In early 2015 a significant changes took place among the top officials of the aircraft industry. In fact, a new team was formed; it will be defining the industry’s development strategy in future. As we know, earlier Russian civil aircraft industry focused on two projects: Sukhoi Superjet 100 and MS-21 (medium-haul aircraft of the 21st century). We’ll discuss present and future of the industry with the Deputy Minister of Industry and Trade Andrei Ivanovich Boginsky.
– Andrei Ivanovich, thank you for agreeing to the interview. After a number of new appointments and changes among the top officials of the aircraft industry should we expect changes in the state program for development of the aircraft industry? What is the strategy of the new team? And is the decision to provide financial support to the SSJ100 project (100 billion rubles allocated for improving financial situation of Sukhoi Civil Aircraft Company, plus 27 billion rubles – for supporting sales of SSJ100) a consequence of these changes? Which mechanisms may be used to facilitate the sales of Superjets?
– Changes in the management team of United Aircraft Corporation (UAC) do not mean that the aircraft industry’s strategy must be changed. All the new employees of UAC took part in development of this strategy. However, there is no doubt that some tactical changes will be made depending on the economic and political situation. The state program is not a dogma; it is a landmark for both enterprises and state authorities. The priorities may be adjusted by autumn, because the new President of UAC needs time to sort out the situation and update some things.
Obviously the decisions made will be affected by the support the state provided to Sukhoi Civil Aircraft Company (SCAC) by allocating 100 billion rubles; this fact will influence the economics of SSJ. Moreover, this refers to state support provided to leasing companies, which should affect lease rates, as well as additional supportive measure developed by us in cooperation with lessors and UAC and approved by the Ministry of Finance – residual value guarantee. Probably a new legal entity will be established in the network of UAC in order to make this mechanism work. We have calculated the financial model and probability of events; we have been working really hard for more than a year. This measure has already been included in the 2015 budget – 750 million rubles.
– Are you considering this mechanism only within the framework of SSJ100 project or it may be used for other projects too?
– We believe that all the measures aimed at supporting export of high-tech products and sales at domestic market will be applied to MS-21 project too. At present we are working closely with the Ministry of Transport in order to harmonize our approaches. It is a rather challenging task. An aircraft’s lifecycle is long and the measures must cover a long period of time. We are working on construction of a long-term infrastructure.
– How many aircraft may be covered by the mechanism? I mean how many Superjets and MS-21 liners will be covered by the residual value guarantee?
– Our aim is to form a civilized secondary market in order to create some deals, which should allow defining the residual value on the basis of market mechanisms. We think that around 100 SSJ and 100 MS-21 liners should be covered by the residual value guarantee in order to form these deals.
– Let’s talk about development of SSJ 100 program. Will it be developed? Will an aircraft family be created?
– The program’s development must be continued. And we hope that it will develop towards the aircraft family. At present leaders of UAC and SCAC are choosing the course of development and negotiating, among others, with Italian partners. They must settle all the matters related to operating activities, reach the break-even point and form the order backlog. The work is in progress; they are working closely with air carriers. We hope that following the results of these negotiations the parties will at least sign memorandums of understanding. This is the top-priority goal. The second goal is to make decision on development of the aircraft family. And we expect management teams of UAC and SCAC to make this decision.
– In my opinion, the decision may turn out to be tough and resource-intensive. Is the state ready to support the UAC’s decision, for it will require significant funding to develop the aircraft family?
– Let’s wait for the decision. It is absolutely necessary that colleagues from UAC define their position. Everyone understands that it is necessary to develop the aircraft family. The question is – which way to choose. We’ll discuss this matter, when the decision is made.
– Recently an agreement with China for selling 100 SSJ100 liners at Chinese market was signed. Another joint projects have been announced. Last year IAC and representatives of Chinese aviation authorities also signed an agreement for unifying standards and recognizing Russian type certificate. When should we expect the first results of these agreements?
– We are working closely with the Chinese colleagues. As you know, a memorandum between Russian Helicopters and AVIC for joint development of a heavy helicopter was signed. The schedule will depend on the readiness of the parties to sign the contract. The second phase of the project for development of a wide-body aircraft should be completed, and we hope that the agreement will be signed this year.
