russia & cis observer july 2012

Russia&CIS Observer№ 1 (34) july 2012

Russia&CIS Observerwww.ato.ru/rco

RUSSIA/CIS OBSERVER №�1�(34)�JULY 2012 1

1212

88

2222

22

•AEROSPACE�INDUSTRY

Irkut is contracting key MS-21

suppliers ..............................................2

Ansat helicopter gets

a new flight controls ............................4

Interview with Andrey Sharnin,

Progresstech Deputy

General Director ................................6

•DEFENSE

Russian arms export:

the end of a «golden age»? ....................8

New applications for

Phazotron-NIIR radars......................11

The Russian Defense Ministry continues

its UAV procurement efforts ..............12

•AIR�TRANSPORT

More passengers,

more empty seats................................16

Russian MRO providers

gain strength ......................................22

Ilyushin Finance eyes regional

leasing market ....................................23

Top 20 Russian airlines in 2011 ..........24

•BUSINESS�AVIATION

The Russian business aviation market

is recovering ......................................25

•SPACE�BUSINESS

Reviewing Russia’s space strategy ......27

Russia/CIS Observer Quarterly is produced by:

Publisher

Evgeny Semenov

EditiorinChief

Maxim Pyadushkin

Art�Director

Andrey Khorkov

Commercial�Director

Sergey Belyaev

Advertising�Manager

Oleg Abdulov

Translated�By:

Andrey Bystrov

All rights reserved.

No part of this publication may be

reproduced in whole or in part without

the written permission of

A.B.E. Media.

©�№�1�(34),�July 2012Tel./Fax: +7 (495) 933 0297

Correspondence:

P.O. Box 127, Moscow, 119048, Russia

2727

Russia &CIS Observerfrom the publisher of № 1 (34) ju ly 2012

Visit our website at www.ato.ru/rco

RUSSIA/CIS OBSERVER №�1�(34)�JULY 20122

AEROSPACE INDUSTRY

Maxim�Pyadushkin

After a protracted period of nonews about the effort to de-velop Russia’s new IrkutMS-21 short- to medium-

range passenger aircraft, the programnow appears to be gathering pace. Irkut,a subsidiary of United AircraftCorporation (UAC), signed a final agree-ment in early June with the US enginemaker Pratt & Whitney to select thePurePower PW1400G turbofan engine asthe sole foreign-made powerplant for thefuture aircraft. Also in June, Bombardiersubsidiary Short Brothers was identifiedas the supplier of the engine nacelle.

The latest development indicates thatthe MS-21 program has moved to ink-ing firm contracts with the key suppli-ers that were selected back in 2009 г.The first deal of a kind was the contractsigned in November 2011 with NizhnyNovgorod-based Gidromash that willdevelop and manufacture landing gearcomponents for the MS-21.

According to industry sources, theagreement with Pratt & Whitney envis-ages the development of engines for twoplanned members of the MS-21 family,

the 150-seat MS-21-200 and the 180-seat MS-21-300. The only differencebetween the two aircraft’s powerplantswill be in the power settings within the11-14.5 t (25,000-32,000 pound) range.The largest version, the 212-seat MS-21-400, will require a different, morepowerful engine. The first PW1400Gprototype will be assembled this year;Irkut expects to first fly it on an MS-21prototype in 2015, followed by the serv-ice entry in 2017.

The next step was the agreement forpromotion of MS-21 variant with aRussian PD-14 engine signed by UACand Russian Technologies Corporation.The first customer that selected this ver-sion was Aviation Capital Services, a sub-sidiary of the Russian Technologies, thatconverted into a firm order its option for35 such aircraft at the end of June.

PD-14 design is currently under de-velopment at Perm-based Aviadvigatel,a part of United Engine Corporation,also controlled by RussianTechnologies. Aviadvigatel started test-ing a PD-14 technology demonstratoron June 9. The company’s CEO andchief designer Alexander Inozemtsevsays tests on an Il-76 flying testbed will

begin in 2014. The engine’s certifica-tion is now scheduled at 2015; its serialproduction is to be launched in 2017.

The baseline PD-14 model with 14tons of thrust, intended for the 180-seatMS-21-300 airliner, will be the firstfrom the new turbofan engine family inthe thrust class of 9-18 t. The downrat-ed 12.5-ton PD-14A is being proposedfor the MS-21-200, and the uprated15.6-ton PD-14M — for the MS-21-400. The PD-14 is a two-shaft bypassengine with an unmixed exhaust. Thedesigners aim for a 12-16% fuel econo-my over the existing equivalents.

According to an Irkut source, thecontracts with the key MS-21 suppliersshould be concluded by the end of2012. This program involves leading in-ternational specialists, includingRockwell Collins (avionics), HamiltonSundstrand (APU, anti-icing, and airconditioning), Intertechnique (fuel, in-ert gas and oxygen systems), and Eaton(hydraulics).

The MS-21 orderbook now stands at235 firm orders and commitments. Themajor customers are Russian state-controlled lessors. In 2011 AviationCapital Services ordered 50 aircraftwith the delivery in 2017-2022, thenew batch of 35 airliners is planned for2022-2025. These airframes will be letto Aeroflot for an operational leasingunder the framework agreement signedin August 2011. Other MS-21 cus-tomers include the lessors IlyushinFinance Co. (28 firm orders and 22 op-tions) and VEB Leasing (15 and 15).Irkut also has a tentative order for threeaircraft from Nordwind Airlines withan option for another two; Irkutsk-based IrAero Airlines has ordered 10.Malaysian launch customer CrecomBurj Resources has signed a contractfor 50 MS-21 airliners in the summerof 2010.

Gaining paceThe Irkut MS-21 developer is contracting key suppliers.

In June Irkut received first order for MS-21version with Aviadvigatel PD-14 engines

ATO.ru


AEROSPACE INDUSTRY

Ansat helicopter getsa new flight control system

Maxim�Pyadushkin

Although Russian helicoptermanufacturers have a his-torically strong position onthe heavy rotorcraft mar-

ket, they do not leave attempts to ad-vance with smaller models. TheRussian Helicopters holding company,the umbrella organization for thiscountry’s rotorcraft designers andmanufacturers, is developing the re-en-

gined 3,600-kg Kamov Ka-226T coax-ial-rotor helicopter, and has also ven-tured the program to revive productionof the piston-engine Mil Mil-34S.

The third product in this filed is thelight Ansat helicopter developed by theholding company’s subsidiary KazanHelicopters. Kazan is known as theproduction plant for Russia’s best-sell-ing medium helicopters of the Mil Mi-8/17 family; it also takes part in theprogram to develop the new 15,600-kgMTOW Mi-38 transport helicopter.

At the end of April, KazanHelicopters unveiled a new version ofAnsat with a hydromechanical flightcontrol system instead of the baselineversion’s fly-by-wire controls.According to Kazan Helicopters CEOVadim Ligay, two prototypes have al-ready been assembled: one for the

ground tests that have been on since2011, the other for flight trials.According to the designers, traditionalhydromechanical controls could sim-plify promotion of the helicopter to thecommercial market since the basic ver-sion’s fly-by-wire system faces certifi-cation limitations.

The 3,300-kg MTOW twin-engineAnsat was developed in Kazan in the1990s and became the first Russian fly-by-wire rotorcraft design. It was also

the first in this country to get a foreignpowerplant – a pair of 630-hp PW-207K turboshafts. This light helicoptercan carry up to nine passengers or1,300 kg of cargo inside the cabin, andhas the maximum range of 635 km.Ansat made its first flight in August1999; it was awarded a Russian ARMAK type certificate in 2004.

Because of its fly-by-wire controls, inearly 2000s the Russian Air Force se-lected Ansat as its new training helicop-ter. Deliveries of the Ansat-U trainingversion to the Russian military startedat the end of 2010. At present the AirForce Training Center in Syzran hasabout a dozen of the type.

Ansat’s commercial record howeverwas not as successful — ironically, dueto the same fly-by-wire controls. Fivehelicopters were delivered to South

Korea in the early 2000s for the localforest service and police force.Problems began when one of themcrashed into a wooded area in 2006,killing the pilot. “After this incident thecertification requirements for fly-by-wire helicopters have been tightened,”explains Ligay. The Russian aviation au-thority issued a new type certificate forthe improved Ansat-K variant in 2010.However, the modified version was notallowed to carry passengers, which seri-ously limited its commercial prospects.

According to Ligay, full certificationof the Ansat baseline will only be possi-ble once the certification requirementsare determined for helicopters with fly-by-wire controls. This is why the Kazandesigners decided to switch to tradi-tional hydromechanical controls in or-der to simplify certification of Ansat asa passenger transport. According toKazan sources, the flight control sys-tem replacement does not affect thehelicopter’s weight and performance.

Ligay expects the new Ansat versionto be certified by the end of 2012, afterwhich the sales campaign will be offi-cially launched. The manufacturerplans to eventually reach productionrates of 20 airframes per year.

In parallel, Kazan Helicopters islooking into further evolution of Ansat.A few years ago it showcased the tan-dem-seat Ansat RC military reconnais-sance version, but now the company’sefforts seem to have shifted to astretched variant. Kazan is currentlyworking to significantly upgrade thismodel, bringing its MTOW up to 4,500kg. Ligay says this variant will requirenew engines; he does not rule out thepossibility of using the 800-hp VK-800V turboshaft which is under devel-opment at the St Petersburg-basedKlimov company.

This Ansat variant with a hydromechanical flightcontrol is to be certified by the end of 2012

ATO.ru

—�Progresstech�has�experience�workingwith�many� leading� international� aero-space�manufacturers.�what�projects�areyou�currently�involved�in?

— Our company continues coopera-tion with Boeing on a number of theirprograms, including the Boing 787 Dre -am liner model and its future modifica-tions. In cooperation with Spirit Aero -Systems we provide support for the AirbusA350 XWB program and for wing designand manufacturing for Gulfstream G280and G650 aircraft. Jointly with Spirit weare actively involved in designing pyloncomponents for the Bombardier CSeriesand Mitsubishi Regional Jet airliners.

