russia cis observer - Авиатранспортное обозрение...the design work involved...

Russia&CIS Observer№ 1 (43) november 2016

Russia&CIS Observerwww.ato.ru/rco

special focus on airshow china 2016

RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 1

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AEROSPACE INDUSTRY•

Russia and China move to industrialpartnerships ........................................2

Russian government to supportaerospace manufacturers ......................4

UAC CEO on new level of cooperation with Beijing ..................5

SSJ 100 in quest for efficiency ..............6

Russian-assembled Il-114 to fly in 2019 ........................................9

Ukrainian Antonov looking for new partners ................................10

Titanium success ................................11

DEFENSE•

Guided weapons against aerial and naval targets ................................12

Innovative electronic technologiesfrom Russia........................................14

Russian military to get improved Mi-28NM helicopter ........................16

AIR TRANSPORT•

Turbulent times for Russian air transport ......................................18

Centripetal traffic in Ukraine ............22

Wind of change for Russian MRO ..............................24

BUSINESS AVIATION•

Russian bizav market shrinks ..............26

SPACE BUSINESS•

Second chance for Sea Launch ..........27

Russia/CIS Observer is produced by:

PublisherEvgeny Semenov

Editior"in"ChiefMaxim Pyadushkin

Art DirectorAndrey Khorkov

Sales & Marketing DirectorOleg Abdulov

Commercial DirectorSergey Belyaev

Cover PhotosArtyom Anikeev, Fyodor Borisov,

Marina Lystseva

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reproduced in whole or in part without the written permission of

A.B.E. Media.

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© № 1 (43), November 2016Tel.: +7 (495) 626 5356. E-mail: [email protected]

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Russia &CIS Observerfrom the publisher of № 1 (43) november 2016

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RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 20162

AEROSPACE INDUSTRY

From direct sales to industrial partnershipsRussia and China havedecided to join effortsunder two major aircraftdevelopment programs

Maxim Pyadushkin

Russia and China share along history of aerospacecooperation. Beijing re-mains a major customer

for Russian combat aircraft and mili-tary aviation technology. Some of themare transferable to indigenous pro-grams. These time-honored relationsare now moving from direct sales to in-dustrial partnerships. Another mile-stone was passed this summer, whenMoscow and Beijing provided govern-ment-level support for the joint devel-opment of a new widebody commercialaircraft and a heavy helicopter.

The relevant intergovernmentalagreements were signed during RussianPresident Vladimir Putin’s visit toBeijing in June. Although both pro-grams are being promoted as joint ef-forts, they seem to differ in the way theparties are planning to contribute.

Widebody aircraftChina’s COMAC and Russia’s UnitedAircraft Corporation (UAC) launchedthe development of a new widebody air-craft back in 2014; the parties have nowagreed that the program will be man-aged by a special joint venture, to be setup on a parity basis. According to UACCEO Yury Slusar, the company, to beregistered by the end of 2016, will be re-sponsible for the aircraft development,sales, after-sales support, and also forinvestment and financing throughoutthe project. The joint venture will be

registered in the Pudong district of theShanghai free trade zone, COMAC’shome region.

The assembly line for the future air-liner, which is known in China as C929,will also be located in Shanghai.According to Slyusar, the locationchoice was caused by the necessity toplace the production line closer to thepotential markets which, apart fromRussia and China, include SoutheastAsian countries.

UAC is prepared to perform most ofthe design work involved in the C929 de-velopment. The company’s 2015 annualreport says its subsidiaries conductedtechnical research on various aspects ofthe future widebody long-range aircraftlast year. This effort was financed by theRussian government, and included re-search on the airliner’s avionics, aero-dynamics, composite wing, fuselage,landing gear, and fuel system. UAC sub-sidiary Tupolev also studied the feasibil-ity of applying a more electric aircraftconcept on the aircraft, while Ilyushinstudied the possibility of heavily upgrad-ing its Il-96-300 jetliner.

UAC and COMAC put together en-gineering teams, which came up with

their conceptual designs for the newaircraft family. These designs will nowhave to be reconciled, an UAC officialexplained earlier this year: “The resultsof this will enable us to pass the Gate 2procedures this year.” The Gate 2 mile-stone usually involves the approval ofthe preliminary design.

Earlier, UAC estimated the programcost at $13-20 billion. The future wide-body aircraft is expected to make itsmaiden flight in 2021, with deliveriesprojected to begin after 2025. The air-liner will carry about 280 passengers toup to 12,000 km in the baseline config-uration. The other two planned ver-sions are to accommodate 250 and 320passengers.

