Does e-commerce fleet expansion signal the untapped potential of Russian market?

[caption id="attachment_414332" align="alignright" width="500"] Aviastar-TU’s latest 757-200PCF is chartered by Cainiao. (Photo: Cainiao)[/caption] Alibaba’s e-commerce affiliate Cainiao has committed to prying open more airfreight links between its home market, China, and Russia, and will soon begin services with a newly delivered 757-200PCF (27051, ex-American Airlines) it is chartering from Aviastar -TU. According to Cainiao , the recently placed 757-200PCF will start flying e-commerce shipments from China to Russia in August, adding to an already robust operation consisting of more than twenty flights a week to Moscow, Novosibirsk and other European cities. Eager to lower delivery times to the largest cities in Russia to ten days by next year, Cainiao plans to launch permanent routes to new destinations such as Yekaterinburg and Kazan, said V i acheslav Savin , general director of Cainiao in Russia. Despite these ambitious plans to add more cross-border flights, the region’s freighter operators aren’t immediately convinced the Russian market can absorb more than a few freighters during the next few years. For Aviastar -TU, this is the third 757-200PCF it has added to its fleet in the past two years. Like the most recent addition, domestic e-commerce growth in Russia has fueled the carrier’s recent fleet expansion, according to Dmitriy Kovalenko, CEO of Aviastar -TU. Due to the country’s centralized population and extensive overland links, Kovalenko predicts “maybe two to three more freighters maximum” will be added to the Russia-based fleet over the course of the next year. As for its own fleet plans, pandemic-related 757 retirements could prompt the carrier to add another 757F this year, said Kovalenko. Russia-based freighter fleet, excluding Soviet-era aircraft Given Russia’s size, it is perhaps surprising that the country’s freighter fleet only grew by around three aircraft in 2019. But, echoing Kovalenko, Vitaly Andreev, general director of ATRAN Airlines, tells Cargo Facts most goods in Russia continue to be transported by rail or truck, with the domestic market accounting for approximately 1% of the global air cargo market. A source familiar with aircraft trading in Russia suggested that the VAT imposed on imported aircraft may have been a factor constraining the expansion of domestic freighter flights in Russia. As a result of the high tax rates, the vast majority of the commercial aircraft fleet in service with Russian carriers is registered in Bermuda or Ireland. There are signs this may be changing. Effective Jan. 1, aircraft imported into Russia are no longer subject to VAT, but this regulatory change has yet to impact aircraft registrations. Most carg o flies into, out of, or via Moscow. As Cainiao’s flight plans suggest, other Russian airports may soon see new cargo links. Noting recent state-funded investments into aviation in recent years, as well as new facilities such as the cargo terminal in Zhukovsky , Kovalenko sees the development of domestic networks as promising . The Moscow-centric nature of the Russian market could shift in favor of other airports such as Kazan, Krasnoyarsk or Novosibirsk, according to Andreev, but it will take time for a significant amount of freight to flow through these points. Many forward-looking trends and decisions will be influenced by the trajectory of the pandemic. Aviastar -TU had been evaluating the addition of a 767 freighter prior to the crisis , and while upgauging still seems appealing in today’s low-capacity environment, Kovalenko cautioned more time i s needed to understand the post-pandemic situation. As for ATRAN, which in 2019 expanded its fleet to five aircraft with the addition of two 737-800BCFs, Andreev doesn’t see much capacity growth in the short term, saying his carrier’s business model is based on express deliveries on short- and medium-haul routes, and that the three 737-400SFs and two 737-800BCFs provide sufficient capacity to accommodate existing volumes and demands. Any additional volumes can be dealt with by affiliate airline AirBridgeCargo , with its large widebody fleet. “In 2020 and beyond we will be more focused on quality improvement and network optimization,” said Andreev. There are also rumblings that some Russian passenger carriers are considering freighters. “These airlines might bring something new to our market , so I would be happy to see new start-ups,” said Kovalenko.

Does e-commerce fleet expansion signal the untapped potential of Russian market?

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