Apart from these current projects wehave also been involved in supporting

the Bombardier Learjet 85 program.Domestically, we continue to activelyparticipate in the Sukhoi Superjet 100program. Our other priority in theRussian aerospace sector is the projectto create the MS-21 single-aisle family,which we also hope to take part in.

Our activities are not confined to fixed-wing aircraft. As part of an effort to diver-

sify our competency we have formed ateam of specialists with prior rotary-wingexperience; they are working successfullyon a number of Kamov commercial prod-ucts. Our cooperation with Kamov startedwith the program to drastically modernizethe Ka-226 light helicopter. AnotherKamov commercial product we are in-volved in is the Ka-62 medium helicopter.—�That�makes� an� impressive� list� of

projects.�how�do�you�avoid�conflicts�ofinterests�in�working�with�so�many�manu-facturers?

— You have raised a very good topic;aerospace integrators are extremelystrict when it comes to the possibility ofconflicts of interest. In my experience,such conflicts are avoidable for as long

as you observe the customer’s require-ments to the letter with regard to confi-dentiality and protection of intellectualproperty. The only solution here is tophysically separate the different engi-neering teams and the information re-sources they use. We do not hold a mo-nopoly on this knowledge; foreigncompanies practice a similar business

model, providing a range of engineer-ing services to a variety of customers -both integrators and Tier 1 suppliers -rather than working with a single client.—� what� is� the� secret� of� Progress�-

tech’s�global�competitiveness?— I would mention the following two

most important factors of our competi-tiveness. First, we employ qualified en-gineering personnel that have under-gone additional training in order to beable to provide quality services to a va-riety of customers. Second, Progress -tech offers turnkey solutions.

I would like to specially emphasizethe high qualifications of our special-ists, who were educated at the topRussian and CIS universities.

Progresstech has now reached a newqualitative level; apart from providinghigh-quality engineering personnelwho are capable of completing the mostcomplex tasks, we are in a position tooffer our customers a range of businessmodels for cooperation.

This�interview�was�preparedby Maxim Pyadushkin


AEROSPACE INDUSTRY

Russian engineering expertisefor the global aerospaceindustry

ThE RUSSIAN COMPANY PROgRESSTECh IS ThE LARgEST PROVIDER OF AEROSPACE

ENgINEERINg SERVICES IN EASTERN EUROPE.�SINCE ITS ESTABLIShMENT IN 1999ThE COMPANY hAS TAkEN PART IN VIRTUALLY ALL ThE MAJOR INTERNATIONAL AIRCRAFT

DEVELOPMENT PROgRAMS.� IT hAS OFFICES IN ARMENIA AND UkRAINE,�AND ALSO

RUNS A JOINT VENTURE wITh SPIRIT AEROSYSTEMS OF wIChITA,�USA.�ANDREYShARNIN,�PROgRESSTEChDEPUTY gENERAL DIRECTOR FOR BUSINESS DEVELOPMENTAND AEROSPACE PROgRAMS,�ShARED wITh RUSSIA & CIS OBSERVER ThE SECRET OF

hIS COMPANY'S SUCCESS.

“We are in a position to offer our customers arange of business models for cooperation”

Pro

gress

tech


DEFENSE

konstantin�Makienko

The nominal value of Russianarms exports continued togrow in 2011, reaching 13.2billion dollars against the

previous year’s 10.4 billion. Never -theless, there are hints at a systemic crisison this front. Russia lost three importantarms procurement contracts last year. Itdid not even get shortlisted in the IndianMMRCA tender for 126 medium multi-role fighters; it also lost the Indian con-tract for 22 combat helicopters; and per-haps most devastatingly, Moscow failedto sell Kilo-class submarines to theIndonesian Navy, which opted insteadfor three examples of the obsoleteKorean Project 209 design built under aGerman license. Each of these failureshas its own explanations, but taken to-gether they indicate an accumulation ofnegative factors affecting the prospects ofRussian arms exports.

A more precise indicator of somethingbeing quite wrong in Russia’s arms ex-porting business was last year’s reduc-

tion in the size of the orderbook, for thefirst time since 1999. The value of orderslanded by the Rosoboronexport state-owned arms trader shrank from $38.5billion as of late 2010 to $32.5 billion bythe end of 2011. According to MikhailDmitriev, former head of the FederalService for Military TechnicalCooperation, the overall value ofRussia’s standing export contracts re-duced from $48 billion as of late 2010 to$40 billion in late 2011.

It is clear that for the first time inyears, the value of the new contractssigned in 2011 proved lower than thevalue of deliveries made that year. Wemay assume with confidence that thetrend will continue into 2012, when theoverall value of deliveries may reachabout $14 billion thanks to the plannedhandover of the aircraft carrierVikramaditya and two Talwar-classfrigates to India, and also the recentlycompleted delivery to that country of aProject 971I submarine. It is highly un-likely that new contracts will be signedto a commensurable total sum, mean-

ing that the value of the Russian exportorderbook will continue to decrease. Inseveral years from now this trend willresult in shrinking deliveries.

Russia’s traditional markets:saturation, reorientation,and embargoesThe first set of factors affecting Russia’spositions as a global arms exporter is re-lated to the situation on Moscow’s tra-ditional export markets.

China, which remained the largestcustomer of Russian armament untilabout 2005-2006, has considerably re-duced purchases of Russian weaponrydue to the continuing development of itsdomestic defense industry. In 2000 and2001, China accounted for 60% in theoverall volume of Russian arms export;at present the figure hardly exceeds 4%.China these days is almost exclusivelyinterested in Russian aero engines androtary-wing aircraft in various roles.Even though Chinese interest in thenewest Russian armament develop-ments, including Su-35S fighters and S-

Russian arms export:the end of a «golden age»?

Leonid Fae

rberg / Transp

ort-P

hoto.com


DEFENSE

400 SAM systems, has somewhat re-in-tensified of late, the volumes of potentialcontracts from Beijing will never againreach the levels of the 1990s or even theearly 2000s. Furthermore, China is in-creasingly competing against Russia onthe international arms market.

The competition in the Indian armsmarket is getting ever fiercer. All the ma-jor arms exporters except China are cur-rently represented in India. The country’sgrowing financial capabilities promptNew Delhi to increasingly shift its inter-est to the higher price segment, in whichRussian products loses the competitionto hi-tech Western and Israeli offerings.

The recent wave of Arab Spring revo-lutions has cost Russia the promisingLibyan market. The value of recentlysigned (but never implemented) armscontracts with Tripoli stands at 1.3 bil-lion euros; together with the potentialcontracts, Russia’s overall losses reach$4.5 billion. It is quite possible thatRussia will similarly lose the Syrianarms market; the standing orders fromDamascus are valued at $3.5-$3.8 bil-lion. Interestingly, the Arab Spring hasboosted Algerian demand for Russianarmament, which may eventuate in thesigning of contracts equal in volume tothe 2006 package. On the other handAlgeria, with its secular nationalist mil-itary regime topped by an authoritariangerontocracy, is itself a possible candi-date for the next Arab Spring victim.

President Dmitry Medvedev’s deci-sion to join the international sanctionsagainst Tehran lost Russia the Iranian

arms market worth up to $1 billion ayear. The economic hardships and un-certain political future of Venezuelamake the possibility of new large con-tracts from Caracas quite dubious.

As we can see, Russia’s traditionalarms export markets are either oversat-urated, partially or completely reori-ented to alternative suppliers, or inac-cessible due to international sanctions.The only remaining customers with asteady interest in Russian arms areVietnam and, to a lesser extent,Algeria; together these countries maypurchase $2 billion to $3 billion worthof Russian arms a year. Combined withIndian contracts and the demand fromother customers Russia could be annu-ally exporting weapons to the tune of$6-8 billion — much lower than thelevels of the previous years.

Competitive offers: a three-year pause?Another negative factor is that Russia’sprospective weapons systems may onlybe offered for export in three to fiveyears from now. In some cases this is dueto the continuing development efforts,whereas in other cases Russian defenseenterprises have their production ca-pacities filled with contracts in the in-terests of the national armed forces.

In the heavy fighter segment, the cur-rent Su-30MK2 export fighter hasgrown too obsolete to be marketed suc-cessfully. The Su-30MKI/MKM/MKAfamily is more recent but also requiresmodernization. Only one more large-

scale delivery of these aircraft is stillpossible: India is set to buy an addition-al 42-ship batch of Su-30MKI fighters.The program to develop the more ad-vanced Su-35 fighter will take anotherthree to four years to complete. In addi-tion, the international heavy fightermarket, limited to a relatively smallnumber of countries, is fairly saturated,and Russia currently has nothing com-petitive to offer in the medium and lightfighter segments.

In the military transport aviation seg-ment, production of the Ilyushin Il-76transport, which still enjoys a high mar-ket demand, will not be launched inUlyanovsk for the next two to threeyears. This production facility will mostlikely be quite busy working on domes-tic orders. An upgraded version of theIl-76, known as the Il-476, will have aprice tag of up to $100 million, whichwill limit its chances on the interna-tional markets.

New development paradigmfor Russia’s militaryaviation industryOn the other hand, a possible reductionin the size of arms exports may only af-fect the Russian defense industry interms of revenues, since the profitabilityof export contracts is normally muchhigher than that of domestic orders. Infact, domestic demand for weaponry of-ten grows at a very high rate, with annu-al growth in the size of contracts for in-dividual systems sometimes reaching300%. Overall, under the state arma-ment program through to 2020, some ofthe Russian defense enterprises willhave to ramp up their output by 10 timesin order to keep up with the orders.Russian aerospace manufacturers, forexample, in the past months alone re-ceived Defense Ministry contracts for92 Su-34 frontline bombers, 30 Su-30Mfighters, and 24 MiG-29K shipbornefighters. The export business model,which was driving the domestic defenseindustry for most of its post-Soviet his-tory, is now getting replaced by a moretraditional paradigm, under which thenational armed forces act as the defenseindustry’s primary customer.

$ m

illio

n

2006 2007 2008 2009 2010 2011

Total deliveriesDeliveries via Rosoboronexport

0

3000

6000

9000

12000

15000

2006 2007 2008 2009 2010 20112

Total deliveriesDeliveries via Rosoboronexport

2006 2007 2008 2009 2010 2011

RUSSIA’S DEFENSE EXPORT

Source: CAST


DEFENSE

—�which�area�of�business�is�particularlyimportant�to�Phazotron-NIIR�today?

