The Other Side Of The Coin for Volga Dnepr
While the outsize cargo charter business with the An-124 continues to grow and provide great results for the participants including Volga Dnepr, the other side of VDA's business is not fairing so well.
From ATW
Tuesday July 22, 2008
Five-year-old AirBridge Cargo struggles with costs, finds profitability elusive
AirBridge Cargo, the scheduled 747F airline owned by Volga-Dnepr Group, said it likely will not achieve profitability this year despite a more-than-doubling of first-half 2008 revenue to $210 million from $96 million in the year-ago period.
The carrier was launched in 2003 with the primary aim of transporting cargo between Europe and Asia via Russia. "We still believe it's a successful business model," ABC Senior VP-Strategy and Commercial Denis Ilyin told ATWOnline at the Farnborough Airshow last week, blaming the lack of profitability on high costs, particularly for fuel and labor.
ABC operates a fleet of three 747-200Fs, one 747-300F and three 747-400Fs. It will take another -400F and retire a -200F by year end and has five 747-8Fs on order plus purchase rights for five more with first delivery slated for February 2010. "We will not grow in the next year as we would like to [owing to high costs]," Ilyin said. "We are thinking about stability rather than growth right now." He conceded that despite increasing traffic and revenue, "we are still struggling with bottom-line profit."
The carrier considers itself "to be the dominant player in the Russian market from both Europe and Asia." It operates flights from Frankfurt, Amsterdam and Luxemburg via Moscow Sheremetyevo and Krasnoyarsk to Shanghai, Beijing, Hong Kong, Tokyo Narita and Nagoya. It recently added limited service to/from Budapest but has put North American expansion plans on hold.
"North America should be a natural. . .in our network," Ilyin said. "But we have to give up growth for the sake of stability. Given the state of the US economy, we're not sure we'd be able to generate enough exports from the US to Europe and Russia to justify [expansion] right now."
He added that since fuel costs are not likely to lower significantly, ABC's decision to place orders for more efficient 747-400Fs and -8Fs will "lead us through" and enable long-term survival. "The cargo market created problems for itself," he commented. "It's been so attractive for everyone that the most lucrative markets [especially in Asia] have just been flooded with capacity. [If fuel costs remain at current levels], I expect the least efficient carriers to go away, which will keep carriers with good service in the strong markets."
by Aaron Karp
The airline business is a fickle and cyclical beast. AirBridge Cargo's difficulties may be coming principally from the oil and resulting aviation fuel price hike and its effects not only on aviation but also on the global economy. Similarly, much air charter work over the last 10-15 years has been in support of the military and one finds it hard to imagine similar levels of activity being sustained as that activity runs down, as we all hope that it will do, in the coming years.
So it may not be quite so rosy in the An-124 business either in the coming years.