The partners expect to start selectingsuppliers as soon as the preliminary de-sign has been approved. The aircraft willneed a modern engine with up to 35 tthrust. According to Slyusar, requests forinformation had already been sent toRolls-Royce and General Electriс, theonly two engine houses capable of sup-plying powerplants in this thrust class. ARussian engine is also a possibility, butdevelopment of the most suitable design,Aviadvigatel’s PD-35, has just begun.

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AEROSPACE INDUSTRY

The Russian governmentplans to allocate 16.5

billion rubles ($262 millionat the current exchange rate)for supporting the country’scommercial aerospace in-

dustry in 2017. According tothe draft document specify-ing next year’s federal budg-et, the country’s largestfixed-wing aircraft manufac-turer, United Aircraft

Corporation (UAC), willlikely receive a major part ofthe planned funding.

Up to 9.6 billion rubles willbe allocated for the programto resume production of the64-seat Ilyushin Il-114 re-gional turboprop. UAC isplanning to transfer Il-114assembly from Tashkent,Uzbe kistan to its facility inRussia’s Ulya novsk. Another5.3 billion is reserved for up-grading the Ilyushin Il-96widebody jetliner. The pro-gram is facing a lack of com-mercial orders, but the man-ufacturer expects specializedversions for government cus-tomers to help build its port-folio.

Another project eligiblefor state support involvesproduction of Czech Let L-410 19-seat turboprops atUral Works of Civil Aviation(UWCA, part of RostecCorporation) in Yekaterin -

burg. Up to 700 millionrubles will be allocated forthe effort to localize L-410production under a franchis-ing contract with AircraftIndustries, which itself isowned by Russia’s UralMining and MetallurgicalCompany.

The government’s aid tothe sector in the form of899.2 million rubles’ worthof guarantees for bond-se-cured loans will be extendedto UAC for the newAviadvigatel PD-14 14-tonturbofan engine, which hasbeen selected to powerIrkut’s MC-21 narrow-bodyaircraft. The powerplant iscurrently being flight-testedon an Il-76LL testbed.Deliveries of PD-14-pow-ered MC-21s are expected tobegin in 2019.

The aforementioned sumswill be allocated in 2017-2019.

Russian governmentto support aerospacemanufacturers

United Aircraft Corporationis likely to be a major recipient of

government funding in 2017

As for suppliers of other subsystems,a representative of Russian specialistTechnodinamika told Russia & CISObserver his company expected to re-ceive a request for proposals in the sec-ond half of 2016. Technodinamika hasrecently been awarded a contract fromthe Russian Ministry of Industry andTrade for developing eight subsystemsfor a widebody long-range aircraft;these could be used by the Russian-Chinese program in the future. Thesystems are for power supply, air condi-tioning and pressurization, inert gasgeneration, fire protection, de-icing,and oxygen supply.

UAC could use the joint program tocomplement its product range. UACstill runs the assembly line for IlyushinIl-96 widebody airliners, but produc-tion has dropped to several airframesper year under a government contract.Independent development of a newwidebody is quite difficult as UAC is

concentrating all its resources on theMS-21 single-aisle program. The newaircraft is expected to fly in early 2017.

Advanced Heavy LifterThe joint program to develop a newheavy helicopter, known as AdvancedHeavy Lifter (AHL), does not appearto be offering equal participation termsto Russia. Originally reported as a jointeffort by China’s Avicopter andRussian Helicopters, the AHL will infact be Chinese-developed andChinese-built. The intergovernmentalagreement signed in June says the pro-gram will be fully managed byAvicopter, including the design, proto-type assembly, testing, certification, se-ries production, and marketing.

Russian Helicopters will be contract-ed to develop certain systems.Representatives of the Russian manu-facturer explained to Russia & CISObserver that the company’s contribu-

tion will be subsequently defined by ageneral contract and a developmentsubcontract. Russian Heli copters is un-derstood to have hoped to develop theAHL’s main gear, tail rotor, and anti-ic-ing system. The intergovernmentalagreement does not specify the develop-ment schedule, but Russian Heli copterssays it expects the new helicopter to becertified by 2025.