— This is a tricky question. From thecommercial standpoint the most im-portant activities would be the oneswhich have the potential to bring profit.From the scientific standpoint we con-centrate on meeting, or better yet ex-ceeding, the design specifications.Good products sell themselves.

In the field of aviation applicationsour top priority at the moment is de-veloping the Zhuk radar family for theMiG-29SMT and MiG-29K fighters,and also for the upgraded MiG-29UPG variant. The second most im-portant area of work is related to ro-tary-wing aircraft. The Arsenyev-based Progress factory manufacturesKamov Ka-52 helicopters, which arefitted with the Phazotron-NIIRArbalet millimeter-wave radar. Thiscontract is very profitable for our cor-poration.

Another helicopter-related pro-gram is to upgrade the Ka-27M heli-copter with our Kopye-A radar; thisdesign is currently undergoing flighttests, we are aiming to complete thetrials in August, after which seriesproduction should start. Kamov plansto develop the Ka-27PS SAR versionof the helicopter, which would alsoneed a radar.

As for maritime applications, whichis a new field for us, we began tests of aship-based AESA radar in June. Theradar ensures total situational aware-ness around the ship and provides itsartillery systems with target designationagainst low-flying aircraft and anti-shipmissiles.

—�Phazotron-NIIR�has�also� startedwork�to�develop�a�radar�for�the�YakovlevYak-130�combat�trainer.

— This is correct, it was decided tofit the Yak-130 with a radar so it couldbe used as a light strike aircraft, armedwith guns or unguided ordnance,against terrorists and smugglers. Thearmed version could be offered to thosecountries which currently buy the base-line Yak-130 trainer. Since installingAESA radar would considerably in-crease the price of the aircraft, the de-cision was made to use a centimeter-wave design with a mechanicallyscanned slotted array. We have starteddevelopment of such a radar, currentlyknown as FK-130. Flight tests are ex-pected to begin in 2013.—�what�about�your�key�product,� the

zhuk-AE�AESA�radar?— We currently are building a Zhuk-

AE example with a full-scale, fullyfunctional AESA for the MiG-35 fight-er. Its assembly will be completed inAugust. We have seen a change of hearton the part of the customer: previouslythe Russian Air Force did not consideran AESA-equipped MiG-35 but now,under the government armament pro-gram, deliveries of this radar are to be-gin in 2014. This is something we havelong been looking forward to — havingRussian warplanes fitted with the mostadvanced radar possible.

We have effectively completed devel-opment of this variant, the only thingleft now is to launch its series produc-tion. I am already beginning to talk topersonnel, preparing them for a changein approach to AESA technology. Weshould change the design of the trans-

mit/receive modules by moving to a 3Dceramic manufacturing process; thiswould dramatically reduce the size ofthe radiating surface. Many enterprisesin Russia are prepared to manufacturesuch modules. I hope that we will starttheir development this year. A furtherstep would be to move on to digital AE-SA technology. It provides numerousadvantages, and from there it would beeasier to transition to conformal AESAradars that could be made to better fitwithin the outlines of the fuselage. Weare conducting active research in thisfield because conformal radars wouldbe very well suited for both fixed-wing,rotary-wing and maritime applications.If we see this technology through tomass production we will be able tomake it sufficiently reliable and bringits cost down, because cost is often avery important factor.

This�interview�was�preparedby�Maxim�Pyadushkin

New applications forPhazotron-NIIR radars

YURY gUSkOV,� gENERAL DESIgNER OF RUSSIA’S LEADINg RADAR DEVELOPER

PhAzOTRON-NIIR,�TOLD RUSSIA & CIS OBSERVER ABOUT ThE APPLICATIONS FOR ThE

CORPORATION’S PRODUCTS AND OUTLINED ThE FUTURE OF RADAR TEChNOLOgY.

Phaz

otron-N

IIR


DEFENSE

Seeking out tacticalunmanned capabilityThe Russian Defense Ministry continues its UAV procurement efforts

Denis�Fedutinov

Russian President VladimirPutin in mid-June said thecountry must develop arange of new unmanned

aerial vehicles (UAV). Consequently,on top of purchasing foreign UAV de-signs several years ago the RussianDefense Ministry will now shop for un-manned systems domestically.

It appears that in terms of mini-UAVrequirements the ministry has settledfor the systems readily available on thedomestic market. This class is currentlywell served by Russian manufacturers.

In the MALE (medium altitude,long endurance) UAV class, two pro-grams were started in Russia last year,led by St Petersburg-based specialistTransas and by Kazan-based Sokoldesign house. Transas is developing asystem weighing up to 1 t, whereasSokol is working on a heavier vehiclewith up to 5 t MTOW. The companiessigned a strategic partnership agree-ment to ensure cross-platform com-monality of the control system andmission equipment. Flight tests ofboth vehicles are set for 2014; deliver-ies should start in 2016.

There is however one more class ofunmanned aerial systems, fitting in be-tween mini-UAV and MALE: tacticalvehicles. It is exemplified by the AAIRQ-7 Shadow. The Defense Ministry’sprocurement plans for such systems areas yet unclear. The Russian military ob-viously needs the capability, which can-not be provided by the several obsoletedesigns currently in service. RussianUAV developers have analysed thecombat experience of foreign countriesthat used tactical unmanned aircraft in

various military conflicts of the pastseveral decades. The results of thisstudy indicate a high effectiveness ofsuch systems.

The Defense Ministry has two op-tions in procuring tactical UAV: it maydecide to purchase some of the sys-tems available on the market, or itcould request the industry to develop anew one to its specifications. The lat-ter seems to be the more probable sce-nario. In this case the ministry willhave to first identify the designer forthe new UAS. There are several op-tions to choose from.

Possible contendersOne possible candidate is Vega RadioEngineering Corporation, which stillformally leads all UAV development ef-forts in Russia. On the other hand,Vega’s reputation could not be de-scribed as exactly positive: the Defense

Ministry certainly has not forgotten thecorporation’s previous failed attempt tocreate the Tipchak tactical unmannedsystem, a design developed by itsRybinsk-based subsidiary Luch.Funded by the Russian military, thesystem received negative feedback frominitial operators.

Another Vega subsidiary, the Kulonresearch institute, could take part in thedevelopment of tactical unmanned air-craft. Back in the Soviet times Kuloncreated the Stroy-P system equippedwith Pchela remotely-piloted vehicles.On the other hand, the Vega manage-ment might decide to prevent competi-tion between its subsidiaries.

Several companies which are part ofRussia’s United Aircraft Corporation(UAC) stand a chance to get the poten-tial UAV development contract fromthe Defense Ministry. The most proba-ble candidate is Tupolev, one of

The Russian military are now choosingbetween domestic UAV designs and foreignproducts like this Forpost unmanned aircraftbased on IAI Searcher Mk II model

ATO.ru


DEFENSE

Russia’s UAV pioneers. In the Soviettimes Tupolev designed a range of largeunmanned aerial vehicles, includingthe Reys, Reys-D, and Strizh models.Some of these aircraft continued serv-ice with the Russian army until quiterecently. Tupolev attempted to developnew unmanned systems in the mid-2000s; at one of aerospace exhibitionsthe company demonstrated a project tobuild a 200-kg tactical UAV. The proj-ect never took off owing to financialdifficulties at Tupolev.

Irkut Corporation, another UACsubsidiary, also has experience devel-oping tactical unmanned systems, in-cluding Irkut-200, which was initiallymeant to use ADS Aerostar airframe.The Israeli manufacturer subsequentlypulled out, forcing Irkut to create anunmanned vehicle on its own. Thiscircumstance considerably affectedthe development deadlines. The un-certain future of the program seems tohave influenced Irkut’s decision lastyear to delegate all UAV work to itssubsidiary Irkut Engineering. Thismove suggests that the Irkut-200 pro-gram will now be funded solely fromthe corporation’s budget, which is notgoing to improve Irkut’s chances ofgetting the Defense Ministry’s con-tract for the development of a futuretactical UAV.

Transas, a relative newcomer to theUAV market, merits a special mention.Originally a specialist in training simu-lators, the company ventured into thefield of unmanned systems several yearsago and quickly created a range ofDozor unmanned aircraft. Transas’most successful model, Dozor-100, is atactical UAV.

Modernization of Aviation Com -plexes (MAK) is another simulationspecialist that has diversified into UAVdevelopment. In the past few yearsMAK has repeatedly showcased itsshort-range Colibri UAV at varioustrade shows; at the MILEX 2011 exhi-bition in Minsk the company demon-strated the Chibis tactical UAV. Flighttests were originally set for autumn2011 but the current status of the Chibisprogram is unknown.

Izhevsk-based ZALA company,known for its mini-UAV solutions, at-tempted several years ago to break in-to the larger unmanned class by pro-posing two tactical unmanned proj-ects of 70 kg and 200 kg MTOW.However, practise shows that no mat-ter how enthusiastic, a companywhich originally specializes in whatcan essentially be described as littlemore than RC models will usuallylack the resources for creating morecomplex systems.

In theory other contenders mayemerge from among businesses withoutprior tactical UAV experience – butthis is exactly the circumstance whichmakes their chances of seriously con-testing the possible contract fairly slim.

Possible requirementsIt would be safe to assume that in de-signing the specifications for a futuretactical UAV the Russian DefenseMinistry will be guided by the charac-teristics of existing foreign systems ofthe same class.

High reliability could be one of theprimary requirements. In terms of oper-ational specifications the future systemcould be expected to operate in harshclimates, in the temperature range of -40 to +50 degrees Celsius. It is highlylikely that the system will be expected to

operate from unprepared sites, implyingthat catapult launch and parachute-as-sisted recovery will have to be supportedat least as an option. Another importantcapability that will probably be requiredis navigation using both the GPS andRussia’s Glonass systems.

