The colluded dynamics of lower utilization and higher cash flow are key to the revival of AV Cargo. It’s a bold move by the British-managed cargo carrier to try and put distance between itself and its previously failed sales operation, Avient Ltd, now languishing in administration.
To that end, the freshly rebranded AV Cargo took delivery of its second MD-11F in July, with the intention to place it in service by September. It will join the earlier intake of a stable mate MD-11F, which arrived in May. Both aircraft are on lease from Boeing Capital Corp.
A third aircraft will join the fleet in November, according to Simon Clarke, CEO for the new outfit.
“This will be the existing MD-11F from the former Avient fleet, which we look forward to putting back into service,” he says.
The aircraft has been parked at Zurich Airport in Switzerland for some months awaiting heavy maintenance.
“Unfortunately, this aircraft has been caught up in the administration situation, so it has taken some time to clarify a number of issues,” Clarke says.
It appears that Avient’s other remaining aircraft, a lone DC-10F, has also been grounded at Liege Airport in Belgium for similar reasons. It, however, faces a lowlier fate, having recently shipped out on its final flight to the U.S. and the junkyard.
With a complete, newly-livered fleet soon to be in place, Clarke confirms that the airline intends to focus its attention on West Africa.
“It is a market which is holding up well and one which we believe can provide strong returns,” Clarke says. ”We have already established service on a number of routes, and the additional capacity will enable us to add frequency and other points to the network.”
AV Cargo is now operating twice per week to Bamako, Mali, three times to Lagos, Nigeria, and has added Monrovia, Liberia to complement the services to Port Harcourt, Nigeria; Pointe Noire, Republic of the Congo; Ouagadougou, Burkina Faso and Freetown, Sierra Leone.
Low ambition appears to be the stated goal of the new carrier, as Clarke is keen to explain.
“We intend to keep it very simple and have no great ambitious plans in the pipeline,” he says. “That was probably a contributory factor in the previous operation, which was eventually overwhelmed by its overheads.”
The business model adopted by Clarke calls for a close alignment between low aircraft utilization and tighter control over cash flow.
“If we look back to three years ago, the leasing cost on a MD-11F was around $400,000 a month,” says Clarke. “That meant that you had to operate at least 300 flying hours a month to make a return.”
Since then, leasing costs on MD-11Fs have dropped dramatically.
“That puts us in a different situation today,” Clarke says. “It means we can operate just as effectively, without having to chase so many flying hours.”
That said, Clarke says he expects to see a 60-40 split between scheduled and charter business generated by the new operation.
“The expanded fleet and lower utilization needs will enable us to be far more flexible in meeting the demands of both market segments,” he says.
As to the issue of cash flow, Clarke obliquely refers to what he describes as a “funding mechanism” designed to ensure that revenue receipts reach the airline more effectively and quickly.
AV Cargo is believed to be working closely with ECS, the leading cargo sales agent in the West Africa market, to put into effect this fast-track funding mechanism.
Contrary to industry rumors, Clarke confirms that Liege Airport in Belgium will remain AV Cargo’s operational hub in Europe – despite the fact that the airport operating company is listed as one of Avient Ltd’s creditors.
“Liege has shown us strong support throughout our recent difficulties and are keen to see AV Cargo become successful,” Clarke says.
That appears to be the collective mantra of Avient’s other creditors.
When Avient Ltd, the sales arm of Avient Aviation, went bankrupt earlier this year, it was with a reported debt burden in excess of US$30 million. There has been discussion and denial of the true extent of the company’s financial state of affairs, made all the more difficult because its accounting records had not been updated for more than a year. Along the way, 18 staffers at Avient Ltd lost their jobs.
To try and retrieve the situation and in an effort to placate creditors, Portland Business and Financial Solutions, the company’s administrators, have developed a formula allowing AV Cargo to emerge from the ashes of Avient Ltd, and, hopefully, provide an eventual financial return for creditors.
All of which is not what Clarke envisioned as being the situation when he and technical director Neil Glover took over responsibility for running Avient at the start of the year. This followed the decision by co-founders husband-and-wife-team Andrew and Samantha Smith to retire from the business. Ownership of the company was passed to the two senior managers for what is said to have been a nominal sum.
Although Avient was based and managed from the rural English idyll of Wiltshire, its heritage remains that of a Zimbabwe-registered airline.
Despite covering the role of CEO of the former operation, it is said that Clarke and his new co-director were shocked at the true extent of Avient Ltd’s financial predicament. With creditors bearing down on them, about to force the company to cease trading, the duo had no alternative but to file bankruptcy.
The creation of AV Cargo, of which Clarke and Glover are the two major shareholders, was seen as a means of raising new finance, injecting fresh capacity and providing some payback for creditors. Time will tell if it will work.