Volga-Dnepr Group reports 55% increase in 2006 sales revenues as earnings climb to US$725 million

Group maintains position as the world’s largest transporter of outsize and heavyweight air cargo and as Russia’s No.1 air cargo carrier by volume as it forecasts $1 billion revenues in 2007

LONDON, APRIL 25 2007 –Volga-Dnepr Group of Russia has reported a 55 per cent increase in sales in 2006 compared to 2005, with revenues reaching a record US$725 million.

In terms of sales volumes, Volga-Dnepr is the third largest Russian airline for both passenger and cargo segments.

Building on another record year in 2005, the Group’s increased income in 2006 was the result of the successful development of its air charter transportation business using AN-124-100 and IL-76 cargo aircraft and the expansion of AirBridge Cargo Airlines, its scheduled cargo business that operates a fleet of Boeing 747 freighters.

Over the 12 months, Volga-Dnepr Group’s AN-124-100 air charter business grew by 26 per cent, while its IL-76 cargo operations achieved a 114 per cent improvement. Revenues from the Group’s scheduled cargo operations rose by 96 per cent.

Volga-Dnepr Group is now forecasting that sales in the current year will reach US$1 billion.

In 2006, the Group’s airline businesses transported over 155,000 tonnes of cargo, making Volga-Dnepr Group the number one cargo carrier in Russia (in 2005, according to ATI, Volga-Dnepr was the 33rd largest cargo airline in the world). Of this total, 98 per cent of the cargo carried was transported on international routes. The Group says its aircraft have now successfully operated to more than 900 airports in 150 countries.

Once again, Volga-Dnepr Group was the world’s largest transporter of outsize and heavyweight air cargo. The year saw significant growth in the revenue contribution to the Group’s charter sales from long-term contracts. In particular, Volga-Dnepr and Antonov Airlines’ joint projects – the global companies Ruslan SALIS GmbH and Ruslan International, launched in 2006 - developed successfully.

Ruslan SALIS provides strategic cargo transportation for NATO and EU countries. As part of this long-term project, Volga-Dnepr successfully completed 220 flights and transported 13,500 tonnes of cargo in 2006, generating total sales of US$70.2 million

Ruslan International is a single marketing agent for AN-124-100 operations, combining the AN-124 fleets of Volga-Dnepr Airlines and Antonov Airlines to provide customers with greater operational efficiency and to improve aircraft availability. In 2006, the joint sales volume of Volga-Dnepr and Antonov Airlines within the Ruslan International project amounted to US$122 million. 290 flights were operated by Ruslan International, carrying a total of 17,200 tonnes of cargo.

Another important achievement in 2006 was the steady growth of IL-76 services, using both classic and modernised (IL76TD-90VD) versions of the aircraft. The commercial launch of the IL-76TD-90VD aircraft in June 2006, meeting all ICAO standards, contributed to a significant increase in IL-76 transport services and the impressive growth of the aircraft’s flight network. With this new generation version of the aircraft, the legendary Ilyushin aircraft has a new operating life and has now restored IL-76 cargo operations in Western Europe, America, Australia and Japan.

At the beginning of 2007, the IL-76TD-90VD made its first flight to the United States, the first time in seven years that an IL-76 has operated commercially to and from the US. In 2006, IL-76 operations contributed 29 per cent of the overall charter services volume carried by Volga-Dnepr and 16 per cent of the Group’s total sales volume. During its six months of operation in 2006, the modernised aircraft performed 35 flights and carried 524 tonnes of cargo.

In October 2006, AirBridge Cargo, the Group’s scheduled cargo airline business, achieved another milestone when it was awarded an Air Operators’ Certificate and the status of an independent company within the Volga-Dnepr Group structure.

AirBridge Cargo earned revenues of US$227.4 million last year and transported 78,400 tonnes of airfreight, a 79 per cent increase compared to 2005.

In 2006, revenues from scheduled cargo services contributed 31 per cent of the Group’s total sales. The company continued to develop its route network with the launch of new services to and from Hong Kong, the reintroduction of flights from Luxemburg to Moscow Domodedovo Airport, increased frequencies to Nagoya and Yuzhno-Sakhalinsk and the launch of its first domestic route between Moscow and Krasnoyarsk.

AirBridge Cargo’s fleet grew to four Boeing 747 freighters in 2006. Last month, Volga-Dnepr Group signed a contract with the Boeing Company for the delivery of five new long-haul Boeing 747-8 Freighters by 2013. The contract also implies an option for five additional aircraft with a total contract value of US$1.4 billion. In 2007, AirBridge will also take delivery of the first of three B747-400ER Freighters.

Alexey Isaikin, President of Volga-Dnepr Group, said: “One of Volga-Dnepr’s strategic goals is to enter the top 20 of the world’s largest airlines by 2015. We have already reached a significant position in terms of unique cargo transport services with AN-124 ramp aircraft. In this segment, the Group occupies more than half of the total international market. As for the air cargo transport market in general, we will increase our presence through the further development of scheduled cargo services, complementing our already-strong position in the worldwide charter market. The dynamic nature of the scheduled cargo industry gives us great confidence that our goal is quite possible to reach.”