ALEXEY ISAIKIN SPOKE AT COUNCIL OF STATE CIVIL AVIATION AUTHORITY

Moscow (Russia), March 2004 – Alexey Isaikin, president of Volga-Dnepr Group, took part in a special meeting of State Civil Aviation Authority, devoted to the 2003 results of social and economic development of Russia’s civil aviation. During the Council he announced a presentation dealing with prospects of the Russian civil cargo aviation for 2004.

“Today Volga-Dnepr and some other Russian airlines have a wonderful opportunity for an expansion onto the global air cargo market. To meet this ambitious goal it is necessary to launch a project of trans-Russian scheduled airlines”, said Isaikin. To that end, it is planned to establish two hubs – one in Moscow and the other in Krasnoyarsk or Novosibirsk, and then –one more in Khabarovsk. Initially it is expected to operate from the Far East, first of all from China, to Europe, later – to Europe via the USA.

It’s very important that this project envisages not only establishment of new airlines, but also development of all existing aviation infrastructure for air cargo business: fuel companies, maintenance, airports, and aircraft production. According to Isaikin, the project will contribute to the international trade development; increase an economic effect given by hub’s offshore areas; create new opportunities for Russian business communities of various sectors: forwarders, manufacturers, insurance companies.

As a whole, according to aviation analysts, building this infrastructure will have a multiplicative effect and form some $10 billion of revenues for the Russian economy. Given the fact that Volga-Dnepr Group plans to use in the project domestic aircraft (mostly new-builds) – IL-76s, IL-96s, TU-204s (total of about 30 aircraft) – total volume of single Volga-Dnepr’s investment into the development of civil aviation is going to be in excess of $1 billion. So as not to oppose Russian competitive aircraft to Western ones, we intend to reasonably combine them together in our project. This is the key to our success. During the next ten years we are going to increase our fleet of large long-range aircraft (B747s) up to eight. This fleet would co-operate with Russian aircraft, which we are planning to use in feeder operations. Later it will be necessary to exempt Russian manufacturing plants from customs duties on western import supplies vital to the Tu-204 and IL-76 production. They are, first of all, engines and avionics. Moreover, it’s vital to create a friendly atmosphere for Russian carriers, a customs procedure for paper works on transit and export cargo, as well as a governmental program to develop transit cargo hubs.

On this ground, I would like to support the initiative, being realized in Krasnoyarsk, to establish a passenger and later a cargo terminal there. It is very important to have permanent talks with China, European countries, the USA supporting interests of Russian airlines that develop transit cargo flows. Here SCAA has a firm policy and we hope it will be realized in practice. Our next target is reinforcing our leadership in the ramp aircraft market. In this field we can earn some $300 million a year, and in a ten-year period we plan to increase this figure up to $1 billion. To that end we have to revive the AN-124 production, to build an AN-124 flight simulator, to re-motorize the IL-76. Another civilized move is to use AN-124 military transports for commercial needs.

By 2007 we expect a deficit in capacity in the ramp aircraft market. This means that Russia has only two years to adopt a program of the ramp aviation support. Otherwise, it’s quite possible to operate western ramp aircraft to comply with the market demand.

To my mind, the support from Russia’s aviation authorities and Government, with regard to customs facilities for import of Western aircraft and equipment vital to start the project, will create a favorable atmosphere for Russian airlines to take opportunities that allow them to redouble country’s GDP.

Volga-Dnepr Group is the leading company in the outsize/heavyweight air cargo market. It operates a fleet of nine AN-124-100s, two IL-76s and six YAK-40s. The Group employs more than 1400 people.

The Group’s activity is aimed at promoting the AN-124-100 unique product to the global air cargo market.