The requirements are likely to in-clude a high quality of imagery trans-mitted by on-board sensors, which isessential for target identification. Theprecision of target designation is alsovery important. Other capabilitiesmight be a plus, including intelligentautomated data processing, automatictarget recognition, automatic mapstitching, etc.

Another important requirement is forthe vehicle to have a low acoustic, ther-mal and radar signature. It is possiblethat the vehicles will be required to car-ry IFF transponders, and also ADS-Bunits to enable operations in airspaceshared with other UAV and mannedaircraft. The future tactical UAV willprobably also have to be able to com-municate with existing and prospectivenet-centric information managementsystems of various levels.

The possible timeline for the creationof such a UAS is difficult to predict. Ifthe relevant decision is made, the pro-gram will probably take at least twoyears to complete.

Transas’ most successful model is thetactical UAV Dozor-100

ATO.ru

MARKET SUPPLEMENT

Russia is known for its solid aerospacecompetencies, particularly in the fields ofmilitary aviation and rotary-wing aircraft.In the past few years, the Russian gov-ernment and industry have been makingserious efforts to put this country backamong the leading global manufacturersof commercial aircraft. production isramping up for Russia’s new SukhoiSuperjet 100 and Antonov An-148 re-gional airliners, and the program to de-velop the Irkut MS-21 mainline passen-ger aircraft is well underway.

However, in contrast to the olden dayswhen virtually all aircraft componentswould be indigenous, at present theRussian aerospace industry heavily re-lies on international cooperation. ManyEuropean and American companiessupply components for the Superjet 100and Tupolev Tu-204 jetliner models aswell as for a range of Russian-built heli-copters; these manufacturers plan to fur-ther expand their business in Russia.

Sooner or later the management ofsuch companies will start to think aboutsetting up parts pools and MRO centersfor their aircraft in Russia. Other compa-nies take even more serious decisionsto organize production joint ventureshere. The latter include Liebherr,AgustaWestland, and HamiltonSundstrand, which have built productionfacilities in Russia — independently orjointly with local partners.

The Russian federal and regional au-thorities are interested in welcoming in-ternational hi-tech aerospace compa-nies, and provide every assistance to in-vestors. One of the measures to stimu-late foreign investment was the creationof a special economic port zone (SEpz)at Ulyanovsk vostochny airport.Ulyanovsk being a renowned aerospacecenter, the city and region have every-thing that is needed for setting up andoperating the SEpz, including the infra-structure, qualified personnel, and es-tablished international business links.

The Ulyanovsk vostochny SEpz isintended as a gateway to Russia for in-ternational aerospace companies, help-ing to keep investor risks to a minimumand improve the cost effectiveness ofinternational projects. The SEpz will ini-tially take up an area of 120 ha, to befurther expanded to 640 ha. The SEpzconcept envisages three major types ofactivities: manufacture of aircraft andassociated components; aviation MROservices; storage, logistics, and whole-sale operations.

What makes the SEpz attractive to in-vestors? The Russian governmentthrough the Ministry of EconomicDevelopment and the Ulyanovsk Regionadministration will use its own resourcesto build the infrastructure required forsuccessful operation of aircraft enterpris-es: roads, including airfield taxiways;

electricity and water supply, gas distri-bution networks, etc.

SEpz residents will enjoy consider-able tax reliefs: almost all of the taxesare nulled and Region Government mayreturn to a company a part of income taxpaid by its workers. The land is providedat minimum prices. In addition, the SEpzbeing a free customs zone, commoditiesto be imported into it from abroad do nothave to be declared, nor are they subjectto fiscal duties or vAT. This provides aunique advantage for many types ofbusiness, especially those involving de-liveries of aircraft parts and materials.

Additional incentives for investors arethe complete transparency, total ab-sence of corruption, and universal ad-ministrative support offered to SEpz res-idents. Each individual project to be im-plemented within the zone will be super-vised by the governor of UlyanovskRegion and by the relevant departmentof the Ministry of Economic Develop -ment. The aerospace competencies andexpertise accumulated in Ulyanovsk, theavailability of qualified personnel, andthe close proximity of several aerospaceeducational institutions are also amongthe factors important to investors whenmaking decisions on where to imple-ment their projects.

These lucrative investment incentives,coupled with the efforts of the SEpzmanaging company Special Economiczones JSC to spread the word about thenew zone, are already bearing fruit. TheSEpz is expected to start operation inlate 2013 but the Ministry of EconomicDevelopment has already registeredthree businesses as SEpz residents. Atthe MAKS 2011 International Aviationand Space Salon, Minister of EconomicDevelopment Elvira nabiullina awardedresidence certificates to volga-DneprTechnics Ulyanovsk, fL TechnicsUlyanovsk, and vityaz Avia.

The former two companies will con-tribute to setting up a so-called MRO su-permarket in the SEpz — a network of

WELCOME TO RUSSIARUSSIA CREATES A SpECIAL ECOnOMIC zOnE fOR AvIATIOn

MARKET SUPPLEMENT

engineering centers offering a widerange of aviation equipment by differentmanufacturers and providing universalMRO support. volga-Dnepr TechnicsUlyanovsk will set up an MRO center inthe SEpz, with two servicing hangars forup to four widebody aircraft, primarily forthe Antonov An-124 Ruslan and Boeing747 fleet operated by volga-DneprGroup. further down the road volga-Dnepr Technics Ulyanovsk is planning tolaunch an operation for Boeing 747 pas-senger-to-cargo conversions.

fL Technics Ulyanovsk is a subsidiaryof the Lithuanian company fL Technicswhich is already well established on theRussian MRO market. Its SEpz projectenvisages building three 80-by-60-meterhangars to service foreign-built narrow-body types, primarily Boeing 737s and757s, the Airbus A320 family, ATR-42/72 and SAAB 340/2000 turboprops.

The US company AAR Corporationexpects to implement a similar projectin the SEpz, jointly with a Russian pri-vate investor. AAR is one of the twoleading players on the US MRO marketand one of the top five major globalMRO providers. The project has al-ready gained approval from the SEpzsupervisory board.

Another planned element of the SEpzMRO supermarket is an MRO center forDiamond DA42 light aircraft, to be set upby the Austrian OEM Diamond Aircraftjointly with Ulyanovsk Higher School ofCivil Aviation, the largest Russian cus-tomer for this type.

There is already an aircraft paintingspecialist operating at Ulyanovskvostochny airport. The Spektr Aviapainting facility will contribute to aircraftmaintenance services at SEpz. TheMRO supermarket project is thereforeshaping up nicely.

As for the aircraft manufacture aspect,general aviation manufacturers areshowing high interest in the SEpz.vityaz Avia, for one, is planning to buildan assembly line there for BombardierDHC-6 Twin Otter Series 400 turbo-props seating up to 19 passengers.

nizhny novgorod-based companyprom Avia is planning to set up an as-sembly shop in the SEpz for its Accord

six-seater aircraft. for this purpose themanufacturer has set up theAerotekhnologia subsidiary, which iscurrently preparing to apply for SEpzresident status. prom Avia already op-erates a production facility in nizhnynovgorod, but is required there to paycustoms duty on imported engines, pro-pellers, and avionics; if sold for export,these extra costs will make the aircraftprohibitively expensive. By contrast,manufacturers operating from within aspecial economic zone do not have topay customs duty.

GA aircraft will not be the only prod-ucts manufactured in the UlyanovskSEpz. Aviapribor Holding, a subsidiaryof the Russian Technologies state cor-poration, will build a production andservicing center there to manufacture,maintain and repair hi-tech avionics in-struments for foreign and domestic air-craft.

The Ulyanovsk branch of SpecialEconomic zones JSC works with all themajor manufacturers across the aero-space industry, from fixed- and rotary-wing aircraft to aero engines to compos-

ite materials and their components, in or-der to attract investments and technolo-gies to the SEpz.

Special attention is paid to workingwith composites specialists, since com-posite materials are playing an increas-ingly important role in aerospace man-ufacturing. Several composites manu-facturers already operate in Ulyanovsk,including the Aviastar-Sp plant and theUlyanovsk branch of the vIAM researchinstitute of aviation materials. United

Aircraft Corporation is setting up theAerocomposit production facility inUlyanovsk that will manufacture thecomposite wing for the MS-21 airliner.Aerocomposit’s suppliers – Russianand international leaders in the produc-tion of composite parts and raw materi-als – may also set up facilities in theSEpz. Eventually, an entire “compos-ites valley” may emerge in Ulyanovskand in the SEpz in particular, withshared laboratory and productionequipment.

In terms of logistics the plan is to cre-ate an aviation cargo hub in the SEpz inorder to encourage major freight opera-tors, logistics providers, express mailand package delivery companies to setup their terminals and sorting centers inthe Ulyanovsk zone. This work is al-ready in progress.

The Ulyanovsk branch of SpecialEconomic zones JSC invites aerospacecompanies to cooperation. TheUlyanovsk vostochny SEpz is welcom-ing investors, and they are already ontheir way. vacant land plots are stillavailable.

www.russez.ruJSC “Special Economic Zones”,branch in Ulyanovsk 29, 40 let Pobedy Street, 432059,Ulyanovsk, Russia

☎ +7(8422)20-70-81,+7(8422)50-24-68

[email protected]

LOCATION AT FARNBOROUGHINTERNATIONAL AIRSHOW – Hall 2,booth C28 – Ulyanovsk Region.

AIR TRANSPORT

More passengers,more empty seatsAir traffic figures are growing in Russia but the carriers’ capacity seemsto be growing even faster

Alexei�Sinitsky

Russian airlines carried over64 million passengers in2011, flying a total of 166.7billion passenger kilome-

ters. This indicates an annual growth of12.6% and 13.4% respectively, or halfthe growth rate registered in 2010.

Official comments stressed that the2011 passenger numbers had exceededthose recorded in 1992, the year whenRussian civil aviation entered a periodof radical reforms. It should be notedthough that the market was on the de-cline in 1992; a comparable figure for agrowing market was last reported backin 1976. In other words, rather thanclambering out of a 20-year recessionthe industry last year rolled back a full35 years in terms of passenger numbers.

