CARGOLUX - Has the Writing Been on the Wall Since December?

CargoForwarder Global is in possession of a copy of a letter sent by a CV top manager in December 2013 to Paul Helminger, CV’s Chairman of the Board of Directors, the contents of which in essence and if taken at face value are a truly critical rundown of the CV BOD’s handling of the company and its management during the past twelve months.

Much has been reported and written on CV’s present state of affairs and the much disputed 35% investment in the carrier by the Chinese province of Henan.
To top all of this, two of the carrier’s most respected managers departed the airline last week within days of each other.
Such departures surely have a meaning and it seems that the issues pointed out in the above mentioned letter were in this case deciding factors for both gentlemen’s decisions.

Is this then the feeling throughout Cargolux as a whole?

We hope that we are able to highlight here the issues in this letter in a constructive and neutral way. Therefore we will present part in this week’s CargoForwarder Global and the remaining, as well as our own conclusion in the next issue.

CV has always been seen as a professional operator and one who has invested wisely, whether in the fleet or the organization - so where does this disturbing unrest stem from?

The rather lengthy and informative letter to Mr Helminger starts by trying to recap on the problems of the past few years, whereby CV, as have most carriers, tried to ride the economic storm and that its management has done much to introduce means to stem the losses incurred due to this situation.
It can be read out of the contents of the letter that CV’s BOD although knowing that the carrier has been making losses since 2010, fully agreed to the 2013 business plan but changed tack later in the year on this and more or less accuses the management of “buying market share.“ The writer goes on to add that if the BOD had not been in agreement with the business plan, then it would have been their duty to say so in one or other of the numerous BOD meetings held throughout 2013.
One could read out of the above that the CV Board of Directors were either influenced from outside of the company or were also looking for a means to divest itself of part of the management.
Was this the case? The issue seems to have other roots, which if were true, would indicate incomptetence on the part of the BOD and signal a lack of knowledge on their part as to how the carrier should function.

So, where did the problem start to escalate?

The letter to the BOD Chairman goes on to state that CV’s management has always been in agreement that the carrier should have a strong “equity investor to support the balance sheet and enable it to continue the fleet renewal program that was decided in 2005.”
The management stands by the opinion that CV’s fleet renewal is of utmost importance if the company is to survive these hard economic times and they further point out that  most of  CV’s present competitors who operate B747-400 freighter fleets will disappear in the coming years.
The author states quiet categorically that Cargolux would never have had the need for fresh capital or of a new share ownership if it had not been burdened with the enormous costs of the anti-trust case as well as other “largely unnecessary legal expenses.”

The letter continues with the Qatar Airways share ownership debate and clearly indicates that this is where today’s misery started, and has still not ended!
The writer is adamant it’s not Luxembourg’s Ministry of Finance who should take the blame for this debacle, but more so, the Ministry of Transport who knew all along what was going wrong and furthermore that CV’s management under its past CEO, Frank Reimen, had briefed them accordingly before it’s meeting in Doha in March of 2010.
According to the author, Mr Reimen was under considerable personal attack by Qatar Airways prior to signing the Shareholder Agreement and is convinced that this was planned in order that Qatar receive the two controlling positions of Chairman and CEO on the Cargolux Board of Directors. At the end of the day they agreed on Chairman only. The writer goes on to say that it’s his view that this however did not deter Qatar from ensuring the exit of Mr Reimen and the introduction of Richard Forson as interim CEO. Forson being the man that Qatar had apparently previously insisted be brought on board as CV’s CFO.
Cargolux’s management  are still today of the opinion that Qatar Airways “sole objective“ was  to reduce the  activities of CV at Luxembourg for the benefit of Qatar Airways in Doha by means of CV fleet reduction and increased utilization of QR aircraft.

At the end of it all, Qatar Airways bowed out, left the Luxembourg government sitting on the 35% share and looking for a new investor.

And there the problems seem to have found no end!

We will further report in our February 11 issue on how the author of the mentioned letter sees the developments since QR’s departure, the present state of affairs within the carrier as well as his six point plan to enable stabilization of the airline, which was presented by him to Mr Helminger.

John Mc Donagh