News / Winding down Cargologicair – unpaid salaries, scattered records and parts

More than 100 Cargologicair (CLA) staff are still owed salaries and benefits totalling nearly £3m ($3.8m).

The UK airline, sister to Volga-Dnepr Group, faced sanctions owing to its ownership by Russian Alexei Isaikin and is currently under administration, now extended for two more years.

It owes 108 employees, as well as about 89 other claimants for some £5.2m.

The administrator, in its six-month progress report, noted that Cargologicair’s bank statements showed payments to staff, but the employees claimed the money had not arrived in their personal bank accounts. Administrator Buchler Phillips said it was investigating where the money had gone. Just two staff currently remain on the books.

Buchler Phillips noted: “The employees have total unsecured creditor claims with a value of £2,978,268 … employees have submitted claims in various forms and we are in the process of adjudicating them. We will write to any employee who has not submitted a claim in Q1 of 2024.”

It gave no details of when staff may finally be paid.

The report provides a colourful narrative of how companies are wound down. HR and payroll records were found in a storage centre, which could only be accessed once the storage company could be paid. Found alongside staff records was an assortment of “branded goods” from both CLA and Volga-Dnepr UK, including aircraft models, which will now be destroyed to save storage costs.

The administrator found the airline’s aircraft technical records in another storage facility, amounting to some 320 boxes, which must be given to the new owners and operators of the aircraft.

Sorting out CLA’s affairs has been frustrated by banks and software companies freezing accounts and services. Microsoft restored services to some accounts in October, but not all.

“The lack of access to Microsoft records is severely hampering the progress of the administration,” said Buchler Phillips, adding that as a result it would take legal action against Microsoft. Software company Trax restored access to the aircraft stock records in November, once it had been paid, which has enabled the administrator to try to sell aircraft parts.

Aircraft stock has been found at Amsterdam, East Midlands and Frankfurt Hahn airports, but it amounts to less than the £1.2m-worth originally thought. The administrator has urged anyone interested in buying the stock to get in contact.

One Dutch airline had initially been interested in CLA’s AOC, but the administrator said this was not a “saleable commodity” and had been revoked in October.

CLA has some £7.5m across two bank accounts, but the administrator, which charges some £500 per hour, only received access in the third quarter, towards the end of the administration period, necessitating the extension. Sole shareholder Caro Logic Holdings, meanwhile, has been struck off the UK companies’ register for failing to file accounts, complicating matters.

The airline could get a tax refund of some £3.3m and is owed £205,000 in VAT, but the claims can’t be processed until all returns are submitted.

Ordinary and secondary preferential creditors, owed some £1.16m, could receive dividends in Q1 next year. Of the creditors, some £3.2m is owed to “connected companies”, which have faced the same sanctions, like Volga-Dnepr UK.

Last month, Volga-Dnepr UK received a compulsory strike-off notice. But, likely connected to CLA, the action was discontinued at the start of December, because “cause has been shown why the above company should not be struck off the register…the registrar is taking no further action”.