Cargolux Gives Birth to Chinese Daughter

In a Memorandum of Understanding signed today (22 January) in China between representatives of Luxembourg and China both sides have agreed to jointly set up a new cargo carrier. Home of the newcomer will be Zhengzhou Airport at China’s heavily populated Henan province.

Luxembourg’s Francois Bausch with Li Jiaxiang of CAAC  /  source: SIP/MDDI
Luxembourg’s Francois Bausch with Li Jiaxiang of CAAC / source: SIP/MDDI

The step taken today had been announced by Cargolux’s CEO Dirk Reich in an exclusive interview with CargoForwarder Global during the Air Cargo China show held last year in Shanghai. It was not a question of “if“ but how the carrier will be operating. Reich indicated two options, a regional cargo airline serving China and the surrounding markets or a company offering also intercontinental flights. Reich left no doubt in the interview that he was supporting the larger solution.

Win-win situation
Ever since it seems his view has increasingly gained ground within Cargolux and also gained the support by Luxembourg’s government and Chinese investor Henan Civil Aviation Development and Investment Company (HNCA), Luxembourg flag carrier’s two main shareholders together with Luxair. This was confirmed by Francois Bausch, Grand Duchy’s Minister for sustainable development and infrastructure during the MoU signing ceremony, who said that founding a subsidiary in China will “give Cargolux operational abilities to link Zhengzhou with other cities in China, and also to combine Zhengzhou with destinations in the United States."
Addressing his co-signatory Li Jiaxiang of China’s Civil Aviation Administration (CAAC) Bausch spoke of a “win-win situation” providing benefits for both sides.
CEO Dirk Reich of Cargolux was not available for comment but it can be assumed that he considers the agreement as an important stage win in the long journey of his company to regain global importance and better its financial situation.

Many questions are left open
Although Reich mentioned the name “Cargolux China” various times in recent months when speaking of the intended subsidiary it is unclear to this point which name the airline will ultimately carry. This issue was left open during the MoU signing ceremony. Further points that were left unanswered and remain of highly speculative nature are fleet matters, network issues and the time frame for setting up the company and launching its maiden flight.
As to the fleet it can be assumed that it will be a mix of smaller freighters and large Boeing 747-Fs, particularly 747-8Fs. This makes sense as a closer look at the strategic and operational aspect reveals, since the carrier shall serve both the Chinese domestic market by feeding and de-feeding Cargolux’s Zhengzhou flights and operate on transpacific routes as well.  

What about ownership?
Will this just be a joint CV and HNCA carrier?
Information recently given in the Luxembourg press indicates that Cargolux will only be a 25% shareholder, with HNCA taking a 51% majority holding in the new airline.
So, who is in line for the remaining 24% on offer?
These could very well be taken by the same Luxembourg financial institutions that have shares in Cargolux itself.
This would make sense as it would give the financial shareholders a controlled look into both carriers’ activities and where necessary, speak up when not happy with results.
Interesting and exciting times for Cargolux, it’s staff and the markets to be served.
It only remains for the unions and the management to finally come to a good compromise on the Collective Labour Agreement so that this proud airline with its 22 aircraft can continue to prove to the industry that the all freighter market is alive and kicking.

With today’s signing of the MoU, Zhengzhou cements its role as important gateway for Cargolux. Currently, the carrier operates five flights per week between its home base Luxembourg Findel and Henan Capital’s Xinzheng International (CGO). In the coming months these services will be increased step by step.

Unions warn of job losses
Opposition to Cargolux’s growing China engagement comes from Luxembourg’s unions OGBL and LCGB. They warn of a creeping tendency to transfer workloads and jobs from the carrier’s home base Findel to Zhengzhou airport. This was contradicted by Minister Bausch, who stated: "In China we are building a supplement to what already exists in Luxembourg. This is fruitful for the company and will secure jobs in Luxembourg as well.” He ended his statement by assuring that “we will never transfer jobs from Luxembourg to China.”
HNCA bought into Cargolux at the end of 2013, acquiring 35 percent of the shares. Luxembourg state controls directly 8.32 percent and indirectly through local saving banks 29.9% with regional carrier Luxair, also partially state owned, possessing the remaining 35.1 percent. 

Heiner Siegmund  /  John Mc Donagh

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Comments: 1
  • #1

    T. Rassel (Friday, 23 January 2015 09:13)

    Apparently Mr. Reich and Helminger think that they are much smarter than Lufthansa's attempt with Jade Cargo.