BREAKING: Cargolux has informed Boeing it will not take delivery of the 747-8F Monday (Update3)

Cargolux Boeing 747-8F N5573S RC503

By Max Kingsley-Jones
Cargolux has informed Boeing it will not take delivery of its first 747-8 freighter on Monday as planned, due to a contractual tussle, the airframer confirms.
The Luxembourg-based freight operator is due to receive its first of 13 General Electric GEnx-powered 747-8Fs during the high-profile ceremony at Boeing’s Everett plant near Seattle on 19 September. However, Flightglobal has learnt from well-placed industry sources that, in a last minute wrangle over “unresolved issues”, Cargolux is withdrawing its personnel from Boeing’s plant and has informed the airframer that it will not accept delivery of the aircraft. The airline had been due to take its second 747-8F two days later, on 21 September.
UPDATE 3:58 PM ET: The official statement from Boeing:
“Due to unresolved issues with Cargolux, delivery of the first Boeing 747-8 Freighter will not take place on Monday, Sept. 19. We continue to work with Cargolux and look forward to delivering its airplanes.”

UPDATE Appox. 9 PM ET: Vice president of Boeing Commercial Airplanes Marketing, Randy Tinseth, posted on his company blog about the delay:

We still need to work through some contractual issues with our customer Cargolux, so first delivery won’t take place as scheduled on Monday. Employee and media events for next week have also been postponed.

While this is disappointing to all of us here at Boeing, we’re working with Cargolux to resolve the issues. They’ve been an incredible partner going back a long way. Two decades ago, they became the first carrier worldwide to operate the 747-400 Freighter. It’s only fitting that they became the launch customer of the new 747-8 Freighter.

The 747-8 Freighter is something to celebrate–and we plan on doing just that very soon.

Earlier, Boeing 747 vice president and general manager Elizabeth Lund also addressed the issue internally to employees:

Earlier today we received notification from our 747-8 Freighter launch customer Cargolux that it would not take delivery of its first airplane on Monday. We are working closely with Cargolux to determine the delivery dates for both its first and second airplanes.

In light of these events, the employee celebration on Tuesday has been cancelled.I am disappointed to have to share this information with you. I remain confident that we will work through these issues and look forward to celebrating the delivery of this great airplane with you.

-Elizabeth

UPDATE 9/17 6:18 PM ET: Cargolux is calling its refusal to take delivery of the first two 747-8Fs a “rejection” and if the contract are not resolved quickly, the cargo carrier will seek capacity elsewhere, reports Flightglobal.
This is a breaking story and will be updated.

36 Responses to BREAKING: Cargolux has informed Boeing it will not take delivery of the 747-8F Monday (Update3)

  1. David Parker Brown September 16, 2011 at 3:42 pm #

    This would be huge. Looking forward to more information. Thanks Jon.

  2. Steven Frischling September 16, 2011 at 3:55 pm #

    Wow! I’m curious if this is due to a financial reason or have they somehow found an issue with the aircraft prior to delivery.

    Has anyone cut it this close to delivery of a new type of aircraft, then delaying it’s delivery?

    Love to hear how this plays out!

  3. Paulo M September 16, 2011 at 3:57 pm #

    Looking forward to the explanation. Potentially huge story..

  4. skiesandseasHD September 16, 2011 at 4:01 pm #

    Hadn’t Cargolux scheduled this to pick up Cargo straight after delivery? Very curious!

  5. Ray M. September 16, 2011 at 4:06 pm #

    Please keep us all in the loop Jon this sounds big.

  6. TC September 16, 2011 at 4:18 pm #

    Boeing put on chrome wheels, trailer hitch, and a visor that they didn’t order?

  7. Paulo M September 16, 2011 at 4:20 pm #

    I believe United Airlines had a venomous reception for their first few Boeing 777′s, but they eventually resolved their differences.

    What an incredible story, these are guys that got Boeing to make this plane. Proposals from Airbus were not sought at that time…

  8. Jim Way September 16, 2011 at 4:22 pm #

    Cargolux didn’t want the protective undercoating Boeing put on there.