As for Superjet – Russian Direct Investment Fund and the Chinese party have signed an agreement for leasing of up to 100 aircraft. We think that the jets will be, first of all, leased to Chinese carriers. The next step is validation of SSJ100 type certificate in China. Chinese aviation authorities and IAC are negotiating the matter. Another meeting between the parties will be held soon. We hope to validate the certificate this year.
– Please tell us about the recent deal made in Egypt.
– In late May meetings with the participation of UAC, Ministry of Civil Aviation of Egypt and the country’s national carrier Egypt Air were held with the support of Russian Ministry of Industry and Trade. Egypt is going to sign the contract for delivery of 12 jets of the type (with an option of 12 more aircraft) soon. The Russian party did its best to present our aircraft in the best possible way; two aircraft were showcased – business and basic passenger versions.
The negotiations will continue, but as far as I know, UAC has managed to spark the interest of the Egyptian colleagues. All the more so the Russian party is ready to discuss not only deliveries of the aircraft, but also establishment of a regional center in Egypt responsible for provision of MRO services, personnel training and, possibly, it will participate in remarketing of the aircraft currently operated by Egypt Air, which may be replaced by Superjets. Analysis prepared by the company’s specialists shows that SSJ100 is optimal for the Egyptian carrier’s route network.
– Lets talk about import substitution. It is a serious problem in terms of both SSJ and MS-21 programs, what are we able to implement and to what degree?
– In the network of the Federal Target Program we have been working on it for quite some time. UAC and Russian Helicopters have approved performance specifications for this work. First of all, this refers to MS-21 project. Rostec State Corporation, parent company of KRET and Technodinamika (former Aviation Equipment) is working on it. This year KRET presented its solutions. Irkut Corporation and UAC understand which solutions they are going to use and when.
In addition, a plan for import substitution has been developed; it is related to other components installed on all types of aircraft and helicopters. We think that both a customer and a contractor must finance its implementation.
We have companies of the aircraft, transport machine building and auto industries, which are ready to become suppliers of the aircraft industry using their own funds and taking into account all the standards and regulations. Our objective is to create conditions for cooperation between the aircraft industry’s enterprises and indigenous suppliers.
A manufacturer must develop its own system for assessment of suppliers both in terms of technologies and financial situation. Once the system is developed and assessment is complete, the manufacturer must elaborate a program for development of the supplier (in cooperation with the latter), which will be implemented in close cooperation.
Russian Ministry of Industry and Trade is working on this problem. We are preparing a program for development of suppliers of the aircraft industry, and deciding what measures need to be developed at the federal, regional and corporate levels in order to make this mechanism work.
Take for example Airbus, employees of its suppliers are working at the Airbus’ assembly line, thus they are also responsible for the quality of the assembly; on one hand, it is a division of responsibility, on the other hand – cost optimization and increase of labor productivity of its own employees. In order to use this model they have traveled a long way. We should learn and use the best practices.
One more important question, as you remember, we discussed it at the congress of Russian aircraft manufacturers in Ulyanovsk, – standards. As you know, in accordance with the law “About standardization”, which should be passed this year, industry standards will be abandoned in 2025. And we must define, which of the standards are out of date and must be removed, and which ones should be transformed into state standards or corporate ones. It is a very important problem and we have already started working in cooperation with the Federal Agency on Technical Regulating and Metrology (Rosstandart).
– Our readers often ask: will there be any problems with foreign partners taking part in MS-21 project due to difficult political situation? And are there any difficulties connected with suppliers involved in SSJ project?
– Today the program is on schedule and there are no delays, all the suppliers confirm their readiness to fulfill their obligations. The ministry, Irkut Corporation and UAC are monitoring the situation. About 70-80% of the assembly line has already been installed at Irkutsk Aviation Plant, the equipment is being adjusted and fine-tuned. We expect to see the broadcast of joining the two fuselage sections of MS-21 at MAKS-2015 airshow; the first aircraft should be rolled out this year. At present the testing of prototypes is being carried out in order to gain permission for performing the maiden flight. We believe that the maiden flight will be performed in the first half of 2016.