The AHL development effort was of-ficially launched in May 2015, with aframework agreement signed betweenRussian Helicopters and AviationIndustry Cor poration of China (AVIC,Avicopter’s parent company). The ro-torcraft is expected to have a take-offweight of 38 tons, and to be able to car-ry 10 tons of cargo internally or 15 tonson an external sling. In the fall of 2015,Avicopter reported that the AHL wouldhave a ceiling of 5,700 meters, a rangeof 630 km, and a maximum speed of300 km/h.

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AEROSPACE INDUSTRY

– Mr Slyusar, how comfortable doesUAC feel on the Chinese market?

— This year we witnessed the signing ofan intergovernmental agreement on thejoint development of the new widebodylong-range aircraft, and the founding doc-uments were finalized for a joint venture tobe registered in Shanghai shortly. Thesewere important milestones demonstratingboth parties’ commitment to long-term co-operation for the benefit of the project. Weare also working on military programs andon a number of other commercial and spe-cialized aviation projects, so more news areto come. These developments indicate thatthe level of cooperation between the twocountries is growing, and that Russia is in-creasingly focusing on the Chinese marketand on the Asia-Pacific region in general.

– Could you expand on UAC’s civilianprograms?

— This year has seen several develop-ments related to our civilian products,

including the rolling-out of the firstIrkut MC-21 flying prototype, the de-cision to resume Ilyushin Il-114 pro-duction, and the presentation of thefirst Taganrog-assembled Beriev Be-200ChS amphibious aircraft. The gen-eral trend, therefore, is towards boost-ing the civilian component of our over-all output.

UAC plans to diversify the structure ofdeliveries and considerably increase theshare of revenues coming from civiliansales. Our aim is to bring this share up to40% or more in the future. Our SukhoiSuperjet 100 (SSJ100) aircraft have beenperforming well with Mexican carrierInterjet, which currently operates 20 ofthe type. Irish regional airline CityJethas started operating the type on itsEuropean flights, including in the inter-est of major EU carriers. At a recentconference of the European RegionsAirline Association in Madrid, CityJet

praised the airliner for its high reliabilityand good performance. Our program todevelop the MC-21 airliner is edging to-wards the first flight. The portfolio for thetype is mainly represented by Russiancustomers, but we also have orders fromforeign companies.

– Could you provide more details onUAC’s third project, the one to design awidebody airliner?

– This is indeed our third globalproject; we are implementing it in part-nership with COMAC. This way wehope to offer an internationally com-petitive solution in the most popularcivilian airliner segments.

We believe this cooperation to be veryimportant: in order to be successful onthe highly competitive market, we arejoining intellectual and technological re-sources with our partner. We will rely onour countries and the primary markets forthe aircraft. Both partners have comple-menting unique competencies to offer,allowing us to share the risks and, not lessimportantly, the financial costs involved.

We are currently in talks over the dis-tribution of development and produc-tion workloads, and certain agreementshave already been reached: in particu-lar, Russia could manufacture the wingand empennage with the use of an ad-vanced composite infusion technology,whereas our Chinese colleagues couldbe responsible for the fuselage and forfinal assembly.

– What about the future airliner’scharacteristics?

– It is too early to discuss any preciseperformance specifications, size, andweight; what is already known at thisstage is that the baseline version willseat 280 passengers, and will have arange of around 12,000 km. We areplanning to design a family of three air-liners; apart from the baseline, therewill be an aircraft seating fewer passen-gers and a stretched version. Deliveriesare expected to begin beyond 2025; thiswill help us ensure the necessary levelof competitiveness. The COMAC standhere at Airshow China 2016 features amodel of the future airliner.

This interview is prepared byMaxim Pyadushkin

New levelof cooperation

China is an established customer for Russian military aerospace products; recently,the two countries have also been developing successful cooperation on a number ofcommercial aircraft programs. Yuri Slyusar, president of the United AircraftCorporation (UAC), told Russia & CIS Observer about the joint projects presentedat Arishow China 2016.

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AEROSPACE INDUSTRY

In quest for efficiencyRussia’s Sukhoi Superjet 100 is looking for better sales and new markets

Maxim Pyadushkin

The Sukhoi Superjet 100(SSJ 100) regional jet re-mains Russia’s major com-mercial aviation program,

but low sales are prompting the projectpartners Sukhoi and Finmeccanica torevise their participation and the cur-rent marketing approaches. They arealso planning to break into new foreignmarkets, including China.

