Due to the fierce competition caused by the economic downturn, rising fuel costs and growing customer demand, airfreight companies are forced to look for new ways to improve their performance and client base. Many are turning to specialisation, focusing on transportation of specific categories of goods in competitive fields. One of the pioneers and the leader in the airfreighting of unique or super-heavy/oversized freight is the Russian carrier Volga-Dnepr.
Airfreight plays a vital role in international trade. With the continuing international division of labour and the growth in international economic and cultural connections, its role in the global economy is becoming more and more significant. According to some estimates, roughly one third of all the world’s products made in the next few years will be part of the international trade cycle. According to International Air Transport Association (IATA) data, despite the fact that the share of air transport makes up just 2% of all freight traffic, with practically all the rest being transported by ship, airfreight accounts for 35% of international transportation based on value.
Aviation logistics is an integral part of the current global logistics system, on a par with other types of transport. In most cases, airfreight services are already firmly established within the production chain of transport companies. The chief driver of development in this field is the trend towards globalisation, which in turn creates demand for fast, reliable and secure transport by air.
At the same time, airfreight functions in an atmosphere of fierce competition, both between airlines and with other types of transportation. This competition, further complicated by the economic situation, explosive growth in fuel costs and growing customer demand has forced airfreight companies to look for new ways to improve efficiency, lower costs, and expand their client base.
Many are turning to specialisation, focusing on transportation of specific categories of goods in competitive fields. By contrast, others strive to diversify their portfolio of services and develop a presence in multiple market niches – such as in logistics for both general and specialised freight. It is worth noting that airfreight is generally broken down into two categories – general freight (cargo which can be transported on standard cargo pallets), and specialised freight. The latter normally includes oversized and exceedingly heavy types of cargo.
Individual Approach to Unique Cargoes
Essentially, the market for the airfreighting of unique or super-heavy/oversized freight was created 20 years ago by carriers established in the post-Soviet environment exploiting heavy cargo aircraft developed by the Soviet design engineering bureaus. One of the pioneers and the leader in this new segment of the global airfreight industry was the Russian carrier Volga-Dnepr, which 20 years ago began commercial operation of the unique An-124 ‘Ruslan’ heavy cargo transport aircraft with a freight capacity of more than 120 tons. The non-standard cargo hold of this enormous plane allows the transportation of very large cargoes, and the specially-constructed floor in the cargo hold enables special features for the transportation of very heavy goods. In 1985, the legendary ‘Ruslan’ set 21 world records in one flight, carrying 171 tons of cargo to an altitude of 10.7 km. The company’s active marketing campaign in the international market, and a whole array of additional haulage systems developed for various different types of goods, gained the company a unique market product and its leading position.
The list of unique freight handled by Volga-Dnepr is endless – and ranges from an 81-ton piece of Coca-Cola bottling equipment and a 125-ton chemical reactor, to a Sukhoi SuperJet airplane, high-tech equipment for mining and oil and gas companies, space rockets and satellites, cars for international rallies, concert equipment for the biggest stars… the list is endless.
Each individual shipment requires the specialised technology and rich experience of the company’s employees in this complex field of activity. Today, the company derives about 90% of its income from international clients. Two-thirds of freight is moved for state organisations with the rest generated from sectors such as aircraft-building, oil and gas and industrial equipment.
Volga-Dnepr is certainly not resting on its laurels. In 2004, it launched a new business running regular cargo flights using the Boeing 747 range of aircraft, which offer freight capacity of more than 100 tons and are the most popular all-cargo aircraft for moving general or palletised freight. The new company was named AirBridgeCargo Airlines. Today, the company operates a fleet of 13 Boeing 747 freighter aircraft. In 2007, AirBridgeCargo was one of the first companies to order the new generation Boeing 747-8F cargo aircraft. The airline received the first and the second of five ordered B747-8F planes in January and March 2012 respectively with three more to join the fleet in 2012-2013 and has an option for another five. Although the scheduled air cargo market is highly competitive, AirBridgeCargo has successfully gained a leading position on the Asia-Europe route and become a major player not only in Russia but at Frankfurt airport as well.
Today, Volga-Dnepr is an international group operating at more than 20 locations in nine countries and including the two largest airfreight companies in Russia: Volga-Dnepr Airlines, operating charter flights for outsized cargo and super-heavy using a unique ramp freighter fleet of An-124-100 Ruslan and the IL-76 cargo aircraft; and AirBridgeCargo, launched in 2004 and specialising in scheduled all-cargo flights using Boeing 747 aircraft across a growing network covering more than 20 destinations in the biggest countries around the world.
