Aeroflot under pressure to buy Russian

Published: 7/20/1999

Russian aircraft manufacturers are continuing to put pressure on the government to introduce fiscal incentives and obligations for large airlines to buy their products. According to a report from RIA Novosti, Ilya Shabanov, governor of the Voronezh region, has recently written to Prime Minister Stepashin, appealing for support of the negotiations between Voronezh Aircraft Building Corporation (VASO) and Aeroflot, for the lease of six IL-96-300s. The letter was prompted by the suggestion that the Russian government is considering granting tax exemptions on the importation, by Aeroflot, of four Boeing 767s. According to Shabanov, the lease of IL-96-300s to Aeroflot is of extreme economic importance to the region. He adds that a previous quid pro quo, agreed with the US government, involving a loan, through EXIMbank to finance the delivery of the IL-96M/T to Aeroflot, in return for tax exemption on the import of Boeing 737s, has only to date been honoured on the Russian side. Shabanov contends that no new tax exemptions for US aircraft should be agreed until the USA fulfils its outstanding commitments. (EXIMbank cut off the credit line in 1998 (Concise 1/31/99). Whatever anti-US sentiments prevail, Concise expects that Aeroflot will make a rational “horses for courses" decision on whether it pursues the Russian or the US aircraft. While the IL-96-300 is showing signs of improving reliability and has a lower price tag, the Boeings remain more efficient and are still preferred by passengers. Concise has verified that there are six IL-96-300s at differing stages of completion at VASO. A year ago, at least two were awaiting the installation of engines and avionics. How the completion of the aircraft would be funded remains unclear. In any case, at the recent Union of Industrialists forum (Concise 7/5/99),Valery Okulov, General Director of Aeroflot, made it plain that Aeroflot would continue to select aircraft to suit its passengers, regardless of origin and added that Aeroflot would not commit to an alliance with indigenous manufacturers unless they came up with a product that genuinely competed with that produced by the US.

Article ID: 688