Vladimir Shlyomin

R

ussia’s Government finished coordinating plans to set up the United Aircraft Construction Corporation. The State will own a stake in the corporation amounting to between 55% and 60%. It is believed that the emergence of a new strong structure will allow to increase 10 times the construction of civil airplanes in Russia by 2015.

The concept of the United Aircraft Construction Corporation (UAC) has been under discussion for several years already but only at the beginning of this year it has been submitted to the Government. It is proposed that the corporation unite assets of several private and state enterprises. Among them are the Russian prominent aircraft makers: Sukhoy, MiG, Ilyushin, Yakovlev, Tupolev, Irkut corporation.
The heads of the Tupolev, Sukhoy and MiG joint-stock companies have already confirmed their readiness to get integrated. "We have no way other than this one for consolidation in all directions", said Igor Shevchuk, the general constructor and president of the Tupolev company.
He reminded that there are four types of the certified airplanes in Russia that are made serially (Tu-334, Tu-204, Tu-214 and Il-96). Shevchuk proposed to arrange construction of precisely these planes on the top-priority basis so as "not to lose the market in Russia and CIS". Then, in the opinion of Igor Shevchuk, efforts should be directed at making "an in-between product" and, after that, "at choosing two breakthrough projects, the implementation of which can take from seven to eight years but which will correspond to the world’s best samples of the aircraft construction".
General director of MiG Alexei Fedorov stressed that precisely his company initiated the establishment of the United Aircraft Construction Corporation. "The very fact that MiG and Sukhoy, which were always competing with each other, are now sitting at one and the same table" proves, in his words, the optimal nature of the chosen option.
So far Russia has maintained its aircraft industry mainly thanks to export of military planes and multi-billion contracts. In experts’ estimates, however, already in the current year priorities of the main consumers will start changing. The export of sea ships will take the lead and that will hardly be surprising. Russia’s largest partners in the military-technical cooperation, India, above all, refuse to purchase airplanes on a mass scale and they want to switch to acquiring technologies as well as components for developing production of their own aircraft’.
Russia inherited from the USSR over a hundred of plants making planes, engines, components and everything that is linked one way or another with the aviation. There are also over a hundred research organizations and design offices. It turned out to be difficult to manage such a gigantic establishment. Promising developments never got to the market, enterprises’ basic assets keep aging and "the window of opportunities" for Russia is closing. Since 1991 the number of employees in the aircraft industry went down from 1.5 million to 530,000 people, while the production volume decreased by as much as 6 times. In 2004 Russian plants constructed a little more than ten airliners. The share of the civil aviation in the total volume of the aircraft construction does not exceed 15%. Sometimes the impression is that the country is losing its ability to keep constructing airplanes.
To Russia the resuscitation of making passenger planes is the matter of both policy and economy. In the market conditions the Soviet system of forcing air carriers to purchase its planes does not have, of course, any future and that is, undoubtedly, recognized in the Government of the Russian Federation. But which option is realistic enough? The department’s director of the Ministry of Industry Yuri Koptev believes that the most advanced Russian planes, such as Il-96, Tu-204, can become the most attractive and economically accessible to air companies through the leasing system established with the State’s participation.
At present, market conditions are sufficiently favorable. After the deep crisis of the 1990s Russia’s air transport has been experiencing the rapid upsurge. Last year its rates amounted to 9.9%; some air companies report even a 30%-increase in passenger flows. If the country maintains the present rates of the GDP growth (6.8% a year on average), the annual increment of the air transportation volume equaling 12 and more per cent may be expected. The sign of the recovery of the air transport is that it is gradually overcoming the disunity. Some time ago there was one national company, Aeroflot, that operated in the country’s enormous space. The monopoly stage was replaced by the chaos resulted from the multitude of independent carriers. Now the process of air companies’ consolidation is underway: their number went down from 360 in 1996 to 217 in 2004; 30 of them account for over 80 % of passenger flows.
The bulk of passengers is transported by the aged airliners Il-86, Il-62, Tu-154, Tu-134 and Yak-40. There are 700 such planes in the total fleet of 1, 600 air carriers. They are not in compliance with the ICAO requirements and are not permitted to many countries, above all, to North America and Western Europe.
