Il-96 M/T programme still vulnerable

Published: 8/16/1999

The recent visit by former Prime Minister Stepashin to Washington has resulted in a minor breakthrough in the funding of the long suffering Il-96 M/T programme. According to sources close to the programme, Eximbank, which suspended its support of the programme in the latter part of 1998, owing to the financial crisis in Russia, has agreed to provide funding for the significant US content of the aircraft. This includes the engines and avionics from Pratt & Whitney (P & W) and Rockwell Collins. The agreement will, however, only extend to three aircraft and there is no commitment to additional funding thereafter. While it is heartening to see Eximbank back in the project, the conditions of its renewed commitment pose problems for the programme"s managers. The US bank is demanding an exclusive first lien on the aircraft and sole rights to the government guarantees. This means that any additional funding, even for the significantly cheaper Russian content of the aircraft, would have to be made on what is, effectively, an unsecured basis. This is a very difficult call for Russia"s beleaguered banking sector and an extremely difficult task for Alexander Roubstov, the Deputy Chairman of National Reserve Bank (NRB) acting for Ilyushin in arranging the project"s finance. There is significant concern among those close to the project that NRB simply does not have the financial muscle or the capability to structure and deliver the complex financing required. The aircraft"s launch customer, Aeroflot, is also rumoured to be having second thoughts. Such rumours have been circulating for some time. Certain factions within the airline consider the Il-96 M/T as still requiring additional work, whereas they need it to be operational now. In principle, the first delivery will comprise three cargo aircraft, but detractors argue that the airline would be better continuing with its leased DC-10s and using the funds for development elsewhere. It appears that significant improvements will be required to make the project work. US partners, P & W and Rockwell Collins, who have sunk significant costs in the project, may, in addition to their deliveries of equipment for one aircraft, need to accept lower payment for their equipment, in exchange for equity in the leasing vehicle. This would potentially allow the whole programme to be funded. For the two suppliers, this might seem a relatively small commitment to a project that is otherwise in danger of going nowhere, along with their investment. The future of the project has therefore become a difficult balancing act of funding at the right price and persuading the launch customer to buy, or replacing it with another purchaser. The cooperation and endorsement of the launch customer is a critical factor in moving the aircraft on from type certification by the FAA to a certificate of airworthiness, by providing the data and collection methods required. Ilyushin's Roubstov and Livanov are well aware of the challenge they face. Reports from sources cite a high level of interest in the programme from marginal operators, attracted by the aircraft"s relative cheapness, but few have examined its operational reality. There is also concern that the lobbying from the airlines and the industry to “buy Russian" may undermine funding already secured from Washington, with Boeing potentially withdrawing its political muscle, deemed as being critical in obtaining the initial commitment, as a trade-off for duty free access.

Article ID: 756