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.

Dr. Félicien M. Steichen, MD on Wikipedia

My Orchids. Photo ET

Dr. Félicien M. Steichen, MD on Wikipedia

In 2011, I had the sad mission to honor Dr. Félicien Steichen as a friend, a good neighbor, a doctor and a great scientist in the Luxembourg Business Journal. 

Letter to a Great Luxembourg Scientist, Dr Félicien M. Steichen, MD, 1927-2011

Dr. Steichen passed away at age 83, after a life filled with the passion of bringing innovative medical solutions and life-saving technologies to the world, his students and his own patients. His son François has brought an important contribution to his father’s legacy to my attention: an extensive biography with references to his extensive work on Wikipedia.

Here we go to the Wikipedia page Félicien M. Steichen

Update:
There is a more modest version of this on the Luxembourg language Wikipedia

Cargolux in the Press

My Orchids. Phalaenopsis "You Name It". Photo ET

Cargolux in the Press

Cargoforwarder, a leading newsletter for the cargo business, carried a favorably disposed interview with Dirk Reich, CEO of Cargolux. There were the good news: Zhengzhou flights are full. The bad news are: return flights are almost empty. But that was to be anticipated from the beginning of the partnership.

The solution, it is said, is to include German airports on flights to Zhengzhou to increase German cargo at more competitive prices by reducing trucking costs, as 20% of freight comes from Germany. The vigilant employee organizations should listen to this: reducing trucking costs by getting closer to the German client shipping cargo to China. What about cargo shipped from China to German clients? How close has that airport to be?

We also get a progress report about the new joint-venture airline to be set up in Zhengzhou. It got a name, Cargolux China. The question no longer is if but when the JV will be operational.

On October 28^th, Cargolux corrected or explained the misleading misunderstandings and misquotes away:

Luxembourg, 28 October 2014 - Due to some misleading statements in the media, Cargolux would like to point out the following.
As foreseen in the cooperation agreement between Cargolux and its shareholder HNCA, a feasibility study for the set-up of a joint venture cargo airline, based in Zhengzhou, is currently undertaken. At this point, the airline does not exist; its set-up depends on the outcome and evaluation of the feasibility study that is expected to be finished next month. Only then will the Cargolux board and management decide on future actions.

In addition, Cargolux is studying the possibility of adding intermediate stops in Germany or other countries on its flights from Luxembourg to China, in order to optimize loads on these eastbound services. No flights from Luxembourg will be replaced by flights from Germany or other countries, all Cargolux China flights will continue to operate to and from Cargolux’s hub at Luxembourg Findel airport.

Unfortunately some more intrusive questions of the day were skipped. Such as:

• Despite the low load factors on return flights from Zhengzhou, are those flights profitable? We know they were not meant to be profitable, and a $15 million fund was set aside to subsidize the operation. Another newsletter, the LoadStar poses similar questions.  
• Cargolux had some unwelcome publicity from the wing wave incident involving President Operations Captain Marcel Funk, Vice President Operations Captain Wieger Ketelapper, and First Officer Benedikt Stock. Though this is not a strategic issue, it is of interest to see how the new CEO is handling obvious risky behavior. During the wing wave, bank angles were probably exceeding 30 degrees and very close to the ground. It was obviously a very broad interpretation of the Cargolux Spirit, all the more when a manager is at the commands, and there were previous incidents. Good news here are that the FAA seems to ignore this incident, and that CEO Reich seems to have enforced a strict application of the “Just Culture” concept.

Which brings us to the two other good news of the month: Cargolux is not a private company anymore, and will fly to Tokyo in the near future!?

Reversing former affirmations that Cargolux is a private company, Minister Bausch traveled to the International Air Cargo Forum and Exhibition 2014 in Korea in support of the company, and mostly to Japan to sell the idea of a direct Cargolux connection to Tokyo. Nice trip. He made it to the Japanese Vice-Minister of Transportation, probably a career civil servant,  who promised he would analyze the question. Our man understood that we made progress, a good step forward. Translation for Mr. Bausch: that means NO! It only can’t be said that way in Japanese diplomatic culture.

Which reminds me of an anecdote: In 1984 a delegation presided by then Crown Prince Henri and led by then Secretary of State Paul Helminger traveled to Japan. Nice trip too. In Mr. Helminger’s bags were two “Grand Officier de l’Ordre du Mérite”, that were bestowed upon two Japanese Senators for their invaluable help in securing landing rights for Cargolux in Tokyo. The ceremony went well until one of the Senators in his speech expressed his deepest thanks for the high Luxembourg distinction, and also his regrets that the announced landing rights unfortunately could not be confirmed. CV was offered Fukuoka as a destination instead, as a positive refusal. So good that almost 30 years later the government as a majority shareholder through Mr. Bausch forced a breakthrough.

Bad Karma at Deutsche Bank?

My Orchids. Oncidium "Double Blossom". Photo ET

Bad Karma at Deutsche Bank?

Zerohedge.com gives an overview over Deutsche Bank’s various outstanding liabilities, under the headline: „ Another Deutsche Banker And Former SEC Enforcement Attorney Commits Suicide”.

The author starts evoking a wave of suicides among top bankers in 2014, among them 2 senior executives of Deutsche Bank, William Broeksmit in London in January, Charlie Gambino just recently in New York. From there a possible reason is found in the multiple points of risk and the overall situation of DB, which prompted the bank to increase its litigation reserves to €3.1 billion and contingent liabilities for fines at an extra €3.2 billion.