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. Last Updated: 07/27/2016

Volga-Dnepr Holds Firm Grip on Air Cargo Market

ULYANOVSK, Central Russia -- With surging sales and the lion's share of a $200 million specialized market niche, cargo airline Volga-Dnepr, operator of the world's largest planes, is a rare success among the nation's struggling carriers.

In the decade since it was set up, Volga-Dnepr has adhered to an aggressive development plan that saw turnover reach $104 million last year after $83 million in 1998, and it remains confident of more of the same in the future.

"This success was not unexpected. It was forecast and carefully planned," said Volga-Dnepr commercial director Valery Gabriel in an interview.

"Over 1999 a lot of work has been done to optimize the airline's structure, its fleet and increase the efficiency of (its) operations ... . Our prospects are most optimistic."

The airline now claims more than 60 percent of sales in the heavy airfreight sector, a market dominated by the Antonov AN-124-100 f an aircraft with a 120 metric ton capacity that is roughly equal to the weight of 25 full-grown elephants.

U.S. Boeing Corp.'s 747 freighter has similar capacity, but the AN-124 f nicknamed "Ruslan" after a Russian folk hero f has a bigger cargo hold that allows it to transport outsized items and gives it a competitive edge no existing plane can match.

After Volga-Dnepr, the heavy airfreight market is divided between Ukraine's Antonov airlines, which has a 33 percent share, and Russia's Polet, accounting for just over 6 percent.

The 10 Ruslans in Volga-Dnepr's fleet have carried everything from yachts for the America's Cup regatta and a 22.5-meter-tall Christmas tree for New York's Rockefeller Center, to a mock spaceship for the last Star Wars movie.

Clients range from pop stars and movie directors to the United Nations and Lockheed Martin f most of whom have probably never heard of the airline's home base, the sleepy Volga River city of Ulyanovsk, birthplace of Soviet leader Vladimir Lenin.

Paradoxically, Volga-Dnepr's success is partly due to the difficulties that hit the local aviation industry with the collapse of the Soviet Union a decade ago.

In 1991, the newly independent Aviastar, builder of the AN-124 and a Volga-Dnepr founder, made the airline's development part of an anti-crisis plan hoping it would help fuel plane sales.

Aviastar and its partners had set up the airline a year earlier after convincing the government to sell two AN-124s to Volga-Dnepr at discounted prices and promise to keep the others cheap.

Despite a successful partnership starting in 1991 with British operator HeavyLift, which provides marketing services, economic turbulence meant Volga-Dnepr's first profitable year only came in 1998, eight years after it was founded.

The airline won't release specific figures but says it was satisfied with what was a modest profit after the August 1998 financial collapse, which had caused cargo sales to be slashed by an average of 25 percent over the previous year.

Volga-Dnepr weathered the crash better than other carriers f sales fell by 10 percent in dollar terms over the previous year f largely because around 98 percentof its business is abroad.

"It's been tough, but in the last few years we've finally become profitable and remain sure of continued growth," Volga-Dnepr's chief executive Alexei Isaikin said at a news conference earlier this year.

"We've achieved this by setting goals and continually struggling to achieve them no matter what happened f that's something that hasn't always been easy," he said.

Prior to the crisis it was already honing in on economic efficiency by reducing staff and cutting management expenses, slashing annual operating costs by as much as 40 percent.

"We're aggressive now about adopting Western management strategies," commercial director Gabriel said.

"Utilizing techniques that make us more efficient and more profitable has been a major goal in our development."

Brenda Drumm, general manager of the British-based Institute of Transport management, said this strategy had brought results.

"Since Volga-Dnepr's inception in 1990 they have pioneered in one of the toughest areas of freight operations," she said.

"Sustained growth in the international heavy-weight market has seen a 25 percent increase in sales volumes for Volga-Dnepr last year ... . The future looks positive indeed for the carrier."

Despite a slim market niche, Volga-Dnepr remains one of the country's top cargo airlines by volume. It is second only to national carrier Aeroflot and is profiting from higher activity in the aerospace sector and the oil and gas industries.

The United Nations accounts for 15 percent of Volga-Dnepr's business f 60 flights in 1999 and more than 30 in the first quarter of 2000.

Such results have meant the airline has had few problems attracting investors to help finance its development.

Russia's Kaskol group acquired a 16 percent stake in the airline in April, saying "efficient management and well-defined strategy" had fueled its interest.

Volga-Dnepr has also secured millions of dollars in loans, including $6 million last year from state savings bank Sberbank for the completion of one of two AN-124s on order.

Isaikin says that Volga-Dnepr is continuing to search for investors to help its long-term growth plans and that it eventually hopes to go public, perhaps even this year.