Grasping at straws? (1100 words)

Published: 1/8/2001

It appears that the major Russian aerospace manufacturers are mounting a PR offensive - spurred on by the denied rumours of Airbus having received orders for 30 aircraft from Aeroflot - in order to confront the national carrier's thinly-veiled desire to equip its primary fleet with western-bought aircraft. On New Year's Eve, the heads of the three major Russian civil airframe producers Yakovlev, Tupolev and Ilyushin met at Moscow's Bykovo airport, ostensibly for a 20th anniversary celebration of the Yak-42 entry into service. The meeting was primarily instigated by Aleksandr Dondukov, the Industry Minister (who, contrary to regulations, is reported to retain his posts at Yakovlev as General Director and General Designer), with the aim of emphasizing the presence and viability of the Russian industry in answer to the widely circulated Airbus rumours, which were a liberal interpretation of French Government statements made during Prime Minister Kasyanov's visit to France in December. Dondukov's speech at the Bykovo meeting was a plea for the future of the Russian aerospace industry. The minister was however, somewhat liberal in his use of the facts he used to support his case. He claimed that, shortly after the financial crisis of August 1998, Russian airlines returned 60 of the 70 western aircraft on their inventories to the lessors and also “began to admire the, so-far, unfairly treated indigenous designs”. In reality, Aeroflot, the largest user of western airliners in Russia, has returned none of its 27 foreign aircraft (ten A310s, ten 737s, two 777s, four 767s and a DC-10). Aeroflot managers continue to say they could effectively employ at least 20 extra modern standard-fuselage western aircraft and have even been reported as considering the possibility of leasing regional jets from foreign producers. In his efforts to state the consummate suitability of Russian aircraft over western alternatives for the Russian market, Dondukov said that 90% of Russian airports are located “further north than Montreal”, which requires aircraft to withstand -40° to-50°C ambient temperature. He pointed out that, “most western aircraft are only designed for a minimum of -20°”. The Minister also claimed that the Russian developers put substantially more strength into their aircraft's landing gear than their western counterparts, in an attempt to overcome the poor conditions of local runways. This has led to a higher relative weight of undercarriage (6%) in the overall structural weight of aircraft and a resultant 1% and 1.5% drop, respectively, in payload and fuel effectiveness, compared with western aircraft reducing on paper at least, Russian aircraft's competitiveness. Dondukov claimed however, that at least ten landing gear failures had already occurred on western aircraft landing at Russian airports. He expects many more, unless the undercarriages are strengthened. Sources from within the industry do not entirely disagree with Dondukov's claims of landing gear problems. They accept that the condition of Russian runways has created problems for western aircraft. In some cases, this has led to landing gear life being shortened in response to, what is seen as, a very “rough life” for aircraft operating in the Russian market - particularly the Boeing 757s. The solution may already be to hand if the Indian example is followed. They already employ a four-wheeled bogey on the Airbus in response to the condition of their runways, many of which were built by Russian contractors. In a further element of his case for unique local conditions, Dondulov claimed that the Yak-130D prototype, which normally has two to three malfunctions during a test flight from Zhukovsky, had only two malfunctions during the entire 40-flight testing programme in Italy. This was, apparently, due to “better climatic conditions ”. Some commentators are of the view that arguing for the future of the Russian industry on the basis of - colder weather and poor runways creating the need for heavier landing gear - is a less than substantive case to make for the industry's long-term future, and that, consequently, the industry leaders are fast running out of options. Mr.Rubtsov, head of the Ilyushin Finance Company and former Vice Chairman of the National Reserve Bank, suggested that the placing of orders with Russian producers would, not surprisingly, benefit the Russian economy. At least 400-500 new aircraft will be required in the next fifteen years to renew Russia's 1,500-strong airliner fleet. The cost of the replacement aircraft would come to an estimated $10-$12 billion (for new Russian aircraft) and $25-30 billion (for the western alternatives). For Rubtsov, this could potentially add another 0.5-1% to Russian GDP (forecast to be $230m in 2000), while saving 500,000 jobs in the industry. He also estimated that if the current upturn in the economy continued, in excess of the government's 4% minimum, it would also add additional traffic at a rate of 1.5% for every 1% of growth, further underpinning the future of the industry. The strong macro- stimulus and the increasing need for replacement aircraft is a restatement by Rubtsov, of the case he made to the government in early December, of its need to begin a leasing structure for Russian aircraft. The initial focus should be on the leases for six Il-96-300s ordered by Aeroflot and six Tu-204s for Transaero (plus options for four aircraft). Even accepting that the benefit from the recently approved “Budget of Development” coupled with the permission for the government to use would-be “extra income” (from oil price rise windfalls) accruing to the federal budget, goes towards the support of the promised state guarantees for civil aviation programmes. The government should launch the lease schemes according to Rubtsov, regardless of how much extra income is generated by the higher-than-predicted oil prices given the potential benefit overall for the economy. While Rubtsov declined to specify the interest rate that Russian banks would be ready to provide seven-year credits for the projects under consideration. He commented that the figure of 24% has been under discussion - in rubles. Under the Ilyushin Finance lease structure, the government should provide 85% guarantees of the investments in the initial stages, reducing the guarantees as the scheme progresses and attracts funding from other sources. Rubtsov commented that he supports the idea of further integration of the Russian aerospace industry, as proposed in Dondukov's industry restructuring programme , initially approved by the government on 7th December 2000. The plan, which called for the merger of Tupolev and Ilyushin, and, potentially Yakovlev, could says Rubtsov, be expected by government order after the completion of the integration of the respective producers, this summer.

Article ID: 2276