CargoLogicAir, victim of Russia sanctions, faces liquidation

CargoLogicAir, the UK-based all-cargo airline affiliated with Russia’s Volga-Dnepr group appears to have officially gone out of business, collateral damage from the invasion of Ukraine.

The airline, which flew two Boeing 747-400 Freighters from London airports, ceased operations earlier this year after the UK government sanctioned majority shareholder Alexey Isaykin for signing a deal with the city of Moscow for Volga-Dnepr Airlines had to maintain supply chain connectivity to countries in Asia and the Middle East.

On Wednesday, CargoLogic Air (CLA) hired corporate restructuring firm Buchler Phillips to manage its bankruptcy, including how to realize value from assets, pay off debt and determine the best options for operating the company while it is temporary protected from creditors. But barring a miracle, CargoLogicAir will likely be liquidated.

CLA was a small airline, but the landing of two extra-large freighters is part of the story behind the tightening of cargo capacity compared to pre-COVID times and why rates haven’t fallen more amid weak demand. Sister company CargoLogic Germany, with a fleet of four Boeing 737 freighters, was also grounded after filing for bankruptcy in May. And AirBridgeCargo, the scheduled airline of Volga-Dnepr, which flew a large fleet of Boeing 747 freighters, was shut down along with subsidiary Atran Airways.

Founded in 2015, CLA has had a rocky history. It scaled back operations in 2019 amid weak market conditions and closed in early 2020, but regained its certificate of operation in April as the pandemic spurred strong demand for freighter services. According to a press release from Buchler Phillips, CLA employed about 130 people before the sanctions and turned a profit in 2020.

The second half of 2020 was an outlier for air cargo volumes and high rates as supply chains were completely disrupted and passenger airlines stopped flying cargo. The press release did not mention the 2021 results.

Isaykin is a Cypriot national who founded the Volga-Dnieper Group and was its president when sanctions began. The British government froze his assets and imposed a travel ban in June for providing material assistance to the Russian government. He resigned as CLA director in June. The airline suspended operations in March when Western nations banned Russian airlines from flying US- or European-made planes. Technically, it was allowed to maintain restricted operations due to its registration in the UK, but could not overcome sanctions against banking activities.

“The company has since been unable to act effectively [Isaykin] became the subject of UK government sanctions against companies believed to be Russian-controlled following the Russian invasion of Ukraine in February 2022,” Buchler Phillips said in a statement. “As a result, the company applied for and was granted minimal continuation licenses to operate HM Treasury. However, it had problems keeping its bank accounts timely: the company faced increasing difficulties with its bankers despite having significant funds in its account that the company should have liquidated.”

Buchler Phillips criticized the government’s treatment of CargoLogicAir.

“The appointment of administrators at CargoLogicAir is a very unfortunate, unintended consequence of sanctions being widely imposed on British companies perceived to be Russian-controlled,” the firm said. “This is a uniquely British company providing a valuable commercial service to British clients trading abroad, employing British staff and paying British taxes.”

Loadstar recently reported that Isaykin left Volga-Dnepr as part of a management buyout. The publication also quoted a source as saying the UK government has blocked CLA’s owners from selling the company.

More FreightWaves/American Shipper stories by Eric Kulisch.

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