Taking into account a higher level of new planes’ turnover, the replacement of the aged ones requires between 200 and 250 air carriers. If nothing is done, then, demand for passenger transportation will exceed supply already next year. At the same time tougher ecological standards will be in effect and they can be observed with great difficulty only by Il-96 and Tu-214 equipped with the latest Russian-made engines PS-90A and noise-absorbing panels.
The Transportation Ministry collected air companies’ requests for acquiring 536 new aircraft’ till 2010, including 180 helicopters, 164 trunk line and 146 regional passenger planes. If this need is to be satisfied by the domestic aircraft industry alone, then, its enterprises will be loaded to the sufficient extent.
However, they have the strongest rival. Since 2001 about 2,000 airplanes have been put out of active operation in the West, mainly those of time-worn, 10 to 15 year-old types. Their owners are ready to sell this fleet for reduced prices to countries of the Third World as well as to Russia and CIS. In order to prevent second-hand supplies of airplanes to the Russian market, which is not protected by technical barriers, it is necessary for the Government to consider taking protectionist measures. So far Russian airplanes have one undoubted advantage: their cost is by 1.5 to 2 times lower than the one of new foreign planes with equal capacity. But the gap is gradually closing due to the constant rise in prices for electric power, materials, components and labor force.
Precisely in these conditions the project of establishing the United Aircraft Construction Corporation has emerged. The concept of an aircraft holding was put forward as far back as 2001 by Vice Prime Minister Boris Aleshin (now the head of the Federal Agency for Industry). After long debates the idea was supported by heads of other Ministries as well. In February 2005 German Gref, the Minister of Economy, reported to the UAC-devoted meeting of the State Council that his Ministry, together with the Ministry of Industry, already "worked out the plan of establishing UAC" and that soon a strategy to develop the aircraft industry will be "elaborated in detail".
The project of the Russian Government provides for constructing 273 aircraft’ between 2005 and 2008. The state support will be given to three main aircraft plants: the Voronezh aircraft construction plant JSC (Il-96 and An-148), Aviastar (Tu-204) and the Gorbunov Kazanskoe aviastroitelnoe proizvodstvennoe objedinenie (Tu-334, Tu-214). They are to construct 135 airplanes and for this purpose 66 new airplane bodies have to be assembled in 2005 already.
The $1 billion funds will be needed, including $377 million from the state budget. It is believed that if a state support is provided on such a scale, then, private investors will put in $340 million and aircraft construction companies will furnish $65 million. The remaining funds are to be borrowed from commercial banks.
The peculiarity of the proposed scheme to finance the project is that the State will support not a producer but a buyer of airplanes acting as the second investor in programs of renovating aircraft companies’ fleet. The state financing will not be provided directly to construction plants. Funds will go to accounts of leasing companies for raising capitalization as well as to accounts of aircraft companies as compensatory payments to reduce rates of credits from commercial banks for renovating the aircraft fleet.
Russia is able to independently satisfy the growing demand for air planes in all categories, insists Yuri Koptev. In his opinion, now the country has a match to practically any serial Boeing and Airbus, probably except the latest Dreamliner and À-380 only.
By failing to consolidate, the Russian aircraft industry will hardly be able to enter the world market, which is valued at $50 billion year-on-year. The trunk line aircraft segment (mid- and long-distance flights transporting from 100 to 600 passengers) has already been taken over by Boeing and Airbus. Precisely this segment is considered one of the most profitable: it accounts for almost 50% of sales (between $20 and $25 billion). Nevertheless, in the opinion of independent expert Sergei Sokut, Russia has the potential for claiming a share in another half of the market. "We still have serious chances in the fighter plane segment, which is valued approximately at $12 to $14 billion year-on-year. It is also true for jet-propelled instructional aircraft ($1.5 billion), military transportation aviation and special-purpose planes, for example, for rescue and fire-fighting services (up to $5 billion year-on-year). If the present rates are maintained, Russia may occupy leading positions on the market of regional airliners (about $9 billion year-on-year) through new projects, such, for example, as RRJ, which is being developed by Sukhoy, believes Sokut.
In case of successful implementation of the new concept to develop Russia’s aircraft industry, the country will reestablish the largely lost status of the third world center of civil aircraft construction industry. It will be able to make all types of airplanes, although on a considerably smaller scale than the U.S. Boeing and Europe’s Airbus that produce 300 airliners each year-on-year.