Is Cargolux’s unique culture strong enough?

HOW do you measure the value of esprit de corps within a company? Since it is an intangible by-product of work satisfaction and team commitment, and its existence cannot be measured on a spreadsheet, it therefore cannot be proven to have any direct correlation with an entity’s overall performance. 

Or can it? In the case of Cargolux, it is the freighter airline’s much admired deep-rooted culture that has been seen as vitally important to its success and sustainability over many decades, writes Thelma Etim, deputy editor.
It remains an intriguing factor, as air cargo industry observers watch the latest drama unfold between the European all-cargo airline’s management and its talented, highly educated, experienced workforce.
Chief executive Dirk Reich’s decision to make a second B747-400 freighter available to the carrier’s seven-year-old loss-making subsidiary Cargolux Italia SpA, has not only fanned the speculative flames that the board is outsourcing ‘through the back door’ – but has also sparked an outpouring of opprobrium on social media websites from interested parties (see the European Transport Workers’ Federation Facebook page).
The disquiet has prompted Luxembourg politician Marc Spautz, president of the Christian Social People’s Party, to table parliamentary questions about the Cargolux’s future.
Since Reich has reportedly stated in the past that Italian pilots work 25 per cent more than their Luxembourg opposites and cost 20 per cent less, is the intention by Cargolux management to force pay cuts elsewhere in the company down to Italian levels?
“The Cargolux Group currently operates 21 aircraft (including one operated by Cargolux Italia). It is important to note that the size of the Luxembourg fleet will not be impacted by the transfer of an older aircraft model (B747-400F) to our subsidiary, because it will coincide with the arrival of a new-generation B747-8F,” a company statement informs Air Cargo News.
“In other words, we will grow the total Cargolux fleet to 22 aircraft by 31 December 2014. We are actually strengthening our activities in both Luxembourg and in Italy as evidenced by the hiring of 50 new pilots in Luxembourg and 25 new pilots in Italy, bringing the total number of flight crews to 450 in Luxembourg and 50 in Italy.”
One air cargo stalwart fears an irrecoverable schism could emerge, if the board does not change tack and soften its approach to its workforce. “You have to deal with them openly and directly – and not play games,” remarks one observer. “It starts with the realisation of the problem and transparency. For this to happen there has to be a basic level of communication and trust instead of simply outsourcing. Ultimately, this approach may not work but you have to try.”
The value of the team spirit of the company cannot be calculated by cost controllers or auditors and, undeniably, Cargolux has consistently overcome some obvious commercial disadvantages, one of them being its Luxembourg location, because trucking is a relatively costly affair – eating into yields.  
Not surprisingly, the new scheduled services to Zhengzhou are perceived as compounding the problem, because major forwarders (DB Schenker, Kuehne + Nagel and Panalpina) are based in Hong Kong, Shanghai and in Bejing, thereby the Zhengzhou service is once again resulting in more trucking.
“Subsidies can mitigate these costs in the short term, but in the long term they will not assist the business unless all the forwarders set up major bases in Zhengzhou, which some may do over time,” remarks a highly experience air cargo operator. “However costs sunk into existing facilities have to be considered.”
However it must be noted that the carrier, which recently took delivery of its 10th -8 freighter, has enjoyed some success. Despite budgeting for a US$27.1m loss last year, Cargolux earned a full year net profit of US$8.4m inn 2013 compared to a $35.1m net loss in 2012.
Total revenues during the 12 months rose 14.4 per cent to $1,988.5m from $1,738.9m in 2012.
Tonnes sold increased 16.7 per cent to 753,848, whilst average load factor softened 0.9 percentage points to 67.7 per cent, exceeding the budget by 13.5 per cent.
Since its inception in 1970, the airline’s staff – ranging from pilots and mechanics to handling staff (employed through Luxair) – has collectively engendered a unique team spirit, which over time has been seamlessly woven into the fabric of the Cargolux’s culture. But the union’s somewhat troubled relationship with management could trigger its unraveling. 

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Established in 1983, Air Cargo News is the leading source of news, information, interviews, analyses and reports to the global airfreight industry. Our leading portfolio includes print, digital and events that give businesses in the airfreight industry the ability to connect with decision-makers in this sector.