he project cargo business is not for the faint hearted. Outsize air freight operators always seem to be working against the clock - and that can just be to get access to heavylift charter capacity, let alone actually moving the cargo.

The rebuilding effort in Afghanistan, ongoing military operations in Iraq and humanitarian efforts in Africa are taking up huge chunks of project air cargo capacity. And what by now was supposed to be a thriving, commercial reconstruction in Iraq remains a dangerous, war-torn situation in which delivering outsize cargo is a risky proposition.

Is it any wonder that the spot market for outsized lifts remains tight and unyielding? And it is not going to get any easier, with all the major operators and service providers predicting a huge rise in demand from the oil and gas sector.

The AN-124 is, of course, the recognized workhorse of the project cargo business. Just three players - Antonov Airlines, Volga-Dnepr and Polet Air Cargo - provide the bulk of the bulky 120-ton capacity these Russian-built monsters can offer up.

According to Graham Pearce, senior vice-president commercial at Antonov, 20 to 23 AN-124 aircraft are in circulation at any one time. That means, in relative terms, the project cargo business is fairly awash in the availability of outsized lift.

If only that were the case.

"Don't call me if you want outsized project cargo capacity in a hurry," says Pearce. "A year ago I would have told you that around 80 percent of our capacity was being assigned to military re-supply and support operations in Iraq and Afghanistan, plus humanitarian projects in Africa. These were programs that we believed would only last a matter of weeks, but a year later these operations are as intense as ever."

Pearce claims Antonov, a Ukraine-based airline, is the only AN-124 operator to be allowed to fly directly into Iraq. The sensitivities of Kremlin politics apparently preclude the other two Russian-based operators from flying into the troubled nation.

"Although Iraq has a fully serviceable port in the south of the country it is still very difficult and dangerous to move goods up country," says Pearce. "This is why we are being called on to fly directly into such places as Baghdad and Mosul in the north."

Built into Antonov's 80 percent take-up of AN-124 capacity is its support of a massive and ongoing United Nations humanitarian operation in Africa.

"This is not a long-term aid program as such and charters are still organized on an ad hoc basis," says Pearce. "But again this work is taking up a regular and continuing part of our available commercial capacity."

Volga-Dnepr insists it has taken a clear-cut commercial decision not to operate into Iraq. "We looked at the inherent dangers of operating into Iraq in the current situation, in relation to our aircraft and our crews, and decided to withdraw for the time being," says Tony Bauckham, sales and marketing director for Volga-Dnepr. "We certainly will be back in there when the situation becomes more stable, at which time we can expect to see a surge in project cargo movements."

In the meantime, Volga-Dnepr claims an ongoing 54 percent market share of AN-124 global project cargo business. It is a position, according to Bauckham, the carrier does not intend to give up anytime soon.

In fact, Volga-Dnepr will soon be able to lay claim to exclusive new project cargo lift when it adds a new-build IL-76 to its fleet this summer (see related story, page 36).

Chris Leach, managing director of U.K.-based charter broker, Air Charter Service, welcomes the return of the IL-76, but maintains its impact will not be as great as some might expect.

"The older version of the aircraft has still continued to be allowed to operate within Europe, under exemption by various governments, to carry out military flights and relief operations," he says.

Leach estimates there were more than 200 such flights in and out of Europe last year.

"This is the type of work the freighter was designed to undertake, operating into airports with restricted handling facilities," he says. "But as a commercial aircraft it has an expensive fuel burn and has little cube capacity for bulkier loads."

But, says Leach, a newer version of the type with an anticipated better fuel burn will probably help relieve pressure on AN-124 availability.

"AN-124 capacity has been tight all year, with virtually zero availability on the spot market," he says. "Brokers have really had to show their mettle in pulling together last minute charters, which inevitably is what our business is all about."

ACS appears to have shown its mettle by putting together 30 to 40 ad hoc AN-124 charters in the last year to provide a record business year for the company, which has recently opened up offices in New York.

"The pre-Christmas market out of Asia was particularly good for us," says Leach.

"The major logistics service providers nowadays buy up a lot of scheduled capacity and organize their own charters to avoid any last minute rush. But some years, like this last one, it is still not enough to meet demand and we are called in to scour the market for every last bit of capacity."

Polet Air Cargo may be precluded from operating direct flights into Iraq, for whatever reasons, but that does not prevent it from getting to the market's doorstep.

"We operate regular flights into Kuwait for onward transport of equipment into Iraq by road," says Maxim Kloushin, the carrier's Cyprus-based European sales manager. The nature of the traffic Polet carries, Kloushin admits, is sensitive.

"Of course, by now, we like other operators were expecting to be involved in huge project movements into Iraq, helping rebuild the country and getting its industry moving again," says Kloushin. "Instead the AN-124s are being used in military support roles."

The big project movements are in the pipeline, he insists. "We have been talking to a number of major contractors about moving large generators and other big scale equipment into Iraq, when the situation is more stable and contract workers can safely be moved into the country," he says.

