Volga-Dnepr Group

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Volga-Dnepr Group

Usacheva Street 35
Building 1 119048
Moscow, Russia
Telephone: (07) (495) 755 7836
Fax: (07) (495) 2442879
Web site: http://www.voldn.ru

Private Company
Incorporated: 1990 as Volga-Dnepr Airline Company
Employees: 1,636
Sales: $487 million (2005 est.)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportation; 484230 Specialized Freight (Except Used Goods) Trucking, Long-Distance; 488190 Other Support Activities for Air Transportation

Volga-Dnepr Group is the world leader in outsized air cargo. The company is closely associated with the giant Antonov An-124 freighter, but also operates more conventional cargo aircraft; the group's AirBridge Cargo unit provides scheduled air freight services using Boeing 747s. Another unit operates a small passenger service. A number of businesses have sprung up around the airlines, offering trucking, aircraft maintenance, and insurance services.

POST-SOVIET ORIGINS

The Volga-Dnepr Airline Company was formed as one of Russia's first joint stock companies in August 1990. It was the country's first private cargo airline. The company took its name from two rivers linking Russia and the Ukraine; this was appropriate, as Volga-Dnepr's operation was based around an aircraft that was the product of both countries. Though it used other types from the start, Volga-Dnepr would be closely associated with the formidable Antonov An-124, the first of which arrived by the end of 1991.

Under the Soviet system, aircraft were designed by one company and built at one or more separate factories, while engines were sourced from yet another facility. The Antonov An-124 Ruslan freighter was designed by the Antonov Design Bureau in Kiev. Engines were also made in the Ukraine; the plane itself was assembled at sites including OAO Aviastar's facility in Ulyanovsk, Russia. The above-named companies were all original shareholders in Volga-Dnepr. The organizer of the enterprise and its first president was Alexey Isaikin, a retired lieutenant colonel from the Soviet Air Force.

The An-124 had an interesting history. Developed beginning in the 1970s, it broke numerous world records for carrying payloads. However, military orders eventually fell off and production was canceled in 1989 after only 25 examples of the aircraft had been completed.

The An-124 soon found a commercial niche, however. There was no other readily available plane anywhere in the world that could match its 120-ton capacity. The Soviet Air Force was willing to part with a few of the planes in order to raise cash.

The world's outsized cargo market, according to the company, was then valued at $42 million a year. The work typically involved one-off shipments of equipment too large to fit in most freighters, including large aerial towers, aircraft fuselages and engines, and machinery for oil and other industries. Such large items previously had to be moved by surface transport.

In September 1991, Volga-Dnepr formed a London-based joint venture with HeavyLift Cargo to pitch the An-124's capacities to the world outside the former Soviet Union. This partnership would last ten years.

Volga-Dnepr was based at Ulyanovsk-Vostochny airport. Its first flight under its own flag took place in March 1992. The destination was Sofia, Bulgaria.

Volga-Dnepr flew its first humanitarian mission on behalf of the United Nations in 1994. Response to wars, natural disasters, and the like would provide an enduring source of business over the years.

NEW VENTURES IN 1994 AND 1995

A trucking unit was created in 1994, allowing for door-to-door delivery. In December that year, Volga-Dnepr launched scheduled service between Moscow and Tientsin, China, using an Ilyushin Il-76. However, this was suspended in 1998 during the Asian financial crisis.

Other new ventures went more smoothly. The group's maintenance unit was certified to provide maintenance on certain Antonov and Ilyushin aircraft types in March 1995. The next year, Volga-Dnepr opened maintenance line stations in the United Arab Emirates and Shannon, Ireland. The New Insurance Company was also set up in 1995.

Volga-Dnepr Airlines participated in an international off-road race. It was chosen to haul participants' vehicles from Paris to Russia for the Master Rally-97 Marathon Paris-Moscow-Baikonur-Ulan Bator. This showcased new proprietary equipment allowing the carrier to pack 40 vehicles inside an An-124. Volga-Dnepr's own two-level loading system ultimately was able to fit more than 50 conventional passenger cars inside the plane.

A small, scheduled passenger service between Ulyanovsk and Moscow was launched in November 1996 using a small Yak-40 regional jet. This was later expanded with summertime flights to the Black Sea. Over the next ten years, this unit grew to six aircraft, one of them configured as a business jet.

In 1996, British Petroleum hired Volga-Dnepr to carry equipment to a remote mining project in Colombia, which lacked suitable roads. The airlift from the port of Barranquilla to the El Yopal oilfield was a challenging undertaking that help helped cement Volga-Dnepr's international reputation, noted Airliner World.

Business increased steadily in the mid-1990s. Revenues exceeded $100 million in 1996. The group had 873 employees and was carrying about 40,000 metric tons of outsized freight annually on its seven An-124s, which accounted for about 90 percent of the company's revenues.