    Seriously tho, thanks as always for the great coverage, Jon. Looking forward to the updates.

  9. 7K7 September 16, 2011 at 4:51 pm #

    “Boeing put on chrome wheels, trailer hitch, and a visor that they didn’t order?”

    They were OK about that, but it was the furry dice that tipped them over the edge :-)

  10. Bryan September 16, 2011 at 5:12 pm #

    Looks like it’s due to contractual performance issue with the plane, which makes me wonder how they’re just realizing this NOW? Sounds like a cry for monetary compensation imo.

    And someone just pointed out that Al-Baker is now on the board of Cargolux seeing as QR acquired shares in the company. It would be hilarious if he’s the driving force behind this, because we all know how much of a drama queen he is when he wants something from either Boeing or Airbus.

  11. ordcargo September 16, 2011 at 5:14 pm #

    thats crazy. cant wait to work on it tho when it comes to chicago

  12. Peter September 16, 2011 at 6:21 pm #

    So, who’s the next contestant for launch customer? NCA maybe?

  13. keesje September 16, 2011 at 6:47 pm #

    Probably Boeing thought Cargolux might accept some compromises because of schedule pressure and they keep refusing. Cargolux COO Peter is a very knowledgeable engine/ MRO guy.

  14. Steven Frischling September 16, 2011 at 6:48 pm #

    Bryan,

    Interesting, as I was reading about the contact issue I was wondering if Cargolux was having a Qatar Airways moment. Good to know I’m not the only one thinking that!

  15. alloycowboy September 17, 2011 at 3:43 am #

    Interesting, Atlas Air just announced purchase of two 747-8F’s on September 15. Coincidence?

  16. Guru Josh September 17, 2011 at 4:35 am #

    As Adam Pilarski said “the performance problems were well known” in the industry. I think the MD-11 got clobbered for less. That said, Cargolux must have been aware since a long time and it is logical to assume that the performance issue had been settled prior to agreeing on a first delivery date.
    So a ‘new’ issue is more likely and the hypothesis of Cargolux having a ‘Qatar Airways moment’ here is an interesting one.
    Some may think of Mr. Al Baker as a Drama Queen, but for me it is good to see that there are still some no-nonsense guys around who don’t like being sold as fools and expect aircraft manufacturers to have more business culture than used car salesmen.

  17. Mick September 17, 2011 at 7:47 am #

    Jon, the ‘ well-placed industry sources ‘ for your Breaking News is a Boeing Press Release?

  18. anon September 17, 2011 at 8:24 am #

    Cargolux and Qatar can order A380 freighters instead.

  19. Tom September 17, 2011 at 10:31 am #

    @Guru Josh,

    good points!
    Boeing earns a lot of money and delivers not in time and not according to specs…
    That doesn’t fit together unless it is just used car business.
    Thus AA was right to oder some 737MAX but not as a launch customer!
    Who will pay the bill? Albaugh, McNerney?

  20. David Spritzer September 17, 2011 at 10:49 am #

    This is mind blowing and quite unbelievable that Cargolux will not take this first 747-8. There must be some major contract issues with Cargolux and Boeing. I was really looking forward to this delivery.

  21. Wilbur Wrong Way Corrigan September 17, 2011 at 4:57 pm #

    So, it’s time for Boeing to send the 747-8s formerly-thought-to-be-destined-for-Cargolux back to the paint shop for paint stripper treatment.

    “Fine. You don’t want our -8s, then we’ll give them to Kitty Hawk.”

  22. V V September 17, 2011 at 8:10 pm #

    Rejection?
    All purchase agreement and the associated letters of agreement, are built and written to protect both the manufactuer and the customer. For each and every committment there is some kind of associated remedy such that the delivery is not put at risk.

    I just do not know how the situation with Cargolux can happen. I suppose the real story is about money. Either Cargolux didn’t get the financing on time, either they are just shouting to get even more concession because they suddenly realize that the expected air freight growth does not happen on time. In reality the AFTK increses much more rapidly than the FTK, meaning that the load factor is getting worse from day to day. Cargolux is probably not looking for capacity but they simply DO NOT NEED MORE CAPACITY today.

