Volga-Dnepr, a Moscow-based airline specializing in outsize and heavy freight, is a notable casualty of the economic crossfire between the West and Russia over the invasion of Ukraine, knocking it out of business in major markets and delivering another supply chain shock to shippers at a time of scarce capacity.
The airline group has 41 aircraft in its fleet, including a dozen Soviet-era Antonov An-124 super freighters and five modernized Ilyushin IL-76 freighters with unique capabilities for large shipments. Scheduled airline AirBridgeCargo Airlines operates 17 Boeing 747 freighters, including 13 latest-generation 747-8s with a payload capacity of up to 139 tons, plus a 777. Subsidiary Atran Airlines, which provides short- and medium-haul express service, has four Boeing 737-400 and two 737-800 converted freighters.
“This remains a crucial time for the industry where every cubic meter of capacity is needed, and with the impact of longer flight times as different areas of airspace become closed or prohibitions implemented, capacity will suffer,” said Glyn Hughes, director general of The International Air Cargo Association, in an email to FreightWaves.
The air cargo market continues to operate at a 10% capacity deficit because of reduced passenger flights due to COVID, with global rates up 2.5 to 3 times above pre-pandemic levels. A 26% increase in freighter capacity during the past year helped offset a 38% gap in passenger belly space, according to the International Air Transport Association. Now, aircraft from a major global freighter operator will be mostly unavailable to companies in North America, Europe and potentially areas of South America and could increase upward pressure on market rates.
On Sunday, the European Union and Canada banned all Russian aircraft from their airspace, joining Estonia, Latvia, Lithuania, Slovenia, the U.K., Czech Republic, Bulgaria and Poland that earlier prohibited overflights of their territory. The shutdown of EU airspace for Russia, as well as takeoffs and landings, covers any planes owned, registered or controlled by Russians. Canada is barring Russian-owned, chartered or operated aircraft.
The moves eliminate the ability for Russian airlines to operate in Europe or to take direct routes to North or South America heading west. The U.S. is expected to soon follow with similar action.
The restrictions potentially threaten Volga-Dnepr’s survival, depending on how long they remain in place. Volga-Dnepr companies are limited to flying eastward, serving China, Asia, the Central Asian Republic and Armenia. Making money will be difficult because the Russia-Asia market is relatively small.
“Our airspace will be closed to every Russian plane — and that includes the private jets of oligarchs,” EU President Ursula von der Leyen said in an address outlining a series of sanctions.
Volga-Dnepr Group is privately owned by Alexei Isaikin.
The two main airlines, Volga-Dnepr and AirBridgeCargo (ABC), appear to have relocated their aircraft out of Europe in recent days in anticipation of potential sanctions.
According to flight tracking site FlightRadar24, ABC’s schedule for Monday shows two flights from Moscow to Bahrain, and the following single flights: Moscow to Seoul, South Korea; Shanghai to Moscow, Tokyo to Hong Kong and Chicago O’Hare International Airport to Moscow via the Norwegian Sea and around Scandinavia. On Sunday, ABC returned a 747 from Milan, Italy, another from Frankfurt, Germany, one from Hong Kong, and one from Chicago to Moscow.
On Monday, ABC plans to fly from Krasnoyarsk, Russia, to Istanbul.
Volga-Dnepr’s fleet has not been very active in the past week, but FlightRadar24 shows an IL-76 flight on Sunday from Portsmouth International Airport in New Hampshire to Tsaratanana, Madagascar. Another IL-76 is scheduled to fly Wednesday from Bratislava, Slovakia, to Moscow.
The company is monitoring the situation in an effort “to guarantee fulfillment of its obligations towards customers, suppliers and employees,” spokeswoman Elena Boykova said, declining to provide further details.
The quick implementation of the airspace bans suggests that some cargo that was in transit may be in limbo at an intermediate destination while the company figures alternative methods for completing deliveries.
Boeing and GE fallout
With a high-volume cargo compartment, front and rear ramps, internal cranes and a payload capability of more than 120 tons, the An-124s are the go-to platform in the super-heavy, project cargo segment. Multirack landing gear equipped with 24 wheels allows operators to change the angle of the fuselage to ease loading and unloading. The planes carry everything from yachts and helicopters, to giant pieces of machinery.
Volga-Dnepr frequently flies unique cargoes for clients within the U.S. under special permission when U.S. carriers can’t perform the mission. The airline last week applied to the U.S. Department of Transportation to conduct a dozen one-way flights for Boeing (NYSE: BA) carrying wingboxes for the 767 aircraft, large manufacturing tools and spare parts from Seattle, or Everett, Washington, to South Florida.
The DOT may authorize a foreign air carrier to operate domestically if it determines the exemption is in the public interest, that U.S. certified carriers can’t meet emergency circumstances and that all possible efforts have been made to find a U.S. carrier to do the job.
“Due to the size of the cargo and the urgency of the shipment, Boeing Commercial Aircraft cannot use surface transportation to ship the cargo. An evaluation conducted by Boeing Commercial Aircraft eliminated all other conventional movement methods including over the road trucking and rail transportation as viable methods to meet current needs,” the petition stated. Volga-Dnepr needs to perform the operations within the set time frame because of tight manufacturing schedules, it added.
A U.S. flight ban would derail those flights and possibly jeopardize Boeing production schedules. It’s also possible that the DOT could deny the exemptions because of the escalating diplomatic tensions with Russia.
In January, the DOT approved three Volga-Dnepr flights for GE Aviation (NYSE: GE) to transport engines from Columbus, Ohio, to Boeing assembly plants in Washington. A GE spokesman said the flights applied for were part of contingency planning and weren’t operated.
United Launch Alliance, a joint venture between Boeing and Lockheed Martin, has previously used Volga-Dnepr An-124s to transport Atlas V rocket boosters from the manufacturing site to the launch area.
“We’re monitoring the situation and have nothing further to add,” said Boeing spokesman Jim Proulx.
Last year, a Volga-Dnepr An-124 delivered a massive piece of machinery for filling vials with COVID vaccine from Germany to a plant in Wisconsin.
Cargologicair, which is registered in the U.K., and Cargologic Germany both appear to be operating normally. Cargologicair has a fleet of two Boeing 747-400s and underwent an extensive restructuring 18 months ago after losing nearly $40 million in 2019. The carriers have significant ties to Volga-Dnepr’s owner, and it is possible they could be grounded as well.
Getting choked
Volga-Dnepr is likely to feel further secondary effects from other sanctions levied against Russia over the weekend.
The U.S. and EU are disconnecting a number of Russian banks from SWIFT, a high security messaging system that underpins the movement of money across borders. It’s how banks transfer funds to one another and connects Russian banks to the rest of the global economy.
The banking sanction will hurt Volga-Dnepr because most companies, especially in the West, pay for air charter services through their SWIFT accounts, said Michael White, president of Trade Network Consultants and a veteran air cargo executive.
Export control measures by the U.S. and its allies are also designed to cut off more than half of Russia’s high-tech purchases overseas, including avionics and aircraft components. Companies like Boeing, GE and others won’t be able to sell goods to Russian airlines without a waiver, which is unlikely to be issued. Over the long term, ABC won’t be able to get parts to maintain its Boeing 747 freighters, which could force them out of service. For now, though, experts say the airline probably has access to stockpiles already in its hands or those of suppliers.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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