Bank of China provides loan to Henan Civil Aviation Development & Investment to facilitate its acquisition of a 35% ownership stake in Cargolux Airlines International

Project narrative

On December 16, 2013, the board of Cargolux Airlines International S.A., a Luxembourg-incorporated and -based all-cargo airline and air freighter, approved entering into a commercial cooperation agreement with Henan Civil Aviation Development Investment Co., Ltd. (HNCA) — a Chinese state-owned aviation investment company under the Government of Henan Province — for the purchase a 35.00% stake in Cargolux from the Government of Luxembourg. On January 14, 2024, HNCA signed the acquisition agreement with the Government of Luxembourg. In 2014, the Luxembourg Branch of Bank of China (BOC) issued a loan to HNCA to facilitate its acquisition of a 35% ownership stake in Cargolux Airlines International. HNCA paid $120 million USD for the 35% stake, plus agreed to aside $15 million AUD to develop a hub in Zhengzhou and pay its 35% pro rata share of Cargolux's $175 million USD capital investment in spring 2014. The acquisition was completed on April 23, 2014, with HNCA (Luxembourg) S.à.r.l. — a Luxembourg-incorporated subsidiary of HNCA — as the direct acquiring entity. Due to the acquisition, the shareholding pattern of Cargolux was as follows: Luxembourg state-owned airline Luxair S.A. (35.10% stake), HNCA (Luxembourg) S.à.r.l. (35.00% stake), Luxembourg state-owned bank Banque et Caisse d'Épargne de l'Etat (10.91% stake), Luxembourg state-owned bank Société Nationale de Crédit et d'Investissement (SNCI) (10.67% stake) and the State of Luxembourg (8.32% stake). In addition to acquiring a 35% stake, HNCA and Cargolux agreed to open a Chinese logistics hub at Zhengzhou Airport, with four weekly flights as the start, creating a dual-hub model with Luxembourg Airport as the other hub. The 35% stake acquired by HNCA had formerly been owned by Qatar Airline for a year, until conflict amongst major shareholders led Qatar Airlines to sell the stake to the Government of Luxembourg at the end of 2012. There were concerns about the viability of the deal, as Zhengzhou Airport, planned to become "Zhengzhou Aerotropolis" and a logistics center for China, was expected to take years to come to fruition. Moreover, Henan Province's plans to develop rail services between it and Europe seemed to threaten the role of air cargo. It was also worried that the large Chinese state-owned air carriers would be able to force or price out Cargolux, even with its Henan Province-backing, though arguments that Cargolux's better aircraft utilization and Luxembourg's airport were distinct advantages (though the airport bringing its traffic to Luxembourg led to price disadvantage compared to other carriers). Cargolux's management were divided over the acquisition, while Luxembourg's unions opposed the deal over concerns over loss of jobs. Union OGBL claimed that the acquisition served China's interests but had little benefit for Luxembourg, while union LCGB voiced the need for vigilance over the partnership. The acquisition would be viewed as part of the Air Silk Road of the Belt and Road Initiative (BRI). In June 2017, Cargolux has signed a joint venture equity contract with HNCA, Henan Airport Group, and Xinggang Investment Group Co to establish Henan Cargo Airlines, a freighter carrier which will operate under a Chinese air operator certificate (AOC), with the Chinese companies holding 75% and Cargolux holding 25%.