Luckin Coffee sticks by chairman despite scandal over fake sales

Embattled Luckin Coffee chairman Charles Zhengyao Lu. (Reuters)
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Updated 04 July 2020

Luckin Coffee sticks by chairman despite scandal over fake sales

  • Luckin suspended trading on June 29 and will be delisted from the Nasdaq by the end of next week.

BEIJING: Embattled coffee chain Luckin Coffee has decided against ousting its founder and chairman, despite an internal investigation concluding that last year’s revenue included millions of dollars in fake sales.

The massive financial scandal has already cost the company two top executives, caused shares to plummet more than 70 percent and put its billionaire founder Charles Zhengyao Lu in the line of fire — and will see it delisted from the Nasdaq in New York.

But the directors decided Lu would remain chairman, the company said, a day after an internal probe found its 2019 net revenue was inflated by 2.12 billion yuan ($311 million).

A proposal to oust Lu failed to get the necessary two-thirds majority vote on Thursday, Luckin said in a filing to the US Securities and Exchange Commission.

The company’s shares went into freefall after it revealed in April that a top officer may have faked billions of yuan worth of sales.

The chain has since fired CEO Jenny Zhiya Qian and chief operating officer Liu Jian.

On Wednesday, Luckin said in a separate filing that a special committee investigation had found the fabrication of sales traced back as early as April last year.

Apart from the inflated revenue, Luckin’s 2019 costs and expenses were also found to be inflated by 1.34 billion yuan.

The committee’s recommendations — which led to Qian and Liu’s removals — brought about a proposal to oust Lu as well.

While it eventually failed to garner enough support to remove Lu, the board earlier announced its decision to fire another 12 employees involved in the fake transactions.

Luckin suspended trading on June 29 and will be delisted from the Nasdaq by the end of next week, having been asked to do so by the exchange.

The chain launched in 2017 and raised $561 million in its initial public offering less than two years later, with plans to dethrone Starbucks in China via an aggressive growth strategy, enticing customers with an app-based purchasing model that prioritized takeaway and delivery options, and generous mobile coupons.

By the end of 2019, the Xiamen-headquartered firm’s 4,500 outlets in mainland China had already surpassed Starbucks’ local footprint, and investors touted the company’s potential to go global. 

The scandal has dealt a blow to US-listed Chinese firms, who find themselves under increased scrutiny as tensions flare between the two superpowers.

Lu must still face a vote of confidence by shareholders on Sunday at an extraordinary general meeting.

Berlin’s ill-fated new airport finally ready for take-off

Updated 28 October 2020

Berlin’s ill-fated new airport finally ready for take-off

  • The airport, located in the south-east of the capital, was originally due to open in 2011
  • BER initially projected to cost $2 billion but already was past the $7.6 billion mark

BERLIN: Nine years late and eye-wateringly over budget, the Berlin region’s new international airport will finally open on Saturday — in the middle of a global pandemic that has crippled air travel.
“We are ready for take-off!” insists the management team at the new Berlin Brandenburg Airport (BER), set to replace the German capital’s aging Tegel and Schoenefeld airports.
But the mood is one of relief rather than celebration.
Ever since construction began on BER in 2006, the project has been dogged by one failure after another, becoming a financial black hole and a national laughing stock — not exactly an example of German efficiency.
The airport, located in the south-east of the capital, was originally due to open in 2011.
Now it is opening its doors in the middle of the worst crisis the aviation industry has ever seen, as COVID-19 restrictions continue to suffocate air travel.
And as if that were not enough, there’s also the climate crisis: pressure group Extinction Rebellion is planning acts of “civil disobedience” on the opening day to protest against the impact of aviation on global warming.
Against that backdrop, “We will simply open, we will not have a party,” according to Engelbert Luetke Daldrup, president of the airport’s management company.
Lufthansa and EasyJet will be the first two airlines to touch down on the tarmac of what will be Germany’s third-largest airport, after Frankfurt and Munich.
A few days before the opening, around 200 staff were busy disinfecting the 360,000-square-meter Terminal 1.
Some 100 alcoholic hand gel dispensers have been installed and robot vacuum cleaners hum over the floors.
The “Magic Carpet,” a huge, bright red artwork by American artist Pae White suspended from the ceiling, brings a touch of color to the check-in hall.
The airport has been designed to welcome 27 million passengers a year, but in November it will see only 20 percent of usual air traffic thanks to the pandemic.
Terminal 2 won’t open until spring 2021.
About 15 shops and restaurants out of just over 100 will remain shut, while the rest will be forced to keep “limited opening hours” because of low traffic through the airport, a spokesman said
None of this good news for BER, initially projected to cost $2 billion but already past the $7.6 billion.
The airport has been granted $353 billion in state aid to help safeguard the jobs of the 20,000 people who will eventually work there until the end of 2020.
The health crisis is already having an impact on employment at the hub: at the end of July, Berlin’s airports announced the loss of 400 jobs out of a total of 2,100.
EasyJet has said it will cut 418 jobs in the German capital, and Europe’s leading airline Lufthansa, Germany’s flagship carrier, is to shed 30,000 jobs worldwide.
“We fear even greater job losses in the future,” a spokesman for the Verdi union said.
Luetke Daldrup hopes the situation will improve “from the spring onwards.” But the International Air Transport Association does not expect global air traffic to reach pre-crisis levels until 2024.
In the state of Brandenburg, which surrounds Berlin, local leaders remain optimistic about the prospects for development.
“No hotel has so far postponed its investment plans because of the pandemic,” insists Olaf Luecke, president of the local branch of Germany’s hotel and catering trade union (DEHOGA).
Construction work began in September on two 14,000-square-meter (150,000-square-foot) hotel complexes, due to open in 2022.
And in anticipation of the opening of BER, US electric-car giant Tesla has chosen Brandenburg as the location of its first European factory, which is set to employ 40,000 people.
“Having new, modern infrastructure will be beneficial in any case, despite the pandemic,” according to Carsten Broenstrup of the state employers’ association.
But “if there is not a vaccine soon, it will be a very big problem,” he admits.