At the end of September, the Russianauthorities gave a final formal approvalto Sukhoi’s plan to consolidate 100% ofSSJ 100 manufacturer Sukhoi CivilAircraft Company (SCAC). The coun-try’s antitrust body cleared Sukhoi topurchase 25%+1 voting shares inSCAC, noting that the deal would notaffect market competition.

The blocking stake was previouslyheld by Finmeccanica (and before that,to Alenia Aeronautica), a strategic part-ner, which had invested $183 million inthe SSJ 100 program back in 2009.

Finmeccanica is also likely to mini-mize its stake in SuperJet International(SJI), another joint venture withSukhoi. The Venice-based companyprovides SSJ 100 maintenance servicesand personnel training, as well as cus-tomizing and delivering aircraft to for-eign customers. The Russian media al-so reported that Finmeccanica couldcut its interest in the joint venture fromthe current 51% to 10%.

Sukhoi’s parent company UnitedAircraft Corporation (UAC) and SCACsimilarly declined to comment, sayingthe details would be released at a laterdate. An industry source told Russia &CIS Observer that the SCAC consolida-tion process might be completed beforeyear-end.

Talks to change the format ofFinmeccanica’s participation in SSJ100 have been on for about two yearsnow. Finmeccanica is not satisfied withthe program’s efficiency. SCAC rolledout 35 airframes in 2014, the all-timerecord since production launch, but

output volumes dropped to 17 in 2015,mainly due to a decline in demandfrom Russian airlines.

In the fall of 2014, the Russian gov-ernment decided to support SCAC byinjecting 36 billion rubles (around $880million at the time) into its share capi-tal. The additional shares were pur-chased by Sukhoi, which brought itsstake in the company up to 94.47% andleft Finmeccanica with just 5.53%. Thepartners agreed that, despite the sharedilution, the Italian company would re-tain a blocking stake in SCAC until2017, and then invest at least $390 mil-lion to regain its share.

However, Finmeccanica itself is un-dergoing a restructuring process, in thecourse of which the group will have itsname changed to Leonardo and shed anumber of loss-making projects; theSSJ 100 is understood to be one of them.

Despite these complications, theRussian program had made seriousprogress in 2016 with the first delivery toa European customer. Irish-based

Irish-based CityJet became the firstEuropean operator of SSJ 100

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AEROSPACE INDUSTRY

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CityJet received two aircraft earlier thisyear, with 13 more on order. The thirdaircraft is to be delivered in October, withdelivery rates projected to speed up overtime to one airframe per two months.

CityJet used its SSJ 100s for charterflights and wet-lease operations thissummer. The airline also wants to oper-ate the Russian aircraft on its scheduledservices from London City as soon as theaircraft is certified for steep approachlandings. According to SCAC, certifica-tion will require the addition of wingletsand certain adjustments to the flightcontrol system. The modified version isto enter production after 2018.

Another new important customer forSCAC, the Royal Thai Air Force, tookdelivery of two extended-rangeSSJ 100LRs in VIP-configuration thisJuly. The aircraft will be operated in theinterests of the country’s leadership, sen-ior officials, and military high command.Their cabin interiors feature three areas:a four-passenger VIP zone, a six-passen-ger business class, and a standard areaseating up to 50 passengers. Both airlin-ers come with multimedia and assorted

telecommunications systems, includingIFE, which is a first for the SSJ 100.

SCAC plans to boost Asian sales, andis particularly eyeing China, which is theregion’s largest market. The Russianmanufacturer announced in July that itwas planning to open its first overseasclient liaison office in Beijing by the endof the year. The office will report directlyto the SCAC Moscow headquarters.

Lee Li, head of the Beijing office,told Russia & CIS Observer the Chineseoperation will involve SSJ 100 market-

ing, certification to the Chinese avia-tion standards, and maintenance, aswell as arranging financial support foraircraft deliveries and participation inindustrial cooperation projects. Leeidentified both Chinese carriers andlessors as potential customers.

SCAC considers China to be a highlypromising and consistently growingcommercial aviation market. The com-pany estimates local demand for regionalaircraft at between 1,000 and 1,300 unitsfor the next several decades. Lee says theRussian airliner could get at least 10% ofthat market: “It is a long-term strategyfor the company involving a lot of work,human resources, investment, and ef-forts, and it will take time, but we have avery big commitment for this.”According to the head of the Beijing of-fice, there are plans to validate the EASAcertificates for both the aircraft and itspowerplant locally. “We have alreadylaunched this work,” Lee said.