In addition, the very structure of airtraffic has radically changed, as wit-nessed by the average sector lengthwhich is calculated by dividing the totalnumber of passenger kilometres flownby the total number of passengers car-ried. The average sector length grewsubstantially in the 1990s as a result ofactively developing international routenetworks; it still continues to grow, in-dicating that the greatest growth on themarket is to be found in the sector ofthe more profitable international airservices.

Continuing concentrationThe Russian air transport sector is wit-nessing a continuing concentration ofservices in the hands of the top five air-lines, which together accounted for62.4% of passenger kilometres flown

and 57.9% of all passengers carried onthe domestic and international routes(see p.24). This is 4.2 and 4.8 percentagepoints higher, respectively, than the 2010results. The average growth rate for thetop five carriers were also higher than theindustry average: passenger kilometresgrew by 21.6%, and passengers carriedby 22.6%, compared to the 13.35% and12.59% growth across the industry.

Aeroflot and Transaero preservedtheir first and second positions on thelist of the largest Russian carriers.Transaero demonstrated a bettergrowth rate, particularly on interna-tional routes. UTair Aviation led thetop five airlines in terms of growth,beating S7 Airlines to the third place bya narrow margin. However, continuingconsolidation of assets and the estab-lishment of air carrier groups are mak-


In terms of passengers carried on international routes NordWindmoved up to fifth on the list of Russia’s largest carriers

Sergey

Sergee

v

MARKET SUPPLEMENT

Russian researchers continue to push for-ward a proposed medium-haul, widebodyaircraft design which has been under devel-opment since 2010 in the framework of anexpanding joint program involving a numberof Russian and international research andconsultancy organizations, including theCentral Aerohydrodynamics Institute, theInternational Air Transport Association, theMATs Inter-Sector Analytical Cente),Infomost Consulting, and SH&E/ACf.

Widely known as frigate Ecojet, theproject was launched in the form of aself-funded initiative by the private diver-sified aviation group Rosaviacon sortium,whose activities include the developmentof civil aircraft in Russia. Over the last 15years the Ros avia consortium team of air-craft engineers has been behind severaldevelopment programs, including thecargo version of the Tupolev Tu-204 jet-liner (several Tu-204C examples havebeen successfully operated by TnT inEurope) and also the Tu-204-300, ashrink version of the same baseline.

frigate Ecojet is based on a fundamen-tally new, innovative aerodynamic andstructural design. Work on the aircraft isbeing undertaken in conjunction with theRussian center for aviation science at theCentral Aerohydrodynamics Institute. Itstands to become a major platform for ad-vanced design technology and innovationin the Russian aviation industry. The mainobjective of the program is the develop-ment of the frigate Ecojet next-generationwidebody short- and medium-haul aircraftthat would be competitive on the interna-tional civil aviation market through the ap-plication of conceptually new aerodynam-ic and structural design.

A study of the overall trends in aircraftdevelopment and the most advancedWestern aircraft design reveals that theconventional aircraft body design hasreached the maximum level of aerody-namic refinement, and that future perfec-tion of design stands to benefit most fromexploiting the application of new aerody-namic schemes. The completely new de-sign approach of the IS-1 aircraft repre-sents an engineering breakthrough poten-tially satisfying the needs of next-genera-tion aerodynamics and serving as a pro-totype for future development in this area.

The result of the conceptual designphase demonstrated the feasibility of anew widebody aircraft for short- andmedium-haul routes with low technicalrisks. The aircraft demonstrates a highlevel of safety and comfort, as well as ahigh degree of competitiveness.

Concurrent with the aircraft develop-ment process using an integral aerody-namic scheme, engineers have obtaineda wealth of experience and taken outmore than 50 patents.

frigate Ecojet is expected to enter se-ries production in 2019-2020. Its opera-tional performance is expected to exceedthat of the most advanced civil aircraft of2010 by 15-20%. The main characteristicof the twin-engine aircraft is an ellipticalfuselage which would accommodate 300-350 passengers in a three-class, triple-aisle configuration. Contemporary studiesof the global air transport market have re-vealed a segment with a flight range of3,000 to 4,000 km in which the operationof widebody aircraft is very effective. Over56% of all global flights of widebody long-haul aircraft is actually for less than 3,000

km. In some regions of the world this per-centage is much higher.

Analysis of the Russian air transporta-tion system provides firm data substanti-ating a flight range bracket between 500and 3,500 km as the core for a potentialtarget market segment. Consequently, akey market requirement for the range vs.maximum payload criterion could be setat 3,500 km. Another key market require-ment is a single-class capacity of 295 to300 seats. Currently the frigate Ecojetproject team is considering various en-gines by leading international suppliers,including the pD-18R and pS-90A20 tur-bofans as well as the latest Rolls-Royceand pratt & Whitney designs. The select-ed engine is to achieve an increased fuelefficiency of 10-16% and save 10 -15%on the life cycle cost as compared withthe existing pS-90А2, pW2000, andRB211-535E4 models.

Analysis of airline route networks hasdemonstrated that the Ecojet’s 302-seatversion operating at ranges of up to 3,500km will exceed the fuel efficiency parame-ters of all same-class aircraft currently inoperation on these routes by 25%. Duringflights with 352 passengers to a range of2,500 km, the fuel efficiency gain wouldreach 30%.

Currently the frigate Ecojet team isgathering an impressive consortium of in-ternational consultants including Ernst&Young, ICf SH&E and InfomostConsulting, as well as Russia’s MATs tostudy scenarios of future development ofthe project - either as a stand-alone effortor a part of certain national, e.g. UAC’spotential wide body program, or interna-tional venture.

Russian Researchers Expect a Leapin Short-haul Efficiency


AIR TRANSPORT

ing precise analysis of performance re-ports difficult: the business groups nolonger coincide with the carriers forwhich performance data are available.For example, the combined 2011 re-sults for S7 Airlines and its subsidiaryGlobus are higher than those for UTairGroup, which also includes the UTairExpress regional feeder airline.

Aeroflot, Transaero, and Rossiyakept their first, second, and fifth posi-tions respectively in terms of passengerkilometres flown on internationalroutes. NordWind Airlines andOrenAir swapped their third and fourthpositions; in terms of passengers carriedNordWind moved up from eighth posi-tion to fifth on the list. The businessmodels of both these carriers are largelydependent on their cooperation withthe Turkish tour operator PegasTouristik. Now that OrenAir is in theprocess of being acquired by AeroflotGroup, it appears that Pegas Touristikis redistributing passengers in favour ofNordWind in a bid to protect its ownbusiness interests.

A number of serious changes tookplace on the Russian domestic marketlast year. Transaero came fourth interms of passengers carried, and pro-gressed from fourth place to second inpassenger kilometres flown. The airlineis obviously intensifying its domesticoperations between European Russiaand the Far East; its primary competi-tion on these routes is Aeroflot. S7Airlines kept its third position in pas-

sengers carried domestically butdropped from second to fourth place interms of passenger kilometres flown. Itssubsidiary Globus climbed from eighthplace to sixth in passenger kilometres,and from 11th place to seventh in pas-sengers carried; this indicates a redis-tribution of passenger traffic within theS7 Group network.

One of the most significant eventslast year was the folding of Russia’s on-ly two low-fares airlines. Acquisition ofSky Express by Kuban Airlines wascompleted in November 2011, andAvianova ceased operations in October.Prior to their exit from the market bothcarriers demonstrated relatively goodperformance results. Avianova last yearmoved from sixth place to eighth interms of passengers carried (the air-line’s fleet never exceeded six AirbusA320s), whereas Sky Express, whichreported an acute fleet shortage lastsummer, moved from ninth to 15thplace in passengers carried, and from12th place to 19th in passenger kilome-ters flown. Both airlines’ problems wereinternal rather than external. The low-fares market niche in Russia is expectedto remain vacant for some time.

Overall, the number of Russian aircarriers continues to shrink. Individualrepresentatives of the country’s avia-tion authorities are being quite frankabout this being the officially endorsedpolicy aimed at reducing the number ofoperators. They usually defend this po-sition by citing flight safety and care for

the passengers. International practicecertainly does not indicate that flightsafety is influenced in any way by thesize of the airline. If anything, cuttingthe numbers of smaller carriers is detri-mental to the accessibility of air trans-port in those regions where the demandfor air services is particularly high. Alltalk about there being too many airlinesis also beside the point. There were 976commercial airlines operating inEurope last year.

Russia is setting a negative record ofwitnessing no new carriers on a growingmarket. Asked directly why this is thecase, head of the Federal Air TransportAgency Alexander Neradko said:“Commercial transportation, in partic-ular passenger transportation, is thehighest league of the air transport sec-tor and therefore very difficult to en-ter.” At the same time, in his words,“the doors are open” to new entrants:an airline wishing to obtain a certificatemay do so by demonstrating the seri-ousness of its intentions, an own fleetof aircraft, a working airworthinessmaintenance system, specialist trainingprograms, and compliance with all thenecessary requirements. In any case theemergence of new civil aviation proj-ects in the current situations is fraughtwith great difficulties.

Empty seatsAir traffic statistics provide no clue asto the financial condition of Russianairlines; there are no detailed officialdata. In this situation one good indica-tor would be the seat load factor of theRussian carriers, which dropped signif-icantly last year.

This trend was especially evident ondomestic routes. In fact, domestic seatload figures have been decreasing forthe past five years. The overall seat loadfactor across the industry, on the con-trary, had been growing almost contin-uously since 2000 (except for 2004),and has only recently dropped by 1 per-centage point.

The fact that the seat load factor oninternational routes exceeds the overallindex across the industry is explainedby the great volumes of tourist traffic,

NUMBER OF AIRLINES IN RUSSIA

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

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which brings the seat load factor of in-dividual carriers to nearly 100%. Thegeneral conclusion however is that lastyear, despite the overall seat loadgrowth, airlines started carrying fewerpassengers. This worsened their finan-cial condition (and we are not takingother factors into account, such as thegrowing fuel prices).

If we are to compare the numbers ofpassengers carried by Russian airlinesto their seat load factors we will see thatthe country’s largest carriers are in-creasing their market share by reducingrevenue loads. Aeroflot is the only air-line whose passenger load factor grewlast year, probably because the carrierwas actively operating to tourist desti-nations; this resulted in so-called char-ter wars, in which Aeroflot’s primary ri-val was Transaero.