    Please see this IATA report:
    http://www.iata.org/pressroom/pr/Pages/2011-09-01-01.aspx

  23. Michael September 18, 2011 at 2:33 pm #

    Word is UPS has made a offer to Buy Cargolux’s 747-8 from Boeing

  24. Tom September 18, 2011 at 8:09 pm #

    I’ve heard that Cargolux are unhappy with realising that what they were getting were re-worked versions of the test aircraft, with all the on-going higher maintenance costs that this would entail. How could they not know what aircraft they were going to get?

  25. Anonymous September 18, 2011 at 10:45 pm #

    From Cargolux’s website:

    “Cargolux announced today that David Arendt has resigned as the Company’s Executive Vice President and Chief Financial Officer. He will leave the Company before the end of the year. Until that time, David will remain fully committed to his present role and continue to be closely involved in all Company matters that currently occupy him, most particularly the financing of the Cargolux fleet renewal.
    David Arendt has been with the Company since 1998 as Chief Financial Officer and was named Executive Vice President in May 2003.
    David has decided to pursue another activity at a new Freeport to be based at Findel, Luxembourg’s national airport. In his new role, Cargolux and David’s firm are expected to cooperate closely as the VAT-free zone at Findel is designed to enhance the attractiveness of the Luxembourg logistics sector by creating a new niche for forwarders of valuable goods. With over 40 years of experience, Cargolux is a reliable partner for the safe and secure transportation of high-value freight.”

    And the same day:

    “Cargolux International Airlines S.A. today announced the appointment of Albert Wildgen as Chairman of the Board, effective 16 September 2011. Albert Wildgen, President of the Administration of the Estate of His Royal Highness the Grand Duke of Luxembourg, has been an independent director since the closing of the strategic partnership transaction between Cargolux and Qatar Airways on 8 September 2011. He succeeds Marc Hoffmann, Chairman of the Board of LuxairGroup, who remains a director of the Cargolux Board.
    In its first meeting, the new Cargolux Board reviewed the financial and business situation of the Company and evaluated potential measures to strengthen its competitive position in the current volatile market climate. The Board further approved the terms and conditions of the ground handling agreement as negotiated in March 2011 between Adrien Ney, President and CEO of LuxairGroup, and Frank Reimen, President and CEO of Cargolux.
    The term of office of the Board of Directors expires at the next Annual General Meeting of Shareholders in the second quarter of 2012.”

    So … internal strife at the company forces the CEO and CFO out.

    My money is on the new CEO and Chairman of the Board are looking to cut costs and they saw these $350 million (list prices) airplanes that they have on contract and said “ooh, that’s a bit of money!”

    Typical myopic business decisions like that and the need to show off one’s penis right out of the gate among executives to show “they mean business” will reveal the boys from the men. I think everyone knows that Cargolux has no say and it would be throwing money away to totally reject these freighters now. They already paid HUGE sums for them.

    -OR-

    It is all politics about the 787. Again. I bet you that neither Boeing nor Cargolux wanted to embarrass anyone they may do business with in the future or have already done business with and deliver the 747-8 before the 787. Remember the whole plan was to have the 787 then a year or so later, the 747-8. The fact that the 747-8 is ready for delivery first is a huge egg-on-face for Boeing.

  26. Hook September 19, 2011 at 2:52 am #

    Hello,
    amazing… Imagine what has to be going on behind the scenes for something like this to happen.

    (I do not think, that it has something to do with “oh this an ex- test aircraft?? We want a new one!!”)

    And I do not think that is “only” money because cargolux is risking a lot as well. Imagine what their customers would say, when it should become clear that cargolux wanted to save some money…

    I was at the airbus festivities for the first A380 to Emirates.. to postpone something like this, is … amazing.

    The Plane is really beautiful though!

  27. DaveJS September 19, 2011 at 3:24 am #

    Wow! Anonymous (on September 18, 2011 10:45 PM) Now that’s what I call reading between the lines!!

