Long awaited contract comes to fruition (715 words)

Published: 8/15/2001

After substantial speculation, China's Main Directorate of Civil Aviation has signed a letter of intent to purchase five Rolls-Royce powered Tu-204-120s for delivery in 2002 and 2003, including three passenger aircraft and two cargo aircraft. According to reports in June, four Chinese airlines, including Xinjiang, had been told they were to receive the Russian aircraft. The announcement of the contract comes as no surprise, although the numbers cited in the letter of intent fell short of those initially reported, which suggested that China was possibly interested in 10-32 aircraft, with specific interest in five, including three passenger planes and two freighters. In an interesting public statement on the prospects of the other aircraft currently being evaluated by China - the KAPO-produced Tu-214 - Aviastar's Deputy General Designer, Oleg Alasheyev, commented that having so far produced only one aircraft for Dalavia, KAPO was not in a position to supply aircraft to China, given the need to meet an additional order from Dalavia, due for delivery in September. This has already been delayed beyond the originally reported June deadline and KAPO is also committed to completing two aircraft for state airline, Rossiya, which are due to be delivered in 2002. Alasheyev's comments follow considerable speculation over the competition between the two producers for orders in and out of Russia, with suggestions that relations between Aviastar, the sole customer for the Tu-204-120 and Sirocco may have been under strain and that talks may have taken place with Kazan-based KAPO. Recent comments from Deputy Prime Minister, Klebanov, however, have implied that China may sign agreement in September for the purchase of Tu-214s, followed by other “breakthrough contracts” before the year end, with as many as three other countries. The Chinese orders come after a prolonged period of interest, not only in the Tu-204/214, but also the Il-96-300, closely scrutinized by Xinjiang during the middle of 2000, with three aircraft in mind. The interest has only gained substance as a result of the recent strained relations between China and the USA and, by proxy, with Boeing. This tension appears to have overcome some fairly substantial misgivings concerning Russian civil aircraft, after a number of Tu-154 crashes in China. The final Tu-154 passed out of service in China earlier this year. It is also likely, given the substantial financial problems of the Chinese air transport sector, that the Chinese authorities were undoubtedly attracted by the value of the Tu-204-120, reported to be priced in the range of $32-$35m, and the prospect of not being solely dependent on Western suppliers. It also seems that the PS-90A powered Tu-204, currently operated by AirRep in JV with Aviastar and a number of Russian entities for express parcel carrier, TNT, is attracting attention, with reports of further interest in another four aircraft, according to Alasheyev. AirRep's interest in additional aircraft on both its own behalf and that of TNT has been well documented, but actual aircraft deliveries have been less swift, owing to the problems at Aviastar. This has lead the UK-based operator even to consider a conversion of an existing passenger aircraft to freight, given the delays in delivery of new aircraft and other reports have suggested the potential leasing of a Tu-204-120, owned by Air Cairo. Aviastar expects that the completion of the JAA certification for the Tu-204-120 will increase demand for the aircraft in Europe. Whether the plant has sufficient, viable capacity and working capital to produce substantial number of aircraft in the foreseeable future, either of the RR powered variant, or for the PS-90A powered version, is another matter. The recent collapse of the New Community (NC) funding of the plant in return for a 26% stake, suggests that the plant will continue to have problems in upping its production rate, given that the NC investment in the company, prior to its withdrawal, seemed largely focused on keeping the plant operating by paying wage arrears and tax debts. The plant is also reported to have only eight air frames left, prompting industry commentators to reflect on the substantial difference between finishing air frames and building them from scratch, both in terms of logistics and finance.

Article ID: 2711