Even S7 Airlines saw its seat load fac-tor decrease in 2011 despite its strategyof restrained growth: the airline’sgrowth in passengers carried amountedto only 6% last year, against the faster-than-market growth reported by othercarriers (25.6% for Aeroflot, 27.2% forTransaero, and 31.3% for UTair). Onthe other hand, the S7 Airlines resultscould have been partially influenced bythe redistribution of passengers fromthe Globus subsidiary, whose load fac-tor increased by 0.7 percentage points

last year. Some of the second-tier air-lines, according to Russia & CISObserver sources, ensured a passengerload factor growth by cancelling andcombining flights. Such tactics affectedthe fleet utilization figures of these car-riers and, consequently, their financialperformance.

Russian airlines continued to activelyrenew their fleets last year. As of late2011, the country’s combined mainlineand regional fleet stood at 561 foreign-made and 511 Russian-made airframes.The share of air services provided withthe use of foreign-made modelsamounted to 89% (compared to 18% in2000), and is set to grow further.

Ironically, fleet renewals may resultin surplus carrying capacities, althoughin the situation of a growing marketsuch a conclusion may appear absurd.There are two points to be made how-ever. First, the Russian air traffic is veryseasonal in nature, with shortages ofthroughout capacities in the summermonths traditionally replaced by over-capacity in winter (which may reach20%, according to some estimates).Second, obsolete airliners often get re-placed with new models of similar seat-ing capacity; foreign-made aircraftused under leasing agreements require— indeed, are capable of supporting —fairly intensive operation.

Conclusions by the marketsegmentsAeroflot and Transaero are activelycompeting on the long-haul widebodymarket, and it is highly unlikely thatany other Russian airline will be will-ing and able to join the fray there anytime soon. The possible outcome ofthis standoff is unclear; both carriershave access to a variety of resources.Rather than backing either rival, weshould hope for this market segmentto further expand through liberaliza-tion of the legislation governing inter-national air services.

On the domestic market, UTair isexpected to further strengthen its po-sitions. The carrier has the advantageof operating a fleet of ATR turbo-props; smaller regional airlines, whichwill soon have to retire their obsoleteAntonov An-24 aircraft of comparableseating capacity, will hardly be able toreplace them with foreign-madeequivalents.

In the mainline narrowbody seg-ment, the primary market for the 20largest Russian airlines, various sce-narios are possible. We may well expectfurther mergers and acquisitions,which would not necessarily be dictat-ed by market conditions. As for thelow-fares segment in Russia, it is onceagain vacant.

Sergey

Sergee

v

AIR TRANSPORT

Despite the overall seat load growth, Russian airlines startedcarrying fewer passengers in 2011

Maxim�Pyadushkin

In the past few years the RussianMRO market has been on therise, reflecting the general growthof the air transport market that

continues since the start of the century.The growing air traffic triggered massivefleet renewals by Russian carriers, withforeign types accounting for 89% of thedomestic passenger turnover in 2011.

The shift to Western-built airframes ne-cessitates the establishment of a com-pletely new MRO system. At present mostof the foreign-made airliners operated inRussia are serviced abroad, but the localMRO sector is also developing. Changesin the sector started with the largestRussian airlines opening maintenance de-partments for servicing their fleets, butnow some of these facilities are evolvinginto independent MRO providers.

The country has now only a few serv-ice centers certified to provide heavymaintenance on foreign-made airliners.These are in fact Aeroflot’s AviationTechnical Center, Vostok TechnicalService and Engineering Holding.

Engineering Holding is likely to ad-vance further than others on its way to

become an independent MROprovider. It unites several facilitiesowned by S7 Group, namely S7Engineering, Sibir Technics and ATBDomodedovo, and also has mainte-nance centers in Moscow, Novosibirskand Mineralnye Vody. In 2011 theholding’s revenues reached about 2.4billion rubles (around $80 million).

According to Engineering Holdingrepresentatives, S7 Engineering was thecompany’s the largest division in 2011,with revenue of 1.35 billion rubles. Lastyear S7 Engineering’s workload ex-ceeded 747,000 hours; it performed 448A-checks, 19 C-checks, and two D-checks. At the end of last year S7Engineering completed the first D-check on an Airbus A319; prior to thatit had offered such maintenance formsonly for the Boeing 737 Classic family.

Another Russian provider certified toprovide heavy checks is Novosibirsk-based Sibir Technics. It can perform pe-riodic maintenance including D-checksfor the A320 family and also for Boeing737 Classic and NG airliners. In 2011the company logged more than 443,000work hours, with 158 A-checks, 27 C-checks, four IL-checks, and five D-

checks. Its revenues amounted to 700million rubles. ATB Domodedovo,which specializes on maintenance ofRussian aircraft types, preformed 80 dif-ferent forms and ranked third withinEngineering Holding with 355,000 workhours and 340 million rubles in revenues.

Russia’s largest carrier Aeroflot tradi-tionally prefers to perform line and peri-odical maintenance of its large fleet at itsown facility in Sheremetyevo Airport. Theairline’s MRO business also provides serv-ices to third parties. For example, in 2010Aeroflot reported that it had providedmaintenance services to 27 other carriers.

In February 2012 the Aeroflot boarddecided to spin off the airline’s MROfacilities into a joint venture to be cre-ated with the Russian Technologiesstate corporation. The JV business planis expected to be approved by theAeroflot board this summer. Accordingto the board, this will allow the airlineto cut fleet maintenance costs; the newJV will also be able to provide MROservices to carriers based in the CIS andEastern Europe. According to sourcesin the Russian aviation industry, theplanned JV could be joined byLufthansa Technik, which has strongpositions in the region.

Vostok Technical Service was recent-ly created on the premises of theVARZ-400 MRO provider at Moscow’sVnukovo airport. The company is cer-tified by EASA to provide C-checks onBoeing 737 Classic and NG aircraft.According to the head of the Vnukovoboard, Vitaly Vantsev, this maintenancefacility plans to develop cooperationwith such large Russian carriers asUTair Aviation and Transaero. The for-mer is based at Vnukovo while the latterhas recently started to move part of itsoperations to Vnukovo from anotherMoscow airport, Domodedovo.


AIR TRANSPORT

Russian MRO providersgain strength

The shift to Western-built airframes necessitates theestablishment of a completely new MRO system in Russia

Enginee

ring H

olding


AIR TRANSPORT

Ilyushin Finance eyes regional leasing market

Polina�zvereva

The Russian lessor IlyushinFinance Co (IFC) is lookingat opportunities to enter theregional turboprop segment.

Among its possible partners areBombardier, ATR, and also manufactur-ers of smaller aircraft. The Saratov-basedcarrier Saravia has already announced itsintention to lease three BombardierQ400s from IFC; the type was issued aRussian certificate in early June 2012.

The demand for foreign-made region-al aircraft is growing in Russia, but thetechnical requirements differ from re-gion to region. According to an IFC-ledstudy, there are 11 airlines offering re-gional services in European Russia, allthe 36 airports of the region are equippedwith concrete runways, and typical sec-tor lengths vary between 200 and 800 km.

In this situation the best option would bean ATR-72 or a Bombardier Q400.

The situation in Siberia and the FarEast is totally different: this huge area isserved by not more than 18 airlines; 43%of the local 119 airports have unpavedrunways, and typical sector lengths liebetween 400 and 3,000 km. The ATR-72range may prove too short for this partic-ular market; apart from the Q400, itwould be best served by Antonov An-140turboprops and An-148 jetliners. In oth-er words, there is no universal, one-size-fits-all regional airframe. On the whole,IFC believes the Russian regional marketwill require about 200 airliners throughto the year 2030.

Russian carriers started importing for-eign-built turboprops almost six yearsago. UTair Aviation became Russia’s firstATR operator with one ATR-42-500.The airline currently operates 17 ATR

72-500s, two ATR 72-200s, and 14 ATR-42-500s (five of the latter serve with thecarrier’s UTair Ukraine operation).NordStar Airlines operates six ATR 42-500s from Krasnoyarsk Territory, andsigned a firm contract in late 2011 for thedelivery of five ATR 42-600s with an op-tion for a further two. AnotherKrasnoyarsk carrier, KrasAvia, opted forsmaller 19-seat Let L-410 turboprops.The first example was delivered in mid-June 2012. Yamal Airlines received itsfirst L-410 in late May this year.

Roman

Gus

arov

This Bombardier Q400 NextGen madea demo tour across Russia in May


AIR TRANSPORT

Top 20 Russian airlines, by passenger carried and passenger kilometers flown in 2011

Note: * No official data available at the moment of the issue's release. Source: Russian Transport Clearing House .

