (yet). According to Albert Einstein, doing the same thing over and over again, expecting better results, is the definition of insanity. The new government in formation had its Einstein moment, and wanted to understand what is going on. An "informateur" has been hauled, who, according to sources, seemed to be at first against the HNCA solution , before being in favor.

I haven't really seen what difference several days make. But for the decision making process, Luxembourg gets the "Ready, Fire, Aim Award". A very touchy national decision is taken in the political No-man's-land between an outgoing and an incoming government. No one will be really responsible, if the affair becomes another fiasco in the future. It is a good strategy though for the Luxembourg soccer team: sneak in during half-time, and score several goals while the other team relaxes in the locker room.

Selling for a song

Pun intended. Robert Song has a good deal, whatever the details are. For barely the cost of a new aircraft, he gets what he wants from a company that operates the newest fleet in the world and has 40 years of experience, and is a recognized leader in know-how. How does this improve CV's capitalization? I'm sure in the days to come we'll learn why this is such a good solution.

Do we solve a problem by simply adding a second problem?

There is no urgency. CV's profit and loss situation might even be far better than expected by the end of the year. The European pressure on Luxembourg can be answered with benign neglect.  Luxembourg has shown enough of goodwill to comply, with its QR partnership that failed.

What is interesting is the vision of solving CV's capital problem by adding another problem and obligations on the to do list with a vast startup problem in a Chinese economic development bet. Those have to be analyzed really carefully, well understood and explained. And please, show me the exits of the deal before takeoff. I already know how to fasten my seatbelt.