Friday, July 27, 2012

(BN) Rigs to Rockets Help Russia’s Volga-Dnepr Ride Slump: Freight


July 27 (Bloomberg) -- Heavyweight freight consignments spanning NASA space rockets to BP oil pipes are sustaining demand at Russia's top cargo airline as big-ticket projects prove resistant to austerity programs and slowing economies.

Volga-Dnepr Airlines, the No. 1 carrier of outsize freight whose clients have included Madonna and U2, has sustained sales and volumes even after the global air-cargo market shrank 1.6 percent in the first five months from a year earlier, North America vice president Konstantin Vekshin said.

The company's prime selling point is a fleet of 10 Antonov An-124-100 Ruslan superjumbos, which can carry payloads of 120 metric tons apiece and boast the largest door dimensions of any cargo plane, allowing them to load single items that models such as Boeing Co.'s 747 and C-17 Globemaster can't accommodate.

"Our access to equipment that isn't available elsewhere makes us very resilient," Vekshin, who is based in Dallas, said this month at the Farnborough air show near London. "I wouldn't say we're looking at growth, but it's pretty stable."

Volga-Dnepr Group, which also includes scheduled freight division AirBridgeCargo Airlines, posted net income of $59.3 million last year as sales rose 10 percent to $1.74 billion.

Global air cargo revenue will gain 1.4 percent to $70 billion this year, with zero improvement in yield, a measure of revenue per ton per mile flown, according to figures published in June by the International Air Transport Association.

IPO Option

Volumes are likely to be virtually static at 47.8 million tons, according to IATA, and while cargo traffic measured in freight-ton kilometers is 1.5 percent above a low in the fourth quarter of 2011, Europe's debt crisis may lead to a fresh slump.

"With business confidence lower, air freight might well go down again," IATA spokesman Chris Goater said. "That's true of Asia-Europe especially, which is dominated by consumer goods."

At Volga-Dnepr, business is sufficiently buoyant for it to be considering an initial public offering to fund growth, with a decision to be taken by the end of the year. The Moscow-based company, which counts General Electric Co., Exxon Mobil Corp., BP Plc and Alcatel-Lucent SA among its clients, is also considering raising loans or issuing bonds, it said last month.

Expansion plans center on resumption of An-124 production by Russia's United Aircraft Corp. and the Antonov design bureau. Volga-Dnepr is interested in taking at least 20 more aircraft valued at $4 billion, charter operations vice president Valery Gabriel said in April, according to the Russian Aviation website.

Easy Loader

While demand for Volga-Dnepr's services generally tracks global GDP, which will increase by 3.5 percent year, according to a July 16 forecast from the International Monetary Fund, the focus on outsize and super-heavy consignments means the company is less exposed to consumer-driven trends, Vekshin said.

In the past two years, Volga-Dnepr Airlines has carried United Launch Alliance Atlas V rocket stages for NASA, relief and rescue equipment to earthquake-struck Haiti and the world's largest concrete pump to Japan's Fukushima nuclear power plant.

The noses of Volga-Dnepr's An-124s can be raised while the 24-wheel landing gear is lowered to jack the front of the plane to within 1.4 meters of the ground in less than five minutes, producing a shallow ramp angle that eases loading. The cabins are equipped with cranes that can lift a single 30-ton weight.

Volga-Dnepr, whose customers also include the North Atlantic Treaty Organization and the United Nations, also conducts technical evaluations of the modifications needed for cargoes to go by air, Vekshin said.

Emergency Missions

Because of the nature of Volga-Dnepr's outsize loads, seaborne shipping option is often its biggest competitor, with the airline winning out where time is short or greater levels of security are required, the executive said.

Aerospace products such as helicopters and satellites are often moved by air because of their high intrinsic values, while the oil industry opts for air transport in an emergency, when the expense of idling facilities outweighs carriage costs.

Scheduled unit AirBridge is the fourth customer worldwide for Boeing's new 747-8 Freighter, with the first of five planes delivered on Jan. 26. The model is 18 feet longer than the 747- 400 Freighter, of which AirBridge has 11, giving it a 16 percent bigger payload, according to figures from the manufacturer.

Chicago-based Boeing claims a 90 percent share of dedicated cargo capacity, or that provided by new and converted freighters rather than in the holds of passenger planes, which carry about 50 percent of overall freight volumes. Rival Airbus SAS estimates a need for 2,731 cargo jets through 2030.


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