Otherwise, maintains Kloushin, the carrier's project cargo business is buoyant and as varied as ever.

"The AN-124 has clearly demonstrated its ability to move large loads, often at short notice, over great distances," he says.

He points to examples of recent lifts operated by Polet Air Cargo, such as the movement of massive generators from Switzerland to Malaysia or the transport of Rolls-Royce engines to power the new Airbus A380 from the United Kingdom to Toulouse, France.

"In another instance, we were recently asked to fly a satellite on behalf of EADS Astrium from Toulouse to Cape Canaveral in the U.S.," says Kloushin. "We sent our own people to Toulouse ahead of the movement to discuss the transport of the payload inside a huge container. So precise was the planning, that at the end of the day there was just two centimeters of space between the container and the ceiling of the aircraft."

The potential savings in time and cost of moving these huge outsized loads by air are now recognized by most shippers, he insists.

"Even so, I believe there is still a huge potential for the AN-124 which is not being appreciated by many shippers or being tapped by the charter brokers and operators," says Kloushin.

Paul Hughes, director energy and projects, Europe and Middle East for EGL Eagle Global Logistics, says the main traffic lanes for energy related project cargo remains out of the U.S. to the Middle East.

"But what we are beginning to see is a significant shift away from the Middle East, particularly with the development of gas to liquefied products projects, which are taking place in such diverse markets as West Africa and Brazil," he says.

EGL is also chasing the new oil markets, and some of the older ones, such as Libya, which is reopening for oil business.

"We already have people in on the ground there setting up our operation, working in conjunction with local Libyan connections," says Hughes. "It is important that we have an established set-up ahead of any demand to start moving oil-related project traffic."

EGL, which for some years has steered away from placing too much emphasis on energy related project work, is now busy strengthening its credentials in that field. Hughes has recently been recruited from Halliburton with that goal in mind.

Klaus Gonschorek, vice president, global projects, at Schenker Project Service, says the overall project cargo business remains reasonably constant, but he too forecasts a strong surge in oil and gas related movements.

"The present high cost of oil has had an effect on oil and gas related projects, where confidence in the market has induced the development of small and marginal fields," he says.

"If the high price is maintained through the balance of 2005 we will see a spiral in project cargo movements in 2006/07."

Gonschorek points to Libya as one of the new oil development markets. Following the lifting of sanctions against Tripoli, the country that has Africa's largest oil reserves is seeking massive foreign investment to release those reserves.

American companies such as Occidental and Chevron Texaco recently have been awarded licenses to explore some of the country's largest oil reserves.

But, cautions Gonschorek, "Libya in the past has been loathed to spend money on its own projects and slow to approve projects funded by others.

"It is unlikely that the current political detente will encourage Libya to 'speed up' to any major degree on project developments unless international finance houses can be convinced to provide major funding."

Schenker Project Service has extensive experience of moving a complete cross-section of project cargoes using a combination of sea freight, air freight and surface modes of transport.

Gonschorek says that,in a recent realignment of the company's project division, the decision has been taken to strengthen and highlight project operations in the oil and gas and petrochemical industries.

"This new initiative is being supported by the recruitment of project logistics specialists from the oil and gas sector," says Gonschorek.

Schenker has prompted the move, says Gonschorek, because in recent years project sponsors and owners have gradually ceded responsibility for their project logistics movements to the service providers, with many outsourcing their complete supply chain management requirements.

"This has required the project service provider to work on the basis of 'cradle to grave, ex works to site,' where they are entirely responsible for determining 'best route, best way' methods of shipment."

This ensures that most project movements are now well planned and well engineered at any early stage to allow materials to shipped on schedule.

"But inevitably there are the last minute adjustments or rescheduling which requires immediate remedial action by the logistics provider," says Gonschorek. "This is where air freight really comes into focus."

The typical project cargo split on a major oil and gas development would be 90 percent sea freight and 10 percent air freight, says Gonschorek. But on a late-running project, the air freight content could climb as high as 20 percent.

Oil and gas may be the new forte of Schenker Project Services, but it is certainly not averse to organizing the odd charter in order to commercial product to market.

Such was the requirement when the company was called upon last October to set-up a series of AN-124 flights to enable Sony to get its latest PS2 Playstation product to worldwide Christmas markets.

"This turned out to be the world's biggest ever single charter movement with the AN-124," says Gonschorek. "Over a period of 14 weeks we organized flights out of China to the U.K., Holland, Spain and Australia. The combined shipments weighed in at 7,500,000 kilos."

Volga-Dnepr took on sole responsibility for providing the AN-124 lift necessary for the charter program.

"It sounds as if this was a last minute rush by Sony, but in fact it was a very well-planned and very secret project to surprise the competition," says Bauckham.

"We were given early warning at the beginning of the year, which enabled us to clear the decks and set-up what turned out to be around 80 separate AN-124 charters, each carrying around 160 pallets. We are still making flights today on behalf of Sony to help them maintain pace with demand for the product."

Nice project cargo work, if you can get it.