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Pressure is building in advance of a meeting between Cargolux’s union and management tomorrow. The carrier’s management, led by interim president and CEO Richard Forson, is attempting to cut costs and wants to make changes to the collective work agreement (CWA) and increase productivity. But the OGBL union, in a letter sent to Mr Forson ahead of the meeting and countersigned by the LCGB, said that a pre-requisite for negotiations was to extend the CWA for a year and backdate it to the point at which it was cancelled last year. The letter also pointed to eight ways in which the unions would be willing to help turn around the fortunes of the ailing carrier, which has forecasted another loss for 2013.

“The staff are willing to help the company with temporary measures,” said Aloyse Kapweiler, syndicate secretary, aviation and logistics for the LCGB. “But the management has not understood the importance of the CWA in Luxembourg. It is a foundation for social peace. Abolishing it is a complete no-go.”

If the management continues to place the CWA at the heart of its plans for change, the next step is to seek a mandate from union members for conciliation – what Mr Kapweiler described as an instrument to save face. The process involves a series of meetings with four representatives of the unions and four from management, plus a representative of the government. If no progress is made, the union has the right to strike. “But this is a confrontation no one wants,” added Mr Kapweiler. “Luxembourg is a peaceful country that does not have strikes, because of the framework of the social model.”

Mr Forson told The Loadstar, however, that Cargolux had no choice but to cut costs. “We have consistently sent out a message that if we expect to compete with the Middle East, we need to ensure costs are at a minimum. Not at the same level as the Middle East, but we have to compensate by improving efficiencies and productivity. There is no single element but a number of major areas that need to improve.”

He added:  “The unions need to buy into sustainability. It is about an adaptation of the benefits.”

Mr Forson has called for $14m in productivity improvements by the end of 2014, said Mr Kapweiler. “If that is possible then you must sack all the management. It is unrealistic. You cannot save a company by cutting salaries when they are only 9% of the costs. If Mr Forson is interested in solutions, we are offering them.”

The plans, approved by the board, also include ending a profit share scheme. “How can you cut costs by abolishing profit share,” asked Mr Kapweiler. “It is a reward for good work. The guys are already going an extra three miles. Cargolux has a cash problem, it always has done. So it is natural that you think of cutting costs. But Mr Forson has a problem. The plans are too big. They involve too many changes at once, all in the wrong way.” He added: “A work to rule would show just what the staff at Cargolux already do.”

Mr Forson, formerly of Qatar Airways, pointed to high levels of unemployment in Europe before adding: “There is an un-level playing field between Europe and the Middle East. Europe is highly regulated and the labour and regulatory laws here are quite sophisticated. I am not going to wish that away. That is the stack of cards I have got to play with. But other carriers are not as restricted by state ownership and funding rules which are quite draconian.”

Increased tension between the unions and management could harm Cargolux’s continuing search for an investor to replace Qatar Airways. Although the government had initially hoped to be able to sell its recently acquired stake to a new investor by the summer, Mr Forson indicated that it was more likely to be the end of the year. “The government wants to do an evaluation of each type of investor within 2013. The due process is important. It is high profile, and it is prudent to make sure that it will be a long-term relationship.”

Mr Kapweiler said that an investor for Cargolux was for the government to determine. “It may be attractive to investors if the management appears to have won over the unions. This is bad publicity for a good company, so let us find solutions together. We could be willing to forego salaries if necessary, and get the money back when things are better. We are really trying to negotiate. We have no interest in hurting the company.”

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