��Passenger�kilometer��Passenger�carried

Airline��Ranking�in��Passenger�km,�� Change�to�2010,��Ranking�in�2011�� Passengers,�� Change�to�2010,��2011��(2010) ��million��% �� (2010) ��thousand ��%

International�and�domestic�routesAeroflot�–�Russian�Airlines ��1�(1) ��42,020.9 ��+20.83��1�(1) ��14,173.8 ��+25.59Transaero ��2�(2) ��33,179.9 ��+26.19��2�(2) ��8,453.4 ��+27.18UTair��3�(4) ��11,119.3 ��+39.30��3�(4) ��5,802.3 ��+31.26S7�Airlines��4�(3) ��10,542.8 ��+2.57��4�(3) ��5,128.3 ��+6.07OrenAir ��5�(5) ��7,500.3 ��+4.77��7�(6) ��2,507.2 ��+4.41Nordwind��6�(7) ��7,281.1 ��+43.26��8�(14) ��1,721.6 ��+44.21Rossiya�Airlines ��7�(6) ��7,190.9 ��+15.19��5�(5) ��3,537.5 ��+15.12Ural�Airlines ��8�(8) ��6,832.8 ��+41.14��6�(7) ��2,513.4 ��+40.24Vladivostok�Air ��9�(9) ��4,534.8��-4.64��12�(13)��1,213.9��-3.79VIM-Avia��10�(10)��3,961.2 ��-0.42��9�(11) ��1,612.5 ��+21.48globus��11�(13)��3,427.0 ��+26.26��10�(16) ��1,472.1 ��+34.73Yakutia�Airlines ��12�(12)��3,374.8 ��+11.42��14�(17) ��1,019.0 ��+12.81Nordavia��13�(16)��2,240.2 ��+13.58��11�(8) ��1,468.3 ��+5.00NordStar��14�(18) ��* ��*��19�(23) ��* ��*Red�wings ��15�(14)��2,162.5 ��-11.26��18�(18) ��781.4 ��-10.80IFly��16�(20) ��* ��*��25�(28) ��* ��*Sky�Express ��17�(17)��1,422.2 ��-14.32��15�(15)��942.4 ��-17.57Avianova ��18�(19)��1,406.9 ��-8.46��13�(12) ��1,048.9 ��-19.46kuban ��19�(25)��1,369.7 ��+40.73��16�(19) ��900.4 ��+35.10Donavia ��20�(15)��1,271.0 ��-47.55��17�(9)��864.1 ��-37.65

International�routesAeroflot�–�Russian�Airlines ��1�(1) ��28,645.9 ��+21.21��1�(1) ��8,679.1 ��+21.86Transaero ��2�(2) ��25,911.4 ��+27.16��2�(2) ��6,673.0 ��+25.87Nordwind��3�(4)��* ��*��5�(8)��* ��*OrenAir ��4�(3) ��6,840.8 ��+2.12��3�(3) ��2,109.1 ��+0.44Rossiya�Airlines ��5�(5) ��4,673.4 ��+16.95��4�(4) ��1,790.7 ��+20.04Ural�Airlines ��6�(9) ��4,359.9 ��+61.06��7�(9) ��1,501.0 ��+58.68UTair��7�(11) ��3,907.4��+172.50��8�(12) ��1,440.7 ��+140.05S7�Airlines��8�(8) ��3,712.3 ��+24.96��6�(7) ��1,580.1 ��+31.76VIM-Avia��9�(6) ��2,592.6 ��-32.24��9�(5)��953.7 ��-24.12Red�wings ��10�(10)��2,071.6 ��-7.15��10�(10) ��756.0��-7.74IFly��11�(13) ��* ��*��11�(14) ��* ��*NordStar��12�(17) ��* ��*��15�(18) ��* ��*Tatarstan� ��13�(15) ��923.8 ��+0.65��14�(15)��327.4��-5.44kolavia��14�(16) ��804.1 ��-10.02��17�(16) ��292.8��-7.40Sky�Express ��15�(22) ��774.1 ��+70.81��16�(22) ��308.5 ��+52.32Vladivostok�Air ��16�(21) ��689.1 ��+11.72��12�(17) ��332.5 ��+5.38Yakutia�Airlines ��17�(20) ��655.6 ��+0.54��18�(21) ��255.7 ��+18.78Moskovia�Airlines ��18�(14) ��650.7 ��-50.35��19�(13) ��247.6 ��-47.24Donavia ��19�(12) ��587.3 ��-56.64��13�(11) ��328.7 ��-49.90kuban ��20�(25) ��413.9��+112.96��20�(23) ��239.4 ��+82.10

Domestic�routesAeroflot�–�Russian�Airlines ��1�(1) ��13,375.0 ��+20.01��1�(1) ��5,494.7 ��+31.96Transaero ��2�(4) ��7,268.5 ��+22.84��4�(5) ��1,780.3 ��+32.37UTair��3�(3) ��7,212.0 ��+10.14��2�(2) ��4,361.6 ��+14.17S7�Airlines��4�(2) ��6,830.5 ��-6.54��3�(3) ��3,548.3��-2.41Vladivostok�Air ��5�(5) ��3,845.7 ��-7.08��10�(8)��881.5��-6.85globus��6�(9) ��3,042.8 ��+49.27��7�(11) ��1,304.2 ��+55.38Yakutia�Airlines ��7�(6) ��2,719.2 ��+14.41��11�(13) ��763.3 ��+10.94Rossiya�Airlines ��8�(7) ��2,517.5 ��+12.06��5�(4) ��1,746.7 ��+10.48Ural�Airlines ��9�(8) ��2,472.9 ��+15.88��9�(10) ��1,012.4 ��+19.62Nordavia��10�(10)��1,918.9 ��+9.45��6�(7) ��1,332.1 ��+2.38Avianova ��11�(11)��1,382.9 ��-10.02��8�(6) ��1,029.2 ��-20.98VIM-Avia��12�(34)��1,368.7��+803.02��14�(41)��658.8��+834.30NordStar��13�(15) ��* ��*��18�(21) ��* ��*kuban ��14�(16) ��955.8 ��+22.71��13�(15) ��661.0 ��+23.55UTair�Express ��15�(18) ��867.4 ��+28.66��12�(14)��691.8 ��+27.06Yamal ��16�(19) ��779.6 ��+22.72��17�(17) ��470.8 ��+14.39Donavia ��17�(13) ��683.7 ��-36.03��16�(12) ��535.4 ��-26.65OrenAir ��18�(22) ��659.5 ��+43.27��19�(19) ��398.1 ��+32.16Sky�Express ��19�(12) ��648.0 ��-46.29��15�(9)��633.9 ��-32.62gazpromavia��20�(17) ��621.1 ��-11.83��20�(18)��344.5 ��-14.10

BUSINESS AVIATION

Anna�Nazarova

Life has finally corroboratedthe optimism of expertsabout a permanent recoveryof the Russian business avia-

tion market. Although 2011 was a diffi-cult year for the sector, its results demon-strated that the market had stabilized.

One of the two key indicators of busi-ness aviation market growth in Russia ishistorically the number of aircraft move-ments. Although no such statistics exist,the figure can be deduced with the helpof expert estimates. Market players con-cur that the frequency of business flightsin Russia began to grow last year, al-though at a slower pace than it had beengrowing prior to the economic crisis.According to Leonid Shcherbakov, chiefinspector of the Aerotrans, Russianprovider of flight dispatch services, lastyear there were more than 140,000 busi-ness aircraft movements in Russia. Thegrowth had begun in 2010, when thenumber of business aviation flights ex-ceeded that performed in 2006 and 2009;the frequency of flights further grew in2011, at a pace not seen since 2006.

Evgeny Bakhtin, president of Avcom-D Group which manages the businessaviation centre at Moscow’s Domode -dovo airport, cites less optimistic figures.According to him, the market continuedto revive slowly throughout 2011 at a 12%growth rate. Bakhtin explains the slowbut sure growth rate by the overall mod-erate growth of the Russian economy, theincrease in global energy prices, thegrowing welfare of the Russian popula-tion, and the resultant increase of payingdemand for business aviation operations.

An even less optimistic view is held bythe Russian business aviation magazineTop Flight, whose analysis is bases onthe performance data for Russia’s largestbusiness aviation airport Vnukovo 3.According to the magazine, the Moscowregion airports (which together accountfor over 70% of all business aviationmovements in Russia) registered a 6%growth in business operations in 2011 toa total of 24,000 flights.

Last year’s results did nothing to over-come the lopsided development vectorof the Russian business aviation market:62% of all flights were international, andonly 38% were performed domestically.

The 2011 results demonstrated thatbusiness aviation services have becomean inseparable part of business activitiesin Russia, and that even the unstableeconomic situation of the recent yearshas not resulted in a significant decreasein customer numbers. This is indirectlyindicated by the Top Flight statistics, ac-cording to which the number of passen-gers carried on business flights acrossMoscow region grew by 3% last year to160,000 people. For comparison, in pre-crisis 2008 the figure stood at 152,000.

Fleet renewalsThe other key indicator of Russian busi-ness aviation development is the condi-tion of operators’ fleets. Again, no exactstatistics are available with regard to thenumber of Russian-owned business jetsbecause about 95% of the entire fleet isregistered abroad. Based on expert esti-mates, one can assume that the fleet ofRussian-owned business aircraft consist-ed of 300-380 airframes last year. Up untilthe crisis of 2008 this figure was growingat a breakneck speed, but by September2008 the growth had ground to a stand-still. By early 2009, one in three business

Bouncing backThe Russian business aviation market is recovering and gearing up for a new,albeit less speedy, growth cycle.


95% of the Russian-owned businessjets are registered abroad

Sergey

Sergee

v


BUSINESS AVIATION

jets had been put up for sale. Yet therewere almost no sales recorded, eventhough the pre-owned airframes were be-ing offered at a 10-20% discount off theirmarket price. Panic selling continued un-til 2010. Last year the secondary businessjet market began demonstrating signs ofrecovery, with the prices and sales startingto grow gradually, but this process remainsvery slow. According to Bakhtin, there is acertain increase in Russian customers’ in-terest in purchasing business aircraft.However, potential buyers of both newand pre-owned airframes are usually largecorporations seeking to replace, ratherthan expand, their fleets by retiring obso-lete aircraft. It is therefore too early to ex-pect a further growth of Russia’s businessjet fleet, despite the recovering pre-ownedmarket. On the other hand, there are pos-itive trends in evidence: more owners arehaving their newly purchased business air-craft registered in Russia. This process isbeing stimulated by the recent lifting ofcustoms duty on such airframes.

Competitionamong operatorsThe ratio of Russian and foreign businessaviation operators on the domestic mar-ket remained largely the same throughout2011. According to Aerotrans, the shareof Russian operators stood at 51%. Thisfluctuating insignificant overbalance inmarket leadership has been observed

since 2012 however the situation has ag-gravated: Aerotrans reports that in thefirst three months of the year the share ofbusiness flights operated to or fromRussia by foreign carriers reached 60%.

Ever since 2006, when the businessaviation sectors first started evolving intoa civilized market, national carriers havebeen operating flights within Russia andto CIS destinations. Most of these oper-ated Soviet-era passenger airliners fittedwith corporate interiors; the noise levelsof these types did not meet internationalstandards and prevented them from fly-ing abroad. Just like today, there werevery few carriers operating foreign-madebusiness jets. International operators, fortheir part, serviced business aviationflights abroad, primarily to Europe.Western carriers operating foreign-regis-tered aircraft are not permitted to servicedomestic routes in Russia. These mutualrestrictions led to a natural division of themarket between the Russian and foreignoperators. However, the rapidly ageingSoviet-made aircraft, first of all TupolevTu-134s and Yakovlev Yak-40s, as well asthe Russian aviation authorities’ contin-uing campaign to promote flight safety(which often results in cancellation ofoperators’ licenses), and government-ledcrackdowns on foreign carriers attempt-ing to offer illegal services inside Russia,have all resulted in a booming demandfor domestic business aviation flights.