GROUP FORMED IN 2001

A U.S.-based unit, Volga-Dnepr-Unique Air Cargo, Inc., was established in Houston in 2000. The next year, the group ended its association with HeavyLift Cargo Airlines in order to handle its own marketing of the An-124. (HeavyLift later merged with Air Foyle and became the agent for Antonov Airlines.)

Revenues fell following the loss of the HeavyLift connection, from about $140 million in 2000 to $99.5 million in 2001. The group had about 1,000 employees. By this time, the entire outsized cargo market had grown to more than $200 million. This was still a mere sliver of the larger air cargo market, which Volga-Dnepr was already planning to penetrate, according to Air Cargo World.

The company's various subsidiaries were organized under the new "Volga-Dnepr Group" in 2001. A Moscow-based managing company was formed to oversee the various elements, which included maintenance, trucking, and insurance operations.

COMPANY PERSPECTIVES

The strategic development plan implemented by the Company management resulted in a new product now available on the international market, which is a global cargo transportation service using unique An-124-100 Ruslan aircraft. The Volga-Dnepr Group of Companies is a customer-oriented company with dynamic growth rates and high-level professionalism, with a widespread network of offices and subsidiaries across the world. Volga-Dnepr is the market leader not only because it has a technical edge, but also, to a great extent, due to its professionally trained international team of employees and modern management techniques.

According to Airliner World, Volga-Dnepr was the first civilian carrier to fly into Afghanistan following the fall of the Taliban regime in December 2001. It made hundreds of flights to the area over the next year, carrying a diverse array of supplies into the country. Revenues nearly doubled in 2002 to $193.6 million.

Volga-Dnepr was estimated to have a 45 percent share of the $500 million outsize cargo market, according to the U.S.-based Journal of Commerce. Its nearest rival was Antonov Airlines of the Ukraine, while Russia's Polet Cargo Airlines made up the remainder. These operators had a lock on the market since there were no similar aircraft available in the West. While a freighter version was in the works for the giant A380 that Airbus was developing, it was being designed to haul conventionally packaged cargo, not massive, oversized items.

SCHEDULED SERVICE LAUNCHED IN 2004

In 2004, Volga-Dnepr entered the scheduled cargo market in China for a second time. The Chinese economy was booming; the new service capitalized on Russia's strategic location as a bridge between Asia and Europe. The scheduled operation was branded "AirBridge Cargo" (ABC) to differentiate it from Volga-Dnepr's charter trade. ABC operated the Boeing 747, which was the largest American-made commercial freighter, and was guided by executives from U.S. cargo line Atlas Air, Inc. The initial flight was routed Beijing-Novosibirsk-Luxembourg. Stops in Krasnoyarsk, Russia; Tianjin, China; and Frankfurt, Germany, were soon added; trans-polar service to New York City was envisioned for the future.

Revenues reached $308.6 million in 2004; the company posted a $12 million loss. In 2005, profits were estimated at $5.1 million on revenues of $487 million. An initial public offering was being planned for 2007.

In 2006 Volga-Dnepr formed a partnership with Antonov Airlines after it, too, broke off an arrangement with Britain's Air Foyle HeavyLift. The venture was dubbed Ruslan International. Ironically, one of its first contracts came from NATO.

PREPARING FOR THE FUTURE

Volga-Dnepr's ten An-124s made up nearly half of the number in commercial service anywhere in the world. The group had another ten Soviet-made aircraft and two Boeing 747s. It was putting newer, quieter engines on its Il-76 airliners, a Soviet transport workhorse that had been banned from Europe and the U.S. due to noise restrictions.

Volga-Dnepr had also been arranging the development of a new version of the AN-124 Ruslan featuring updated engines and avionics. A company official told Airliner World that planned production of three planes a year was expected to begin around 2020. By this time, Volga-Dnepr was aiming to have become a leading integrated logistics provider or "cargo supermarket."

PRINCIPAL SUBSIDIARIES

AirBridge Cargo; Managing Company Volga-Dnepr-Moscow; NIK Insurance Company; Passenger Operations; Volga-Dnepr Airline Company; Volga-Dnepr China Company; Volga-Dnepr International Educational Center; Volga-Dnepr Ireland Ltd.; Volga-Dnepr-Leasing; Volga-Dnepr UK Ltd.; Volga-Dnepr—Unique Air Cargo Inc. (U.S.); Volga-Trucks.

PRINCIPAL COMPETITORS

Antonov Airlines; Atlas Air, Inc.; CargoLux Airlines International S.A.; HeavyLift Cargo Airlines Ltd.; KLM Cargo; Polet Cargo Airlines.

KEY DATES

1990:: Volga-Dnepr Airline Company is formed.
1991:: A joint venture is formed with HeavyLift Cargo Airlines.
1994:: Volga-Dnepr flies its first United Nations mission.
2000:: A U.S. subsidiary is established in Houston.
2001:: The HeavyLift Cargo partnership ends; Volga-Dnepr is reorganized into group structure.
2004:: AirBridge Cargo scheduled air freight service is launched using Boeing 747s.
2006:: Ruslan International partnership is formed with Antonov Airlines.