Alexei Isaikin, Volga-Dnepr's
Director General, has reported 2000 as being the most successful year ever for
the Ulyanovsk-based carrier.
The airline company's
fleet of 10 An-124-100, spent 11% more time in the air in 2000 and flew a total
of 8765 hours; allowing the company to increase its revenues by 19% - to $125
m. 2000 also saw the company increase its share of the world super heavy lift
and unique cargo market, by 6.4%, to 60.4%; well ahead of its nearest rival,
Antonov Airlines (whose share fell to 32% from 40%). Including the airline's
fleet of Yak-40s and Il-76, sales grew to $136m, with the airline's passenger
business producing $1.6m and the Il-76 fleet - $9.8m (up 42% on their 1999 performance).
VD's strategy
Isaikin believes the success
of Volga-Dnepr has been through its adoption of the correct business strategy.
A good illustration of this according to him is the dramatic increase in the
lives of the An-124-100s carriers, to 24,000 hours - through investment - in
cooperation with the Antonov Design Bureau; amicably concluded, after some initial
wrangling with the Kiev-based designer. Additionally, the extensive modernization
of the aircraft has also improved the older aircraft's effectiveness alongside
newly acquired aircraft; with the tenth aircraft delivered in the latter part
of 2000. The airline has also improved its management and marketing systems
during the year and opened international offices in the US and the UK (to improve
its client relations).
This development, while
not cutting relations with Heavy Lift (its marketing partner of eight years),
is changing the nature of the relationship; allowing the carrier to negotiate
separate agreements with other agents, to increase volume. Reports of protracted
negotiations (driven by VD over most of 2000), for substantial changes in the
marketing relationship with the UK operator, although actively denied by both
parties, now appear to have led to a significant restructuring. This effectively
removes Heavy Lift's sole marketing responsibility outside Russia and the CIS
for VD. It has been a bone of contention between the two, particularly on UN
contracts, which VD maintains owes little to Heavy Lift. Whether the new marketing
approach will allow VD to sustain and increase its share in, what has been,
a very successful competition against its main rival Antonov Airlines, only
time will tell. Some sources in the industry still remain sceptical of the airline's
ability to replicate its marketing success to date.
Cargo
During 2000, Volga-Dnepr
carried 31,600 tonnes of cargo, of which: 28% was aerospace equipment; 26% humanitarian
aid for the UN; 12% described as industrial cargoes; and 34% in freight. The
UN business, particularly, made it a busy year for the carrier, especially towards
the latter part. Business was geographically split: 25% in Europe; 25% in the
US; 5% in Russia; and the balance, around the Pacific Rim.
VD
An-124-100 loads Tor missile systems
Despite the positive top
line results, the company's margins have decreased during the period, reflecting
the rises in fuel prices and a 28% increase in taxes paid by the airline. Furthermore,
the dumping of Il-76 capacity onto the market, by Russian operators, has also
damaged margins. VD says that some operators offer, what they consider to be,
unviable rates of $4800 an hour in the hope of gaining business, while they
know the viable rate to be $6700. The low rates, according to Isaikin, mean
an Il-76 carrying 50 tonnes of cargo, undercuts the: L-100 Hercules carrying
21 tonnes for $5100 an hour; and the Airbus-300-600 Beluga carrying 47 tonnes
for around $20,000. He does not believe that the Il-76 operators are profitable.
Market prospects
Looking forward to 2001,
Volga-Dnepr estimates the market will become increasingly competitive, with
the entry of new capacity and the decline of humanitarian business. Isaikin
is confident that his airline can maintain its share, but believes that it will
involve considerably greater effort than in 2000. Volga-Dnepr forecasts the
long-term prospects for the heavy lift market are good, and might grow from
the $208m generated in 2000, to $1 billion; suggesting that a potential forecast
of 13% growth through to 2003, followed by a period of slower growth, are conservative.
The company also believes that growth will be sustained, and anticipates the
potential market being worth $3 billion, by 2030. VD sees the sustained growth
as due to the introduction of more super heavy lift aircraft into the market,
which will stimulate customer demand from 2001 onward.
Russian aircraft production remains in crisis and the Russian producers are
still failing to understand the needs of the market ie. operators require aircraft
that can meet the market's needs and earn revenues. Producers must create a
marketable product and then concentrate on manufacturing them. He illustrated
his point by saying that Russian producers had largely failed to produce cargo
versions of their airliners, in contrast with Western producers Boeing and Airbus.
Those examples that have been created, the Il-96 and Tu-204, are of restricted
benefit, due to the lack of an international maintenance network. Volga-Dnepr
has had to create its own bases in Shannon and UAE to support its aircraft.
VD is due to display its
new An-124-100 with new avionics and upgraded D-18Ts, at Le Bourget. Isaikin
says that it has offered funding to Antonov for the completion of the An-225,
to be displayed at the same time (but the Ukrainians had decided that they had
sufficient funds for the completion). The An-225 is currently being heavily
marketed, to potential customers, for hire in the second half of 2001.
Volga-Dnepr is considering
entry into the scheduled cargo transportation market - but not in 2001. Regular
cargo transportation represents 99% of the world cargo transportation market,
while unique and cargo transportation makes up only 1%.
Passenger developments
VD's scheduled passenger
services, using its small fleet of Yak-40s to link Ulyanovsk with Moscow and
Gelendjik, increased the number of passengers carried by 20% in 2000. The Yak-40
fleet is however; in need of replacement, given its fuel burn and increasing
unattractiveness to passengers. VD has accepted this, but have been reluctant
to name the successor; having declined involvement in the An-140 trials and
been reported as unenthusiastic in adopting the Il-114 (which they consider
to be unproven). The airline is apparently involved with MiG on the development
of the 100-seat Tu-334 but, as yet, there is no firm commitment.