“Domestic demand for business avia-tion services is growing faster than themarket,” says Bakhtin. “This is primarilydue to a shortage of supply. The absence ofsufficient numbers of modern business air-craft in Russia is further restricting the al-ready very scarce offer of business aviationflights into the country. This is why it is toodifficult and too expensive at the momentto find a modern business aircraft thatwould be operated within Russia.”

Several large market players are com-peting for the rapidly growing domesticbusiness aviation segment in Russia.First to arrive on this market wasJetAlliance, which brought two CessnaCitations to following the purchase ofthe Aeroflot Plus charter provider.

In December 2011 Avcom Grouprolled out its Jet Travel Club program,which offers members the use of businessjets for private flights. The program termsare similar to those of rent-a-car arrange-ments; this business model is enjoying anincreasing demand among Russian busi-nesspeople and medium-level managers.

In June 2012 Austrian operatorVistaJet announced its intention to cre-ate a joint venture with the Russian air-taxi operator Dexter. VistaJet will con-tribute for the Dexter fleet with twoBombardier Challenger 605s for opera-tion inside Russia. Also in June 2012,RusJet — one of Russia’s largest opera-tors of Western-built aircraft — joinedthe fray by launching operations with anEmbraer Legacy 600. General directorMikhail Titov says the aircraft will bemostly used for domestic revenue flights.

2011 will be remembered as the first yearof stability on the Russian business aircraftmarket following the economic crisis. Thelifting of customs duty on foreign-madebusiness aircraft certainly played a posi-tive role here, as did the recent changesto the country’s aviation regulationswhich considerably simplified access ofbusiness aviation to Russian airspace andairports. Another favourable develop-ment was the partial opening of Russianairspace for notification-based GA oper-ations. All these factors, coupled with theobserved revival of the Russian economy,give hope for a further growth of theRussian business aviation market.

0

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Num

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ight

s

2007 2008 2009 2010 201112007 2008 2009 2010 2012007 2008 2009 2010 201

Russian operatorsForeign operators

BUSINESS AVIATION FLIGHTS IN RUSSIA IN 2007-2011, BY OPERATORS

Note: The chart is based on the data on non-scheduled flights from/to Russia under the assumptionthat all of them are business flights.Source: Aerotrans


SPACE BUSINESS

Igor�Afanasyev,�Dmitry�Vorontsov

Last year was exceptionallydifficult for the Russianspace sector. Undisputedachievements were marred

by a higher-than-normal number ofembarrassing failures. Formally,Russia preserved its global leadershipin the number of space launches (32,or 38% of the overall number oflaunches worldwide), but simultane-ously set a worrying record with fivelaunch failures.

The 2011 successes included the or-biting of the Elektro-L geostationarymeteorological satellite and theRadioastron (Spektr-R) radio tele-scope. Another major achievement wasto complete the deployment of theGlonass constellation of navigationsatellites to a global coverage capacity.Last year also saw the start of theRussian-EU project Soyuz at Kourouwith the first two launches of Russianrockets from the ESA-operated equa-torial spaceport.

However these successes wereeclipsed by a string of mishaps. TheGeo-IK2 geodesy satellite and theExpress-AM4 communications satel-lite were both placed into wrong orbit.The Progress M-12M resupply shipwas lost in a launch failure onAugust 24. On November 9, thePhobos-Grunt probe — Russia’s firstinterplanetary mission in decades —found itself stranded in low Earth or-bit. All attempts to reactivate the craftwere to no avail. The probe burned onre-entry in mid-January 2012. Finally,on December 23, 2011 a third-stageengine failure at launch resulted in theloss of the Meridian 5 military com-munications satellite. Furthermore,the dates for many other Russian

space launches were missed through-out the year.

What makes these failures are all themore vexing is that government alloca-tions for space exploration have in-creased tenfold over the past decade.The program budget of Russia’sRoscosmos Federal Space Agencystood at about 95 billion rubles lastyear, or $2.8 billion at the current ex-change rate. The disparity between thehefty funding and the absence of im-pressive achievements has led the gov-ernment to doubt the effectiveness ofthe current space exploration strategy.

One immediate consequence was areshuffle at Roscosmos, which sawagency head Anatoly Perminov re-placed by Vladimir Popovkin. The gov-ernment also identified a systemic crisisin the country’s space industry, tracingits roots to the late 1980s and early1990s when the funding for space ex-ploration first started to shrink. This,the reasoning goes, eventually erodedthe production capacities and compe-tencies of industrial enterprises, whichin turn led to a drop in the quality ofspace-related products and compro-mised the responsibility of personnel.

The crisis at hand prompted the gov-ernment to get down to strategic plan-ning by revising (and, if required,amending) the current priorities andtheir relevance to the country’s actualneeds. Popovkin in October 2011 pro-posed a number of measures to improvethe quality of space industry products,and identified a new order of key prior-ities: applied problems, scientific re-search, manned space flight, and thedevelopment of new launch vehicles.Since the allocation of funding at thatmoment did not correspond to the newpriority list (up to 42% of theRoscosmos was being spent on manned

Reviewing Russia’sspace strategy

In 2011 Russia preserved its globalleadership in the number of space launches

A.Ilyin


SPACE BUSINESS

programs, leaving only 7% for researchmissions), Popovkin proposed to re-assess the agency’s spending strategy.

First, the painful but unavoidable de-cision was made to suspend the pro-gram to develop the Rus-M launch ve-hicle, owing to the significant costs in-volved in it and the fact that the rock-et’s performance overlapped with thatof the new Angara system, which willsoon enter flight tests.

Second, it was decided to build alaunch pad for Soyuz-2 vehicles atRussia’s future Vostochny Cosmodromeso that the first launch from the new sitecould be performed as early as 2015.

Finally, and most importantly,Roscosmos developed a draft develop-ment strategy for the Russian space in-dustry to 2030 and beyond. The draft wassubmitted to the government in March2012. A formal medium- to long-termconcept of Russian space efforts had longbeen due. Until recently the industry’sdevelopment was guided by targeted 10-year programs and unspecific regulatorydocuments like the federal law on spaceactivities and the framework of Russia’spolicy in the area of space exploration to2020 and beyond.

Of special interest are several keypoints made in the Strategy, the first suchdocument ever that has been proposedfor public discussion. In particular,Roscosmos suggests choosing prospec-tive space programs based on their cost-effectiveness. Independent access tospace should become one of Russia’s pri-orities. Perhaps for the first time in

Russia’s history, the Strategy mentionsprivate space exploration as being essen-tial to the country’s strategic interests. Atthe same time, in the light of the highrisks involved in private space activities,it is being proposed to promote public-private partnerships in this field.

The Strategy is somewhat vague onthe objectives of space exploration. Inpursuing its space program Russia is ex-pected to “meet, on a global level, thegrowing socioeconomic, scientific, de-fense and security needs through theuse of indigenous space assets”; to “se-cure independent access to space fromits territory for the entire spectrum ofspace-related activities”; to “assume aleading position in the most significantareas of fundamental space researchand Lunar exploration”; and to “en-sure international-level performancecharacteristics of indigenous space as-sets”. These objectives do not appearequisignificant; besides, far from all ofthem can be measured quantitatively.

The Strategy proposes several stepwisedevelopment phases. The “restoration ofcapabilities” phase, through to 2015,envisages the completion of the currentplans and programs across the space sec-tor. In the “consolidation of capabili-ties” phase, through to 2020, Russia isexpected to get re-instated in the club ofthe leading space powers as applied to allthe key aspects of space activities.

During the “breakthrough” phase,through to 2030, Russia should begin im-plementing major projects in near spaceand outer space. In particular, by that

time the country should have expandedits capabilities in terms of independentaccess to space by putting VostochnyCosmodrome into operation, creating asuper-heavy launch vehicle system and afleet of space tugs. Also during this phaseRussia is expected to perform “a demon-stration manned Lunar orbital missionwith subsequent landing of cosmonautson the surface of the Moon and their re-turn to Earth”, as well as to “continuewith active unmanned research, includ-ing through international cooperation, ofthe Moon, Mars, Venus, the Jupiter sys-tem, Saturn, and asteroids”.

The next phase, “consolidating thebreakthrough”, should include the im-plementation of major projects in nearspace and on the Moon, and alsopreparations for a manned mission toMars. In particular, the Strategy pro-poses opening a re-visitable Lunar or-bital station after the year 2030.

The Strategy confirms the main prior-ities of Russian space exploration as out-lined by Popovkin in October 2011: “thedevelopment and operation of spaceequipment, technology and services inthe interests of meeting the country’s so-cioeconomic, science, defense and secu-rity needs”; “creating crew, cargo andEarth-based assets in the interests ofspace exploration, including a reusablelaunch vehicle”; and also “laying thegroundwork for an international mannedmission to Mars and the development ofa new-generation orbital station”.

It should be noted that such complexprojects as manned missions to theMoon and Mars would require colossalexpenses and extensive international co-operation. In fact, none of the leadingspace powers currently has any concreteplans for interplanetary manned mis-sions. An emphasis on manned spaceexploration would run counter to thestanding order of priorities for theRussian space industry, which brings ap-plied problems and scientific research tothe fore. Another point to be made hereis that the proposal to develop a super-heavy launch vehicle seems to be toospecific to be included in the Strategy: itis as yet unclear whether Russia wouldrequire such a system.

The new head of RoscosmosVladimir Popovkin identifiedkey priorities for Russia’s

space industry

I. M

arinin

russia & cis observer july 2012

Documents

seat ms

key ms

thatthe ms

agreement forpromotion

russian airlines

russiacis observer quarterly

engine nacelle

morepowerful engine