Volga-Dnepr Group / Press-center / Media Coverage

On the runway to recovery?

11/19/2009

In the air, Aeroflot Cargo's three-year existence as a separate company, albeit a fully-owned subsidiary of its Russian parent airline, has just come to an abrupt end. Russian international scheduled freighter service operator AirBridgeCargo, part of the Volga-Dnepr group, has also continued to make positive noises about expansion.

On the ground, new doubts have surfaced over previously mooted plans to develop several Russian airports as significant international air cargo hubs.

Together, those developments would appear to dampen prospects for international investment in Russia's air cargo sector, at least in the short- to mediumterm.

"How are you going to fulfil long-term strategic plans if you are getting such big u-turns, or apparent u-turns, happening in the industry?" asks Sergey Stanovkin MD of Moscow-based Dars Consulting.

Public confirmation that financiallytroubled Aeroflot Cargo was being reintegrated with Aeroflot emerged in mid-October, when Natalya Rusakova, head of the cargo organisation's press relations centre, announced her departure in the light of the fact the company was to lose its independence "very soon". Rusakova said the cargo business would be transferred to Aeroflot, with Oleg Korolev, to date general director of CJSC (Closed Joint Stock Company) Aeroflot Cargo, becoming head of a new Aeroflot cargo department.

Attempts by IFW to secure further information about planned future developments direct from Aeroflot Cargo or Aeroflot failed to produce any response.

One well-placed source suggests that even Aeroflot Cargo's senior managers are still unclear about what will happen next. He says it could be several weeks before the picture becomes clearer.

At the time of writing, Aeroflot Cargo's established MD11 freighter services linking western Europe with Russia and the Far East are reported to be continuing as normal.

This ties in with Aeroflot's statement outlining the airline's international winter season passenger service schedule, which came into effect on 25 October and includes a paragraph announcing: "During the winter season 2009-2010, Aeroflot plans to perform regular cargo flights to seven airports across the globe: (Frankfurt) Hahn, Helsinki, Narita, Beijing, Shanghai, Hong Kong and Seoul.

"The frequency of Hahn flights will be increased from 24 to 31 flights a week.

The introduction of a regular flight to/from St Petersburg is also planned.

"All the regular cargo carriage will be made on MD11 aircraft."

Rather overshadowed by the upheaval at Aeroflot Cargo, reported recent comments by Russian deputy minister of transport Valery Okulov, a former chairman and CEO of Aeroflot, who took up the government post earlier this year, also appear to have potentially negative implications for the country's air cargo industry.

Okulov is said to have suggested that Russia only needs two international air hubs, one in Moscow and the other in the Far East of the country, specifically Vladivostok.

Such sentiments appear to run contrary to Russia's previously well-documented ambitions to develop a series of international air cargo hubs across the country, notably in Krasnoyarsk.

"I think the minister's comments could be bad news for many Russian airports, " says Stanovkin. "It is fairly strange because there was a programme approved by the Ministry of Transport which said that at least eight international air hubs should be created in Russia."

However, one of Russia's major problems in that context is a continuing failure to develop the necessary supporting infrastructure.

"Everyone talks about how important it is to develop that, but with a few exceptions, such as at Moscow's Domodedovo airport, nothing is being done, " says Stanovkin.

More optimistic Christian Becker, regional director Russia and CIS for Lufthansa Cargo, paints a more optimistic picture, at least as far as Krasnoyarsk - currently only used by the German carrier as a technical/refuelling stop for Asia-Europe freighter services - is concerned.

"Krasnoyarsk won a tender for a freetrade zone so we are expecting to see developments there, not necessarily in the next few months but certainly in the next couple of years, " he says. "If they use the freezone possibility to attract industry into the region, Krasnoyarsk could become very interesting as a future point to be served with our freighters."

Becker adds that every time he visits Krasnoyarsk, he finds the local authorities very keen to bring in other industries. "I don't have too much doubt that sooner or later, that region will develop. I have already heard rumours that some Chinese industries are looking at it."

The Russian air transport industry was given another potentially significant boost at the end of October with official confirmation that a consortium led by German airport group Fraport had signed a publicprivate-partnership agreement relating to the development, reconstruction and operation, effective April 2010, of St Petersburg's Pulkovo Airport, the fourth largest airport in Russia.

