CV Fleet Goes South

Luxembourg’s Pilots Association sees an alarming trend with carrier Cargolux (CV) torpedoing the country’s well-proven social model step by step. The pilot’s concerns are based on plans of CV’s management to outsource part of their fleet and operate these freighters under an Italian AOC - for cost saving reasons, as their headquarters claims. 

Source: CV
Source: CV

Since 2009 Cargolux’s Milan-based subsidiary Cargolux Italia is operating a single Boeing 747-400 freighter on roundtrips to Japan and Hong Kong. By the time the offspring was established, only Italian airlines were given the formal okay to fly to international destinations from Malpensa Airport (MXP). Hence, an Italian AOC was needed to provide the services.
So far, so good.

The trouble began in 2010 when the Italian Aviation Authority ENAC demanded that Cargolux solely employ Italian cockpit staff on their aircraft. Until then it was Luxembourg-registered Cargolux cockpit manpower which was maneuvering the Jumbos operating out of MXP.
In order to comply with the changed rule, since 2013 all pilots of CV Italia are employed in Milan on terms and conditions that substantially differ from Cargolux working contracts back home.
Meanwhile, parent Cargolux operates flights on behalf of her Italian daughter between Milan and U.S. destinations under Cargolux Italia flight numbers with its own (LUX-based) aircraft. These flights, comprising 46% of the total market capacity offered by Cargolux Italia, supplement the Milan and Asia operations conducted by the Malpensa registered carrier.

Executive Secretary Dirk Becker of Luxembourg’s Pilot Association A.L.P.L.  /  source: private
Executive Secretary Dirk Becker of Luxembourg’s Pilot Association A.L.P.L. / source: private

Second Jumbo freighter to follow
On 25 September a second CV Jumbo freighter will be transferred from Luxembourg Findel Airport to Milan to be registered in Italy, servicing routes under Italian AOC.  This step will open the floodgates for more freighters to be outsourced in the near future, claim the pilots, who feel provoked by this decision. Once based in Malpensa, capacity is shifted southward with Luxembourg Findel Airport inevitably losing cargo traffic and hence part of its hub function. Negatively affected by the upcoming freighter transfer is also the adjacent located Luxair Cargo Center that will see less throughput and Cargolux’s Maintenance shop due to reduced technical checks. This all, if not stopped by the management, will successively lead to an erosion of Luxembourg as main European gateway for cargo traffic and affect the country’s social model negatively, argues Dirk Becker, General Secretary of the Association Luxembourgeoise des Pilotes de Ligne (A.L.P.L.). It is questionable if expanding MXP would be in line with the announced dual hub strategy, which was praised a cornerstone of the collaboration between Cargolux and Chinese investor HNCA when HNCA has bought a 35 percent stake in CV, he says.

Doubtful plan
The key question raised by the A.L.P.L. organized Cargolux cockpit personnel is if it is indispensable for financial reasons to transfer freighters from Luxembourg to Italy and have them officially registered there.
The answer is given in an interim report presented by the law firm Janezic & Schmidt, which specializes in European and international aviation law. In their expertise they confirm that the legal justification for the establishment of Cargolux Italia has meanwhile become obsolete. Nowadays, all flights from Milan could be operated by Cargolux (Luxembourg): "There is no (legal) necessity to operate these flights through an Italian subsidiary which holds an Italian operating license," Janezic & Schmidt conclude.

So what’s the solution?
When asking the pilots they say that it would make sense to close down CV Italia the sooner the better. This way, dual structures would be eliminated by concentrating the administrative activities at CV Luxembourg Findel’s headquarters. This would be a decisive step to improve the much debated efficiency enhancement, with little coming to fruition so far. Becker goes on to say that the indirect labor costs are about one third lower in Luxembourg compared to Italian social legislation.  His and his pilot association’s conclusion: If Cargolux management wants the carrier to become more efficient and save money they better scrap their outsourcing project and concentrate as many activities as possible in Luxembourg Findel instead.

But - economics should make sense!
CV is as many other all freighter operators, striving for better “return on revenue” and basically has the right to use all means at their disposal to keep costs at a minimum especially where net yields are still being eroded by price dumping around the world as well as ever increasing overheads.
It’s a matter of survival and both sides would maybe be well advised to sit soberly around the table and look for the “middle road.”
The same discussion is going on in Germany with Lufthansa pushing for more services to be undertaken by their passenger daughters, Germanwings and Eurowings. The German pilots association is not happy with that either.

One can easily blame foreign competition for all this misery, but at the end of the day, be it CV or LH, all have to come to terms with what makes sense for future profitability and job safety.

Heiner Siegmund  /  John Mc Donagh

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