According to sources in Russia’sUnited Engine Corporation (UEC),PowerJet, a joint venture between UECsubsidiary NPO Saturn and French

powerplant specialist Safran AircraftEngines, has put together a dedicatedteam that will take part in the Chinesecertification of the SSJ 100’s SaM146engine.

The Beijing office’s announcementfollows SCAC’s earlier effort to pro-mote the airliner on the Chinese mar-ket. In May 2015, its parent companyUAC signed a framework agreementwith the Russia-China InvestmentFund, the Administrative Committeeof Xixian Fendong New Town of

Shaanxi Province, and Chinese lessorNew Century International Leasing toset up a joint venture that would leaseSuperjets to operators in China andelsewhere across Southeast Asia. Thenew entity was expected to purchase upto 100 SSJ 100s within a period of threeyears, with deliveries to China expectedto begin in 2016.

In China, the SSJ 100 will be pittedagainst both Western rivals and the lo-cally designed Comac ARJ21 passengerjet, which commenced revenue opera-tions in June this year.

Along with the export opportunities,SCAC is looking for more domesticclients. The Russian airframer plans tohave built 27 aircraft this year. Accordingto the Russian Minister of Industry andTrade Denis Manturov, SSJ100 produc-tion rates are expected to reach 34 air-frames in 2017 and 40 in 2018.

The Russian government effectivelyre-launched the SSJ100 leasing systemfor Russian operators last year by re-capitalizing GTLK State TransportLeasing Company with 30 billionrubles, which will enable the lessor topurchase 32 airframes and lease themto domestic regional carriers.

GTLK has managed to find new op-erators for already-assembled jets, in-cluding Siberia-based IrAero, whichopted for four aircraft and has plans toadd four more of the type. One of theexisting domestic operators, Yakutia,has refinanced its SSJ 100 deal withGTLK and is looking to expand itsSuperjet fleet.

SCAC also expects another major or-der from Aeroflot, the Russian flag car-rier and the local launch customer forthe type. The airline has just taken de-livery of the final airframes under theinitial contract for 30, and is now intalks with the manufacturer to firm upits option for 20 more.

Another important new customerfor the program was Russia’s govern-mental air squadron Rossiya. Thiscompany that provides the transporta-tion of the head of the state and othercountry’s high-ranking officials, start-ed the operations of a pair of SSJ 100sthis summer.

SSJ 100 VIP configuration is usedto carry Russia’s high-ranking

government officials


AEROSPACE INDUSTRY

Russia’s United AircraftCorpo ration (UAC) is

expanding its commercialproduct range by way of re-suming production of theIlyushin Il-114, a Soviet-de-signed passenger turbopropmodel. The first flight of theRussian-assembled Il-114 isscheduled for 2019; deliveriesare expected to start in 2021.Prior to 2012 the aircraft wasmanufactured at the ChkalovTAPO facility in Tashkent,Uzbekistan.

“The first flight of the ren-ovated Il-114 is scheduled for2018,” Ilyushin CEO SergeyVelmozhkin commented forTASS news agency inOctober. “We hope to be able

to use the existing inventoryof the Tashkent factory. Afully Russian-made aircraft isto fly in 2019.”

According to Velmozhkin,the Ilyushin Design Bureauhas already started accumu-lating design documentationand readying the terms of ref-erence for the modernizationproject. The all-newIlyushin-114 will have to un-dergo additional certification.“We will make the first com-mercial delivery in 2021,”Velmozhkin says, adding thatthe aircraft will also be offeredin medevac, patrol, and anti-submarine warfare versions.

Production will bearranged at the Sokol avi-

aiton plant in NizhnyNovgorod. UAC CEO YuriSlyusar explained earlier thisyear the remaining Il-114fuselages stored at TAPO hadbeen inspected, and that talkswere on over the possibility touse them: “This could speedup the aircraft’s first flight.”

Sokol will be able to build12 aircraft per year. UACputs the estimated programcost at 55 billion rubles

(about $820 million). TheIl-114, a 64-seat turbopropwith a maximum range of1,500 km, first flew in 1990and was certified in Russiain 1997. Before going bank-rupt in 2012, TAPO assem-bled 17 of the type. Two Il-114s, powered by 2,500 hpKlimov TV7-117S engines,were operated by Russianregional airline Vyborg in2002-2010.