Based on 2010-2011 results, Volga-Dnepr Group is one of the top 15 airfreight companies in the world, based on turnover.
Volga-Dnepr Group’s mission is: “We build reliable air bridges for our partners all over the world. We change expectations of aviation logistics by using our unique abilities. We are sure that we will meet our goals, contributing to the success of each employee and leading on to the success of the company as a whole.”
Volga-Dnepr Group’s overall goal between now and 2030 is to be a “timeless”, professional organisation and a leader in the global airfreight industry.
The Group’s success is due not just to its unique market position, but also to the technology and services Volga-Dnepr is able to offer to its customers. After launching its scheduled cargo business, the Group concentrated on expanding its range of services and improving the service efficiency of each and every flight. In 2009, Volga-Dnepr presented the global market with a uniquely innovative solution – it’s Engineering & Logistics Centre (ELC), a new comprehensive logistics service. This pulls together all the main services offered by group companies and is based on three principles: 1) ‘door-to-door’ transportation solutions, 2) a ‘single window’ principle with a dedicated manager to control the freight, coordinate all the services and interact with the client, and 3) a ‘freight supermarket’ principle – providing efficient transportation of cargo of any degree of complexity to any point in the world, using an efficient fleet of aircraft. Additional services offered through the ELC include full-cycle work for ground freight transportation, developing special transport solutions for a specific project, handling customs procedures, and freight insurance. To provide these services, the company uses its competitive advantages: a universal and complementary fleet of aircraft, a developed network of routes and representatives around the world, its status as a customs importer, its own fleet of freight vehicles, and its in-house insurance company. Services are coordinated by a single global centre for freight management, which coordinates the work through three Volga-Dnepr offices located in the USA, UK and Russia, and which work around the clock.
Today, Volga-Dnepr’s services are employed by large international industrial corporations in various sectors of the global economy, including Lockheed Martin, The Boeing Company, Airbus, Alcatel, Astrium, Bombardier, British Petroleum, Exxon Mobil, British Aerospace, General Electric, Bedford Group, Lukoil, and Starsem. Its service capability also allows the company to play an active role in peacekeeping and humanitarian missions run by international organisations around the world.
At first glance it may seem like a fairly simple task to meet a client’s needs but in the highly specialist airfreight market it requires great knowledge, expertise and experience to deliver such a service. The issues of implementing a unified system of freight management, with unified technological standards and involving the best contractors is complex. This may explain why Volga-Dnepr is the only aviation logistics company in the world to offer such a comprehensive service.
And so another question arises – where is Volga-Dnepr headed? On one hand, there is offering of new services and developing client relationships, a path to new market segments, including the niches of smaller freighter aviation and express delivery.
On the other hand, there is the focus on further improving business efficiency and tightening expenditures at all levels.
The most important part of this work is to modernise the company’s fleet of aircraft.
Volga-Dnepr specialises in transporting unique and outsized freight using An-124-100 Ruslan aircraft. The An-124-100 ‘Ruslan’ is unlike any other ramp freight in the world. There is a whole category of freight (particularly cargo for the space industry) which cannot be transported any other way but in these particular airplanes. But the problem is that sooner or later the ‘Ruslan’ aircraft fleet is going to be depleted and so far there is no aircraft being in production capable of taking its place. Volga-Dnepr Group has initiated a project to resume series production of the An-124 to provide a new fleet of aircraft for Volga-Dnepr, state clients, and other airfreight companies using the An-124. The project also aims to preserve Russia’s leading position in the non-standard airfreight market.
In 2008, under the Group’s fleet modernisation programme, Volga-Dnepr Group ordered 40 new An-124s from the Russian United Aircraft Corporation (UAC), to be delivered by 2027. In 2009 at the International Aviation and Space Salon MAKS in Zhukovsky, Volga-Dnepr Group, JSC United Aircraft Corporation, and the developer of the ‘Ruslan’, Antonov, agreed the technical requirements for a new An-124-300 modification. It is proposed that 20 An-124-300s with improved technical and economic characteristics and meeting all future ICAO standards will be delivered to Volga-Dnepr under its firm order and another 20 aircraft will be ordered under option.
In 2009, the project to start production of a modern, updated version of the An-124 heavy cargo aircraft, initiated by Volga-Dnepr, received the support of the President of the Russian Federation: through to 2020, the Russian government was instructed to include into the national defense programme the creation of 20 modernised An-124 military transport aircraft, as well as providing necessary assistance to the United Aircraft Corporation in promoting the aircraft in the domestic and foreign markets.
