Wednesday, December 19, 2012

Freight Only Air Cargo Carrier Sells Stake - But for How Long ?

As Predicted Qataris Pull Out and Government Fill the Void for Cargolux Again
Shipping News Feature

LUXEMBOURG – The 35% stake in Europe’s main freight only air carrier, Cargolux Airlines International SA, owned by Qatar Airways, which we wrote of on the 19th November, has been repurchased by the Luxembourg government, apparently for the original sale price from 2011 of $117.50 million. It is reported that the HNA group has expressed an interest in obtaining the stake in Cargolux; the Chinese carrier currently operates a 129 strong fleet including those under the Yangtze River Express cargo brand.

Unions will view the deal as a victory so far as it was strenuous objections from labour groups to the Middle Eastern ownership, coupled with a sharp drop in profits, which is thought to have initiated the sale. The Luxembourg Government first took a stake in Cargolux when Swissair collapsed in 2009 joining Luxair and two local banks as shareholders. The failure of the Qatari’s to use the deal as a stepping stone to a greater share of the world’s cargo market was in large part due to continuing arguments over how best to return the airline to profit.

What is certain is that Cargolux plans to work towards a cost cutting exercise and the company, the first to buy the Boeing 747-8 freighter reportedly still has to finance the seven aircraft outstanding from its original order for thirteen of the giant aircraft. A recent statement from the company said:

“The airline will commence negotiations with the unions representing employees to work towards achieving a level of labour cost and improvement in productivity that will put the airline into a better position to withstand these challenging times in the market, both now and in the future. A reduction in labour costs and improvement in productivity are only two of several initiatives to be undertaken by Cargolux to achieve sustainability in the long term.”

Interestingly heavy lift and project forwarding air cargo specialist Volga Dnepr is also apparently showing some interest in obtaining the 35% which the Luxembourg authorities have freely admitted they want to pass on as soon as practical saying they foresee ‘a relatively short time frame’ for the deal.

The real poser in this is what lies ahead for Richard Forson, currently interim CEO who is said to have the backing of the company’s shareholders but who was viewed with suspicion by the unions as he is a former General Manager of Finance and Administration with Qatari Airways.