CargoLogicAir: Flying the flag in a Brexit world

27 / 04 / 2018

You don’t have to smoke a big cigar and display the V for victory sign to prove you are a true Brit.

A UK Air Operator Certificate (AOC) does the job equally well for CargoLogicAir (CLA).

David Kerr, chief executive of Stansted-based CLA, has declared that the carrier remains “totally committed” to flying the UK flag and in supporting the UK government’s forward-looking aviation policy and the continued strong growth of the UK economy.

That robust CLA rebuttal came in response to the news that CargoLogicManagement (CLM), part of Russia’s Volga-Dnepr Group, has employed former Qatar Airways’ cargo boss, Uli Ogiermann, to establish a freighter airline with a German AOC. In this particular case, CLM is acting for its Russian parent and not CLA.

States Kerr: “CargoLogicAir is a British company with a British AOC under my leadership. It has shareholders Alexey Isaykin and Sergey Shklyanik

who are European passport holders and common shareholders of Volga-Dnepr Group as well.

“Under their shareholding, CLA has the mandate for strategic partnerships and arms length agreements with Volga-Dnepr Group subsidiaries, namely Volga-Dnepr Airlines, AirBridgeCargo Airlines (ABC) and CargoLogicManagement.

“CLA is not part of the Volga-Dnepr Group of companies in terms of its legal structure. It is an independent carrier.”

CLA’s expansion strategy is following a flightpath set when news of its UK AOC emerged in February 2016, after much press speculation about the airline’s launch.

Says Kerr: “We have a mandate for growth set out in the original strategy for the airline, and we are part way along that path.”

The carrier currently has three B747s in its fleet: a 400ERF, a 400F and a -8F.  It has its eye on acquisitions in the secondary market and also, says Kerr, of “more strategic discussions within the group of companies we belong to under the shareholder” with manufacturers for new aircraft.

He adds: “We are looking to scale up our B747 fleet, so our mandate for growth and longer term plans is for ten aircraft. Our medium term goal is to move up to five, so we expect to have done that within the next 18 months.”

The primary focus is on the B747, because of benefits of scale from reaching a certain size in a certain fleet type, but Kerr adds that there is “room for variety” in the fleet and that could mean the increasingly popular Boeing 777 freighter.

The choice of aircraft is drive by customer demand, says Kerr, adding: “There are markets, segments and industries that lend themselves to nose-loading B747 solutions and there are others that lend themselves to the capabilities and efficiencies of the B777 or aircraft of that type.”

In July 2016, Volga-Dnepr Group confirmed an order for 20 Boeing 747-8 freighters at the UK’s Farnborough Air Show for its ABC subsidiary, aircraft which are now rolling off the production line and entering the fleet, often via the ownership of an aircraft lessor intermediary such as Intrepid, BOC Aviation or GECAS.

CLA is not wedded exclusively to the Boeing freighter brand says Kerr: “No, we are looking at all options in our future plans. Within the family coming under our shareholder, there was a large order made a few years back and we are reviewing the delivery schedules and timing and nature of those deliveries.

“Obviously those are primarily, at this stage, into AirBridgeCargo but if the capabilities cannot be delivered into AirBridgeCargo then we are also there to make the most of opportunities that come from that programme.”

CLA was created before the UK voted in June 2016 to leave the European Union (EU), and Kerr – who came onboard the airline 18 months after that ‘Brexit’ referendum – is keeping a close eye on political discussions between London and Brussels.

In March this year, British Prime Minister Theresa May said that Britain would be willing to pay to remain part of a series of European bodies, including the European Aviation Safety Agency. It is hoped that this will extend to EU single aviation market for the freedom of the skies currently enjoyed by UK flagged carriers.

Says Kerr: “My strong sense is that certain political solutions are heading in the right direction for UK aviation to get its own solution for Brexit.”

Bilateral discussions with EU countries cannot begin until the final Brexit deal is signed by the UK and the EU, but discussions with third-party countries, says Kerr, “seem to be progressing well, they are extensive and indepth and working towards intent, so my observations on that are positive”.

The Brexiteers favour new trade deals with the US, China and others, all of which would be good news for a UK-flagged carrier.

Kerr recognises the backdrop of growing protectionism worldwide but says that sustained global economic growth calls for cautious optimism.

He makes the point that there is not a lot of airfreight moving around Europe, it mostly goes by truck, but trade deals struck in good time with the US and China, the biggest air cargo markets in the world, and other non-EU countries are positives for the likes of CLA.

“We feel we can play a role as the leading main deck cargo carrier for the UK. We can play an active role in that trade development and are beginning to do so.”

CLA has schedule services to the US, Mexico, the Middle East and a new route to Hong Kong starting later this month (April).

“There has been a steady growth in our scheduled services while we can also provide uplift for ABC, with whom we have a strategic partnership agreement. That [partnership] that allows us to deliver solutions to key customers across a global network which is also complemented by our partnership with Volga-Dnepr Airlines and the unique solutions offered by its fleet of ramp loading Antonov and Ilyushin aircraft.

“We are able to provide a one-stop shop for significant outsize and specialist industry capability, and that is an exciting part of the growth model that we have. “

It has been noted that the livery of ABC and CLA are very similar, is that a coincidence?

“There is a synergy for sure, but it is born out of an arms length agreement, and with our shareholder we clearly have an alignment of branding when we present ourselves to global customers. We want them to be able to identify a one stop shop which we call a cargo supermarket, so the customer can go to one place in order to find the breadth of unique solutions that we can offer. 

“So branding consistency is important in our commercial proposition.”

The relationship with the Volga-Dnepr Group of companies is not an exclusive one.

Says Kerr: “We have a formal relationship with Etihad Airways, to provide block space for them on some of our destinations. Another example is that we have performed solutions for such companies as UPS during their peak season on an ACMI basis.

“We are not constrained by whom we work with. We have discussions with a number of different operators about solutions for them, or for joint network partnerships which I believe are at the heart of how the industry can grow and deliver solutions that are more complicated and which have viable economic models that share risk.”

Kerr adds that CLA’s traffic rights allow it to focus on markets “without spreading ourselves too thinly,” while joining up the dots with ABC from time to time as a network without stopping CLA from developing new markets independently.

“I think that is a happy medium, and that we are able to coordinate network opportunities in a strategic way.”

Kerr would not be drawn on the German AOC project of CLM consultant Ogiermann, other than to observe that it would be “an enhancement to the international network of cargo airlines, which can only be a good outcome for our customers”.

Kerr was asked about the surprise news that Robert van de Weg has re-joined Volga-Dnepr Group, just over a year after leaving the airline group, to take on the role of vice president for sales and marketing, the same role he occupied until the start of 2017.

Says Kerr of the Ogiermann consultancy and the return of van de Weg: “It speaks to the strength that we will have in growing our ambitions, and we hope our customers see that as a positive signal from a key organisation they want to work with for the long term future.”