Spun-off as a separate entity within the Aerofl ot group two years ago and fl ying solo for one year, the move to create a separate freight subsidiary – Aerofl ot-Cargo – has proved to be a signifi cant step in the right direction as the cargo carrier looks set for rapid network growth and fl eet expansion on the back of solid cargo volumegrowth.

Increased competition in the Russian air cargo market from the increasingly liberalized environment and the desire to create a more “transparent” cargo business was the key impetus behind the spin-off, according to Alexey G. Prikhodchenko, CFO of Aerofl ot-Cargo.

The Aerofl ot unit is responsible for both dedicated freighter operations as well as belly-hold cargo on the group’s passenger side, which operates a fl eetof 86 passenger aircraft to 93 destinations.

Volume growth
With a 15 per cent growth in cargo volumes over the period November 2006 to July 2007 – representing a 23 per cent growth in revenue – the newly created entity is now looking at ramping up effi ciencies, expanding its network and modernising its fl eet whichcould include B-777 freighters.

Carrying over 150,000 tonnes a year, Aerofl ot-Cargo has recorded a 15.4 per cent growth in cargo volumes over the period November 2006 to July 2007. As expected much of this growth has been from the Far East region, where the carrier has seen volumes jump 38 per cent in the same eight-month period with the associated revenue contributionrising an impressive 80 per cent.

“China for us is a main market, we have good relations with forwarders there and our service is very effective,” according to Prikhodchenko who added the much talked about overcapacity in the China market had not impacted Aerofl ot-Cargo.

In fact, he pointed out that in the eight-month period volumes out of China had grown 26 per cent with revenue up 17 per cent. Currently the carrier has scheduled services into Shanghai and Beijing and may start services into Guangzhou next year.

The carrier recently launched its inaugural freight service to the UK with a weekly service into Manchester using DC-10-40F freighters. The operation is the only scheduled cargo service operating between Russia and the UK and offers the added advantage of direct links into Aerofl ot’s domesticcargo network.

The next network addition will be a new service to the US by November or December this year. Using an MD-11, Aerofl ot-Cargo will mount two fl ights a week to Anchorage, Chicago and Seattle. This will be followed sometime next year by new services to Dubai andMumbai.

Fleet expansion
But growing volumes and new routes naturally precipitate a need for growing its capacity beyond its current fl eet of four DC-10-40 freighters, something Prikhodchenko said will be taken care of through new aircraft purchases and conversions. The carrier will take delivery of three MD-11 freighters starting from this month. The MD-11s are being converted from passenger aircraft by Boeing Commercial Aviation Services and SASCO, a subsidiary of SingaporeTechnologies Aerospace.

By 2009 Aerofl ot-Cargo will take delivery of three more MD-11 conversions, bringing the total up to six and at more than 93 tonnes of cargo lift per aircraft this represents a signifi cant capacity upgrade. Two of the four DC- 10s, meanwhile, will be disposed of according to Prikhodchenko, while two will be retained for the carrier’s domestic cargo network, a market he describes as a “very profi table operation”. By 2009 the remaining two willalso be phased out.

In November Aerofl ot-Cargo will take delivery of the fi rst of six B-737-300 freighters with one more this year, two next year and another two in 2009 for use on domestic and regional routes. The carrier also has a contract with Russian airframe maker Voronezh Aircraft Manufacturing Company for six Ilyushin Il-96-400T freighters with the fi rst to be delivered in July 2008 with two more by end-2008 and three the following year. By 2010 the carrier will have a fl eet of 18 dedicatedfreighters.

Aeroflot-Cargo’s parent recently made headlines with an order for 22 A-350 and 22 B-787 Dreamliners, deals worth as much as US$3.6 billion each. The new aircraft will begin entering Aerofl ot’s fleet from January 2014,through 2019.

While the signifi cant plane order will certainly boost Aerofl ot Cargo’s belly capacity, it may have to wait a bit longer for its B-777 freighters that Prikhodchenko said were in cards. Eight or ten of these freighters would be delivered from 2012through to 2016, he said.

The carrier is also looking to develop a new domestic express logistics business by opening a new regional hub in Khabarovsk, near the Chinese border, and develop an existing one in Novosibirsk, Russia’s third largest city after Moscow and Saint Petersburg andthe largest city in Siberia.

These hubs will be connected to a surface delivery network through express consignment trucking out of these large regional centres to thehinterland.

“In the complex and diffi cult climatic conditions of the Siberian and Far East regions delivery of food stuffs, medicines and articles of prime necessity are possible only by air transport,” said Prikhodchenko. The new B-737s will be destined for use in this new express logistics focus, replacing AN-12s that currently serve the existing Novosibirsk hub.