Russian industry struggles to fly

At Russia's first civil aviation show this week, aircraft designers showed off their latest offerings.

When the United States needed somebody to retrieve a damaged US Navy EP-3 Orion re- connaissance aircraft that crashed in China last year, it turned to a Russian airline.

Flying the giant Soviet-built Antonov An-124, the world's largest operational transport, the Polyot company from the Volga city of Ulyanovsk was able to haul the huge $80 million American plane home in a single trip.

It's stories like that are fueling optimism in the Russian aviation industry.

Despite a decade-long slump that saw thousands of engineers and specialists leave the industry, executives of top Russian design bureaus say they still have plenty of ambitious projects in their cupboards. With Russian airlines carrying about 15 percent more passengers every year, and companies looking to replace their ageing Soviet-era fleets, many believe that formerly world-class Russian aircraft producers could be poised for a comeback. "Our new offerings are up to global standards and comparable to the products of Boeing, Airbus, and other Western companies," says Mikhail Bakharev, head of the export department at Ilyushin, one of Russia's most famous aviation names. "We have recovered from the post-Soviet crisis, and are ready to work."

Russia's first civil aviation show, now under way at Domodedovo airport just outside Moscow, has brought together most of the country's aircraft industry leaders to talk up their wares. But despite the hopeful atmosphere, it's hard not to notice a touch of desperation just below the surface. Most of the "new" aircraft models on display are actually late-Soviet-era designs which independent experts say are arriving on world markets at least a decade late.

Getting off the ground

"Russian producers can carve out a place, but they have to make a very swift transition to the market mentality," says Alexei Komarov, editor of Air Transport Review, a Russian industry journal published in partnership with Aviation Week. "If they don't grab this chance within a couple of years, they can forget about it entirely."

Among the more interesting products from Soviet drawing boards is the An-124's big brother, the An-224, an airborne behemoth capable of lugging a 250-ton payload around the world with two complete crew shifts living on its comfortable upper deck. Then there is the world's only jet-powered flying boat, the Beriev Be-200, which producers say could revolutionize fire fighting and air-to-sea search and rescue. On display at the air show is the Tupolev Tu-334, a mid-size passenger jet whose makers claim could compete head-to-head with comparable products of Boeing or Airbus. Unfortunately, only a single flying prototype of each of these planes exists, and no one knows when the companies will be able to afford more.

"Without orders, nothing can happen," says Alexander Tafeyev, an executive of Klimov corporation, a leading aircraft engine builder. "The Soviet military used to be the main client for our whole industry, but now the armed forces buy almost nothing. Even when you have great designs, it's hard to sell them on the market."

Experts say Russia's chances on global markets are slim to none.

Apart from selling a few new Tupolev Tu-204 airliners to Egypt last year, no big carriers are showing interest. Even the giant Aeroflot, which flies most of the Russian industry's international routes, plans to purchase mostly US and European planes, citing the inability of Russian models to meet new international standards for noise, pollution and safety.

Russian producers are hopeful that domestic airlines will kick-start their industry by ordering the new products. Steep tariff barriers imposed by the Russian government against imports, and much lower production costs in Russia, make their planes a bargain, they say. About 70 percent of the Soviet-era planes currently serving domestic routes are said to be due for retirement. Meanwhile, airlines are consolidating, following the post-Soviet chaos that saw the state monopoly Aeroflot broken up into hundreds of tiny, inefficient and sometimes downright dangerous "babyflots."

"There were some airline companies that had only one plane, one crew, and the object just to make some money," recalls Sergei Rudakov, manager of Domodedovo airport.

The number of domestic carriers has plunged from 328 in 1999 to 267 this past year and could be cut in half when new flight safety standards are imposed by the government next year. Experts say this means fewer but bigger companies, who will be interested in purchasing new planes.

A financing issue

"Russian planes that correspond to modern standards are coming on the market just as Russian carriers capable of purchasing them are emerging," says Sergei Rudakov, manager of Domodedovo Airport.

But airline officials tell a different tale. They say Russian planes are fine for domestic use, but the Russian government won't help with financing, and Russian aircraft manufacturers don't follow through with post-purchase servicing and maintenance.

"The only thing the Russian government does is make it difficult to buy foreign planes," says Andrei Martirosov, director of Tyumen Avia Trans, a large regional carrier in Siberia. Despite the hurdles, he says the airline is planning to purchase Canadian-made de Havilland Dash-8 short-range turboprops to replace the 12 decaying Tu-134's it presently uses on local routes. "Foreign companies offer much better packages, including help with financing and full servicing for the life-cycle of the machine," says Mr. Martirosov. "Our aircraft makers still think they're state bureaucrats, and have no idea how to do these things."

The solution might be for Russian aircraft makers to share their design prowess with Western companies, in exchange for commercial expertise, high-tech and entree to global markets.

But so far only one joint venture of this sort exists, a feasibility plan by the Russian industry leaders Sukhoi and Tupolev to build a mid-size regional passenger plane in conjunction with the US aviation giant Boeing.

"If Russian aircraft companies can find terms of integration with Western firms, they can still manage to be a major player in the future aviation world," says Mr. Komarov.

"But time is running out for them. It's not enough to just build a decent plane. They need to make big changes to the way they do business before the present window of opportunity closes forever."

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