VOLGA-DNEPR AIRLINES OPERATIONS IN AFGHANISTAN 24 JULY 2002

Volga Dnepr doubles first half volume An-124-100 CAA certification process has started

Volga-Dnepr split with Heavy Lift is now a distant memory as the Ulyanovsk based outsized and super heavy cargo carrier reported a doubling of its volumes in the first half of 2002 to 24,000 tonnes. With sales increasing by a similar proportion to $80.6m representing, according to VDA, a 53% share of the $157.4m An-124-100 market in H12002.Il-76 sales were $5.5m in the first half bringing total revenues for the carrier to $86.6m.

The level of Il-76 revenues however, represents a decline of 12% in revenues for the aircraft compared with H1 2001. Reflecting, according to the company, the higher use of the aircraft in the first H1 to compensate for weak An-124 demand. The modernisation of one of the airline's Il-76 in H1 2002 to meet ICAO standards, also meant revenue from that aircraft was lost.

The strong performance of the company overall was attributed by Alexei Isaikin, the airline's Chairman, to the continued boost in demand for lift capacity to support operations in Afghanistan. Isaikin is however, confident that despite the rather volatile patterns of demand in outsized cargo volume due to the high proportion of emergency demand related to relief of natural disasters and operations such as Afghanistan. He believes there remains a good underlying growth trend of around 13% for the sector as a whole and it is this demand that has recently allowed the airline to obtain financing for the completion of a tenth An-124-100 from the International Finance Corporation (IFC). Funding that Isaikin believes is a precursor to more mainstream finance in the future, with the airline continuing to move towards its three year target of a listing its stock on the international market.

The funding programme running in parallel with airline's efforts to get the An-124-100 certified with the UK's CAA as part of the goal of obtaining European registration for its fleet, which the airline believes is an essential element in finding stable and competitive funding. Isaikin did however, make the observation that the IFC appeared unconcerned by the issue when lending for the completion of the airline's tenth An-124-100 at Aviastar in Ulyanovsk.

The certification process for the An-124-100 started in London this week, with the passing of documentation between the Russian aviation authorities to the CAA. The exchange of the details of the Russian certification of the aircraft, being the first step in identifying differences between the CAA and the Russian air registry certification process and resolving those differences. The airline believes certification will be completed within 18 months.

Isaikin said that the airline had spent the last year working on the development of its international marketing and the first half results reflected that the task had been achieved with some success exceeding the airline's own targets by 18.5% for the period. His focus in his new role of Chairman of the airline was to continue the development, through the development of foreign offices and representation such as the establishing of VD's UK operation. And more generally develop the market for his fleet through the improvement in the standing of the carrier within western markets, essential for both the growth of the business and the financing of future expansion.