LEJ-based CargoLogic Germany has filed for insolvency at the District Court of Leipzig. Consequently, the carrier, operating since OCT20 with a German AOC, has become a victim of the EU sanctions against Russia. Already on 11MAR22, the responsible regulator, the German Federal Aviation Authority (LBA), revoked CLG’s takeoff and landing rights. The authorities did this because its financier is the Russian oligarch, Alexej Isaikin.
The flight ban broke the neck of CLG. Due to the fleet’s grounding, the carrier was cut off from generating any revenues, but had to continue paying leasing rates for its four B737-400 P2F aircraft, and wages to its staff. Zero cash influx against a growing mountain of expenses, including parking charges levied by airports, forced CLG into insolvency. It is another blow for Mr. Isaikin after his conglomerate’s freighters, including the fleets of Volga-Dnepr, AirBridgeCargo, and regional carrier, Atran, were banned from European and North American airspace following Russia’s assault on Ukraine. This has shot the group's business model - carrying air freight between the Far East and Europe and, in some cases, to the U.S. - to pieces. The business model was based on a combination of scheduled services (B747F - ABC), and charter flights in the case of voluminous or heavy cargo items (V-D – AN-124).
2 million euros for an EU passport
Since the share of e-commerce shipments kept growing disproportionately for years, Mr. Isaikin decided to capitalize on the local distribution of these shipments, complementing intercontinental transports. To this end, CLG was created to provide the pan-European distribution of parcels and smaller items through a network of regional services across Europe. The Russian national was able to establish an own airline because he obtained an EU passport, issued by authorities in Cyprus. This allowed him to establish his own carrier registered in one of the 27 block member states, in this case, Germany. Years ago, he invested 2 million euros in the economy of Cyprus, which qualified him for citizenship. It was all simply about money since the authorities do not test any applicant’s Greek language skills or knowledge of the history of the country.
So, when Mr. Isaikin decided to kick off CargoLogic Germany, the local aviation authorities had to accept his Cypriot passport, which is valid throughout the EU. Once founded, the airline succeeded in contracting DHL Express as its main customer. Right from the start, in the fall of 2019, the integrator utilized the capacity of CLG's B737 freighters to transport its own shipments all across Europe. However, this collaboration was immediately terminated, following Russia’s invasion in Ukraine leading to a flight ban of all airlines associated with Russia or based on Russian capital, such as CargoLogic Germany, ATRAN, ABC, or Volga-Dnepr. For DHL Express this meant that it used its own uplift capacities and contracted other carriers to get its express items flown to their final destinations in time, spokesperson, Sabine Hartmann confirmed to CargoForwarder Global. Although she did not go into details (“We don’t comment on any rumors”), it is unlikely that DHL Express is interested in acquiring CargoLogic Germany. The Boeing 737s do not fit DHL’s fleet and the price tag that owner Isaikin has attached to the carrier is “astronomical”, as a person close to the case told CargoForwarder Global.
CLG is for sale
The question now is how to proceed with the airline and whether it has a future at all. Its greatest asset is certainly its AOC and its highly skilled roughly 100 employees, more than half of whom are pilots. A new proprietor can easily return the 4 freighters to their owners, since they are leased.
In the meantime, insolvency administrator, Lucas Flöter, is eagerly on the lookout for a well-funded investor. The latter was appointed as provisional insolvency administrator by the Leipzig court and, following an overview of the company's economic situation, has begun to explore restructuring options. "Above all, we are examining whether it is possible to resume flight operations in the shortest possible time, taking into account the sanctions. German insolvency law certainly offers suitable avenues here," says the lawyer. The main aim is to save the jobs of the staff, he added.
According to him, the takeover of the company by a well-funded investor or a group, unaffected by any sanctions, would be the best solution. For this to happen, however, CLG financier Isaikin would probably have to considerably scale back his pecuniary demands.
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