Another important project for Russian aviation is the modernisation of another unique ramp aircraft, the IL-76TD. In the early 2000s as new noise pollution standards were introduced internationally, the IL-76TD was banned from flying in Western Europe, North America, Australia, and Japan. This efficient and convenient freight aircraft was suddenly out of action, having lost access to the most important destinations and hubs for international logistics. In 2002, Volga-Dnepr Group and the Perm Engine Company began a project to modernise the IL-76 and fit it with new PS-90F-76 engines. A year later, the Chkalov Tashkent Aircraft Production Corporation joined the project and production of the modernised aircraft was launched there. The updated IL-76TD subsequently received its certificate of compliance with noise pollution codes in accordance with ICAO standards and today is approved for operations all over the world with no limitations. The business plan envisages building up to 15 IL-76TD-90VD planes by 2020. At present, Volga-Dnepr’s fleet already includes four of the airplanes and delivery of a fifth is expected in the second quarter of this year.
The An-124-100 Ruslan and IL-76TD-90VD aircraft are used primarily for all-cargo charter flights, transporting unique and outsized cargoes. For regular freight flights operated by Volga-Dnepr Group subsidiary AirBridgeCargo, Boeing 747 freight aircraft are used. This is the ideal solution for transporting containerised and palletised cargo – this type of aircraft can be serviced modularly at any major airport in the world, enabling the company to minimise freight loading and unloading times and offering maximum efficiency in freight transit. At present, AirBridgeCargo operates 13 Boeing 747s, and was the first Russian buyer of the new Boeing 747-8F freight airplane.
E-ticket to Life
A key direction throughout the industry as a whole, and for the company in particular, is the implementation of a standard for electronic document management, which is already working well in passenger air travel.
The e-Freight standard, developed by IATA and implemented in Russia by the Ministry of Transport of the Russian Federation, is currently being tested on a number of transit and transfer freight routes running via Sheremetyevo International Airport in Moscow, one of Volga-Dnepr Group’s main freight hubs. With this system, freight handling no longer requires paper documentation.
The switch to electronic document management for airfreight movements could be very beneficial for the industry. In contrast to passenger flights where, generally, one can manage with just one e-ticket, freight operators are saddled with significantly more complicated documentation. So the results are promising to be very significant – the new system could save the need for 20 separate paper documents and according to IATA estimates, the transition to the electronic format could save the industry up to $4.9 billion every year.
IATA’s plans foresee 100% of freight being transported using the e-freight system by 2015. The transition to electronic technology should reduce losses and shorten shipping times, while improving punctuality, service and information available to the client. The level of service should improve by reducing the number of errors. For Russian companies, the switch to e-Freight will improve their competitiveness in foreign markets, including by speeding times for transit and transfer of cargoes in Russia.
Mastering electronic technology will help to modernise the processes for cargo across the entire logistics chain. The e-Freight programme includes airlines, freight agents, ground services companies and customs bodies. The goal of the IATA programme is to minimise the expense of paper documentation by 80%. As a result of implementing e-Freight, efficiency and oversight should improve dramatically. Access to electronic information about cargo allows clients to assess risk, focus their resources, and make decisions before the cargo physically arrives at the airport. Electronic data makes it easier to profile/segment and analyse trends in the movement of import/export freight. In addition, control over payment of fees and duties will be easier; the primary source will be responsible for ensuring entry of correct data and the risk of mistakes will be lowered. Electronic information allows the control of freight movement in real time.
According to the Ministry of Transport of the Russian Federation, Russia could be making about $10 billion annually if it could significantly increase the share of air freight transiting through its territory. Today, most global airfreight companies choose foreign airports, which offer a high level of service at reasonable prices but there have been successful experiments to establish hub business in Russia.
AirBridgeCargo has started implementing a hub model at Sheremetyevo Airport. Together with Sheremetyevo International Airport, Kratos Group of Companies, and the Federal State Unitary Enterprise Rostek, the airline has signed an agreement to develop freight infrastructure at the airport. Under this project, construction has begun on a new, modern freight terminal which will allow the provision of services at a whole new level as well as improving the airport’s throughput capacity. In 2011, work on the hub model also began at Moscow’s Domodedovo Airport, which is another positive development for this international airport operation.
Other Russian airports are waiting for their hub transformation, which will allow Russian airports to make money by servicing transit flows and give domestic airlines a new advantage.