There was no specific reference to cargo, but Fraport said the plan was to invest ?1.4bn (US$2bn) in the airport as a whole.

Positive noises Russian international scheduled freighter service operator AirBridgeCargo, part of the Volga-Dnepr group, has also continued to make positive noises about expansion. Tatyana Arslanova, executive senior VP for strategy, marketing and sales, says one of the latest additions to the carrier's western Europe-Russia-Asia network is a weekly service between Amsterdam and Almaty, Kazakhstan, via Moscow, which then continues on to China.

"We see good prospects for that service and are already considering increasing the frequency to twice-weekly." Arslanova explains that the launch of the service last month followed development of the route using part-charter operations. That approach, she says, is in line with a general strategy for network development being employed by the airline. "We decided at the beginning of this year to step up our charter operations and use those to help us assess demand to particular destinations, " she says. "That strategy has proved successful and has enabled us to launch some new scheduled routes."

Arslanova adds that AirBridgeCargo is also set to further expand its fleet of three B747-400Fs, one B747-300F and two B747-200Fs.

"We are looking to add one, and possibly two, more B747-400Fs, depending on the market situation, by the end of this year or early next. That will free-up some B747-200F capacity to support charter market demand."

Other recent expansion on the Russian air cargo scene has seen Polet Airlines start commercial flights with the first of three IL-96-400T aircraft due to join its fleet this year. Two more of the 92-tonne capacity freighters are due to follow in 2010.

Polet says initial planned international routes for the aircraft are China-Europe, Europe-Russia, Russia-Europe and Turkey.

"The second stage is to organise regular cargo flights India-Russia-Europe, " the carrier says. "Further down the road, there are planned flights between Russia and South and North America."

Meanwhile, international airlines and forwarders active in Russia report that in common with global trends, the market appears to be climbing out of the trough it fell into earlier this year.

"This year we have seen a real downturn, but volumes stabilised during the summer and, since August, have started going up again, " confirms Chris Nielen, cargo commercial manager for central and eastern Europe at British Airways World Cargo (BAWC), whose main capacity offering to and from Russia is 10-12 tonnes of bellyhold space on 12 B767 wide-bodied passenger flights a week between London Heathrow and Moscow Domodedovo.

In fact, adds Nielen, in September and October, BAWC has seen its Russian air cargo export volumes running at the same levels as in the comparable months of 2008, boosted by increased volumes of precious metals such as gold and silver. Lufthansa Cargo's Becker provides similar market observations. "Russian air cargo exports, particularly of higher-value commodities like titanium, silver and bank notes, have recently recovered to the sort of levels seen last year, although import volumes are still down. As in Europe generally, though, yields have declined."

Becker points out that in addition to bellyhold cargo capacity on Lufthansa's various passenger services between Germany and Russia, Lufthansa Cargo offers maindeck space into Russia on three MD11 freighter flights a week between Frankfurt and Moscow Sheremetyevo, which then go on to Tokyo Narita. "For Russian exports, we offer daily maindeck capacity, seven days a week, from Sheremetyevo to either Leipzig or Frankfurt on Tupolev-204 freighters operated by DHL Aviation, " he added. Slowly recovering Further support for the view that the Russian international air cargo market is recovering is provided by George Gharibian, Kuehne + Nagel's (KN) air freight and aviation logistics manager for Russia.

"Imports in general dropped about 30% at one point, but they are slowly recovering. With regard to exports, nobody really has any exact numbers for the Russian market as a whole but it does seem to be recovering."

Meanwhile, KN is continuing a push, started earlier this year, to step up its development of domestic air freight services within Russia.

"We already have substantial traffic in that market and are looking to develop that further, " he says.

The forwarder has sought to meet the challenge of Russia's well-documented shortage of scheduled domestic air cargo capacity by developing bellyhold block space agreements with some passenger airlines.

However, Gharibian admits that while S7 Airlines (which now claims to be Russia's largest domestic airline) operates A310s offering "quite good" bellyhold capacity, most other Russian domestic carriers only fly quite small aircraft.

"Space can be a particular problem with the reduced winter schedules, but we are working on alternatives, " he says.

Array

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