The Ulyanovsk, Russia-based charter carrier Volga-Dnepr Airlines seems to be in severe financial trouble. This was confirmed to CargoForwarder Global by insiders and is reported by
ULnovosti.ru in an article published on 14 October. According to the information, the company’s operating deficit in October amounted to US$100 million, adding to the US$200 million already
accumulated by V-D in the months before.

The above-mentioned sources and a number of other signs indicate that the carrier’s financial situation is grave. Yet, for the time being it is unclear as to how serious the situation really is,
since the management remains silent. When CargoForwarder Global asked them to provide specifics, all the V-D officials said was that “negotiations with creditors are routinely held within the
agreements.”
Put under the microscope, this statement is neither a clear confirmation of urgently needed funds nor is a call for fresh cash explicitly denied by the V-D management. So, the question remains:
how much money is required from banks and financial sources to pay off the accumulated debt and keep Volga-Dnepr afloat. That is the million-euro question awaiting an urgent and credible
answer.   

The wage issue
The dire situation became obvious after the September salaries of the 1,000 Ulyanovsk staff were not paid in time. Worse still, employees were asked to sign a voluntary declaration of
renunciation in which they commit themselves to waive their salaries until January 2020, ULnovosti.ru claim in their article. Further to this, V-D told the Ulyanovsk staff that they would not be
hindered should they wish to quit.
When asked about the wage issue, the V-D management told CargoForwarder Global that “to date there are no salary arrears to the employees of any company of the Volga-Dnepr Group.”
Therefore, this topic seems to be off the table.

Various reason for the woes
A closer look reveals that the reasons for the current financial squeeze V-D is facing are manifold and their origins date back more than a year.

Reason 1
A main cause were the sanctions imposed by the EU and NATO as a reaction to Moscow’s Crimea occupation enforced by the Putin regime. The revenue generated through the SALIS transport agreement
accounted for huge revenues, since a single flight hour of V-D’s AN-124s on behalf of NATO and / or EU had a price tag of 23,000 euros. In 2017, the EU and NATO countries agreed to remunerate 973
flight hours operated by V-D’s AN-124s, amounting to revenues of 22.3 million euros for the Russian company alone. However, at the end of 2018, Putin “strongly recommended” V-D to step out of the
SALIS pact to prevent further military transports on behalf of the U.S. military by a Russian airline. Thus, from 1 January 2018 onwards, the carrier lacked an important income factor.

Reason 2
The situation was aggravated by state owned Antonov Airlines’ refusal to deliver spare parts to the Volga-Dnepr operated AN-124 fleet of “Ruslans”. This, because the Ukraine-based company claims
to be the main developer and sole license holder of the AN-124, including spare parts and tools needed in case of repair. From that day on, parts of the V-D owned and operated “Ruslans” were
idle, sending sales further south.

Reason 3
Last but not least, Volga-Dnepr lost a lot of business after announcing they would not cooperate with air charter brokers any longer but would instead inhouse all sales activities. However, last
July they pulled back and scrapped the decision. Simultaneously, leading executives exited the V-D Group or were asked to quit for different reasons. Robert van de Weg, Sergey Lazarev, Oleg
Demidov or David Kerr are just some of them. The result of this staff turnover is a loss of know-how and customer loyalty.
To put it in a nutshell, V-D has many construction sites, loses money every month, and seems to lack a strategy how to stop and end the downward trend.
What the V-D crisis implies for the air transport of heavy and oversized cargo, since there is only a very limited number of Antonov 124-100s available for such missions, remains to be seen.

Heiner Siegmund

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