  28. GraemeA September 19, 2011 at 12:44 pm #

    The timing of this move says it all. It is merely hardball theatrics designed to put Boeing under pressure as part of an effort to squeese some more juice out of the Boeing lemon.
    This is classic Al Baker style.
    If Cargolux really had issues preventing them from accepting the aircraft, they would have raised them long ago.
    They waited until now only to put Boeing under serious pressure.
    Cargolux want this aircraft and they wont be going to any alternatives if its up to them.

  29. marvin September 19, 2011 at 1:58 pm #

    @graeme, I think this conclusion might be premature.

    1) If this is merely about money the lawyers would have been working till sunday night to resolve it. The fact that they pulled out on friday points to something that cannot be solved on paper alone.
    2) You don’t reject a product if you are not certain that you have a very valid reason. Perhaps Cargolux, does not want this plane (or not at this price), still Boeing must have given them a very good excuse to reject it at this point.

    Last week was the first opportunity Cargolux had to inspect and fly the airplane they were getting. Occams razor would suggest that they were not happy with the actual plane (rather than the type) they were getting and rejected it.

  30. JH September 19, 2011 at 2:01 pm #

    If you ask me, I’d say that dealing with those Arabs is a risky business from Day 1. Too bad the 747-8 got a little delayed; if it wasn’t the Qatar way of doing business would not have existed in this case (as they just purchased part of Cargolux like… 2 weeks ago?).
    No matter if you are Boeing or Airbus, you DO NOT want those guys against you.

  31. dopydem September 19, 2011 at 2:18 pm #

    It absolutely amazes me, the conspiracy theories and total lack of knowledge in aircraft contracting that appears on this blog. Some of this stuff is right out of the old Rod Serling TV series “Twilight Zone”. As VV pointed out shortcomings and remedies are all called out in these contracts as well as the customer receiving early production aircraft was been used in qualification testing.

    As for Al Baker, he is lumped in the category with Bob Crandall and Michael O’Leary. They all like to negotiate in the newspaper, make splashy headlines and create faux crisis. The terms narcissist and ego maniac come to mind.

  32. sfst September 19, 2011 at 3:30 pm #

    @Marvin, Boeing always follows “Working Together” policy. Cargolux was onboarded the moment Boeing decided to design 747-8. I hope you follow lot of news with 777-300ER and Emirates being helping them.

    It is not that Cargolux was given a product in the end and they were not happy about it.

    There are always bunch of cargolux team working in Boeing starting from designing till the delivery.

  33. Cessna September 19, 2011 at 4:36 pm #

    What’s next? What about the 747-8i? Lufthansa ordered it with the expectation to have similar costs per seat as with A380. They hoped to attract passengers with a new ‘Jumbo’. However, passengers of LH love the A380 and do not understand why they ordered this old fashioned 747. If the 8i will have similar performance issues like the freighter, LH should reject it and order additional A380. That’s not only my personal opinion, that’s common sense in most of LH passengers.

  34. marvin September 19, 2011 at 6:35 pm #

    @sfst Please correct me if I’m wrong. But this plane has only been flying for a 2 1/2 weeks and has only been flown by Cargolux pilots for the past week (whereas they have flown on others.)

    General issues surrounding the type should have been known for a long time, however specific issues regarding this plane, (eg. workmanship related), could not have been evaluated before.

    Not to draw a conclusion just to point out that the world might be less black and white than some suggest.

  35. GraemeA September 19, 2011 at 7:33 pm #

    In order to understand the Al Baker style it is important to understand the difference between the underlying premise of an American business transaction compared to an Arab one:

    Whereas the American party will always strive toward a win-win outcome, the Arab sees business as a zero sum game – that is, for one party to win in a transaction, the other party must, by definition, lose.

    It’s the same in Arab politics.

  36. George September 20, 2011 at 5:40 pm #

    The Cargolux plane is flying around Everett a lot today (20th); looks beautiful and seems to be very quiet. I hope they get this worked out. If not it might be an opportunity for one of CargoLux’s competitors; planes in the air deliver more cargo than planes on paper…