Stormy Times Ahead: QR Cargo to Challenge Cargolux

The Qatari capacity provider pushes plans forward to utilize Luxembourg Findel Airport as a hub for cargo flights. Up to 24 weekly operations are under consideration, almost all of them in direct competition to routes served currently by home carrier Cargolux.

Cargolux (CV) is facing a rough ride once Qatar Airways Cargo puts strategic considerations into practice, shifting operations from Liege to Luxembourg supplemented by additional capacity they intend to put into the Grand Duchy, thus bundling their European traffic activities there. The pressure on CV becomes presumably even greater by intentions of QR Cargo to compete directly with Cargolux, putting their Boeing 777 freighters on identical intercontinental routes CV is currently serving with their Boeing 747-400Fs and the larger -8Fs. Only exception standing on QR’s itinerary are their intended flights between Luxembourg and Norway, a route not operated by CV.
Asked to give his view on the situation, Chief Cargo Officer Ulrich Ogiermann of Qatar Cargo sent us this answer: “we have a schedule of 13 movements (take offs/landings) in LUX as of today. We are partially moving flights to LUX from Liege. LUX is a European gateway and not a market in itself, has a very good infrastructure and our customers are also using it as a gateway. Our strongest points in Europe remain FRA, AMS with daily freighters and many passenger frequencies. We are happy to create jobs in LUX at the handling agent there and expanding our own staff.”

5th freedom flights
QR’s upcoming step is covered by a treaty between Qatar and Luxembourg, guaranteeing the Arabian airline 5th freedom flights. This way, QR Cargo is allowed to transport shipments between foreign countries as part of their services connecting their home country, like Luxembourg-New York or Luxembourg-Mexico City, just to name two options.  Luxembourg’s government granted Qatar Airways 5th freedom flights following QR’s decision in September of 2011 to purchase a 35 percent share in Cargolux, making it the second largest shareholder after Luxair (43.4%). However, 18 months later QR divested its stake in the freight airline following a hard-fought conflict with the other shareholders and Luxembourg’s unions on the future strategic orientation of Cargolux.
Smartly enough, the rights for fifth freedom flights were maintained by the Qataris and will be further utilized, as Ogiermann confirms. 

Discussed controversially the future role of aviation in Luxembourg at Radio 100.7 (from l > r): Luxair Chief Adrien Ney, Transport Minister Francois Bausch, LUX Airport President Johan Vanneste and OGBL General Secretary Hubert Hollerich - courtesy Radio 100.7

CV has to fasten their seat belts
To what degree this forthcoming QR move will affect Cargolux, was indicated by their departing CEO Dirk Reich on May 11. During a meeting with staff council members. Reich spoke of “grave consequences for Cargolux causing harsh effects,” a participant told CargoForwarder Global.
Reich’s warning signal was followed by a round table discussion on 18 June focusing on pressing aviation themes, initiated by Luxembourg’s public broadcaster Radio 100,7. In the course of the debate, Secretary Hubert Hollerich of Luxembourg’s largest union Onofhaengege Gewerkschaftsbond Letzebuerg (OGBL) accused state-run Qatar Cargo of following a strategy of purchasing market shares by offering forwarding agents extremely low kilogram rates, this way trying to push commercial competitors aside. In this context, Hollerich spoke of prices undercutting Cargolux’s rates by up to 75 percent (!!). We also have asked Mr Ogiermann to give his opinion on these tariff assertions but he left this topic unanswered.

Bausch is not alarmed
During the round table talk aired by radio 100,7 Luxembourg’s Transport Minister Francois Bausch, member of the Green party defended QR’s intention to use Findel airport as hub and their fifth freedom flight intentions. “You cannot grant somebody basic rights and take them away the next day,” Bausch exclaimed.

Close financial links
Local market observers point out that Bausch’s statement must be seen against the background of the enormous financial influence the state of Qatar is exercising in the Grand Duchy. This is exemplified by the influential Al Thani family of the gas-rich Gulf state that runs financial institutes like the KBL European Private Bankers and the Banque Internationale à Luxembourg (BIL) through their investment firm Precision Capital. PC manages over $1.5 billion of commitments for institutional investors and other venture capitalists. It holds 99.9 percent in KBL and 89.9 percent in BIL. It can be assumed that Bausch and his government don’t want to put this financial relationship at risk by stopping QR Cargo competing against Cargolux directly on key trade lanes.
These impending revenue and volume challenges triggered by QR Cargo’s move to further increase their LUX flights might have been one reason why CEO Dirk Reich announced his Cargolux departure, complemented by the lack of political backing by Bausch and other members of Grand Duchy’s government and personal family matters prioritized by the manager.

Heiner Siegmund  

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