Duty exemptions on imported aircraft under increasing pressure (360 words)

Published: 2/9/2001

It seems that that the Russian aerospace industry may be beginning to anticipate the demise of the long hated tax breaks available for the importation of foreign aircraft into Russia in the event of a competitive Russian product not being available. The tariff relief introduced as part of a deal around the Eximbank financing of the Il-96T/M programme, has long been a source of irritation for both the industry and politicians. With both sides calling for its removal, given that there is now believed to be competitive Russian products in the airliner market. The President of the Russian Association of the Aircraft Producers, Alexander Batkov, has said that the Russian government should reconsider the relief granted under decree #716 in 1998, which has offered Aeroflot and Transaero primarily, the opportunity to operate foreign aircraft without paying the restrictive duties intended to protect domestic producers. The regulation has long been a bone of contention within the industry and has come to prominence recently largely through the actions of Aeroflot. The industry sees the airline, probably rightly, as hostile to domestic producers. A view supported by recent reports of negotiations with Airbus to acquire a large number of A-320s: discussions that Aeroflot denies, but generally believed to be true. Further supported by the reports of plans to acquire a low cost foreign airline, in a move intended, according to sources, as a means of gaining access to a fleet of western aircraft. Also the recent well-publicized discussions among Aeroflot's board, regarding the poor reliability and viability of Russian made aircraft, particularly the Il-96-300, which it has undertaken to buy. According to Batkov, the possible leasing of the A-320 by Aeroflot does not meet the terms of the decree, given the availability of the Tu-234 and 214. Batov's comments join those of a number of politicians over the last few months and as we await the detailed recommendations of the current plan for the industry, due to be delivered by industry minister Dondukov in early March. We will undoubtedly have further attacks on what is considered to have been a deal that benefited western producers, but offered little to Russia or the industry.

Article ID: 2346