Russian-assembledIl-114 to fly in 2019

l-114 may become the first turbopropaircraft in UAC product range

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In the Past The Chinese market has known AEROSILA’sproducts since long time ago. The air pro-pellers, such as AB-68, AB-72, and theirmodifications, were installed on the aircraftsupplied from the Soviet Union to China forboth civil and military aviation. Some ofthem were licensed to be produced in Chinafor various Chinese-designed aircraft.

The auxiliary power units (APU), designedand built by AEROSILA, such as the earlyTA-6A and later other “TA” models, werewidely used on the Ilyushin, Tupolev,Antonov aircraft, Mil helicopters.

TodayThe APUs, developed by AEROSILA, areused in (being delivered now to China) Su-35 aircraft, Ka-31 helicopters, and propfansare used in hovercrafts. AEROSILA designsand manufactures:• the new generation of APUs for new, mod-

ernized and prospective aircraft and heli-copters

• air propellers and propfans ranging up to30,000 hp with aerodynamic efficiency upto 0.9

• lifting and propulsion mechanisms forhovercraft

• power converters for supersonic aircraft• influx and exhaust fans, jet axial fans for

tunnels and underground premises

On Customer’sdemand AEROSILA provides:• Adaption of serial products to the

Customer’s requirements• Design and development of new products• Localization of manufacture under a li-

cense agreement

In the near future AEROSILAplans to develop:• advanced small size gas turbine engines • high electric output board power units for an im-

plementation of the “electric aircraft” concept• base gas generator for small size propul-

sion engine

Tomorrow AEROSILA is ready to develop an APU for theRussian-Chinese project of a Long-RangeWide-Body Commercial Aircraft (LRWBCA) andhas already submitted the relevant technicalproposal based on New Gen APU TA18-200MC. The current China International Aviation & Aero -space Exhibition 2016 has been also mar ked bythe signing a Protocol between AEROSILA,NEIAS and AVIC International on making theAPU for the Advanced Heavy-Lift (AHL) heli-copter, being based on APU TA18-100.

AEROSILAA world-wide known developer and manufacturer of air propellers and APUsat the 11th China International Aviation & Aerospace Exhibition 2016

ADVERTISMENT


AEROSPACE INDUSTRY

Valentin Makov

The soured relations betweenKyiv and Moscow over an-nexed Crimea and the con-flict in the east of Ukraine

are affecting bilateral aerospace coop-eration. Ukrainian airframer Antonovhas lost access to the Russian market,and is now seeking new partners andsuppliers for its programs.

China was considered as one of the ma-jor options. In August this year, Antonovmanaged to secure a Chinese investor forreviving production of the An-225 Mriya,the world’s heaviest transport aircraft. TheUkrainian manufacturer signed a cooper-ation agreement with Aerospace IndustryCorporation of China (AICC). The initialphase of cooperation calls for completingthe second An-225 airframe, which iscurrently stored at about 70% completionat Antonov’s production site. The aircraftis then to be handed over to the Chinesecorporation. Subsequently, the partnersare planning to organize An-225 produc-tion in China. Rather than selling its in-tellectual rights to the aircraft, Antonovintends to launch fully licensed series pro-duction jointly with the Chinese partner.

The first and only example of the six-engined An-225 was built in the mid-1980s as the transport for the SovietBuran space shuttle and for compo-nents of the associated Energia launchvehicle. After the space project fellthrough, the aircraft was repurposed fortransporting outsize and heavy com-mercial freights. The Mriya is currentlyoperated by the OEM’s subsidiary car-rier Antonov Airlines, whose fleet alsoincludes seven An-124-100 Ruslan su-per-heavy freighters.

Antonov is working to minimize itsreliance on Russian parts suppliers forboth the An-225 and the An-124. Thecompany first announced plans towesternize the two types in late 2015.The first step in this process will involvefinding news suppliers for the tires,brakes, and avionics.

New An-124 tires, developed byDunlop Aircraft Tyres, were trialed atAntonov’s testing facility in October.The tests involved an An-124-100M-150 with take-off weights of 340 t, 360t, and 402 t, and with different CG po-sitions. The take-offs and landings wereperformed within the limits of expectedoperational conditions.

“Our cooperation on the Ruslan’s newtires started successfully, as confirmed bythe testing results,” Antonov PresidentOleksandr Kotsiuba remarked, addingthat the Dunlop product’s advantages in-clude an EASA authorization and com-petitive prices. The new equipment is tobe installed on the first An-124 in thecourse of a heavy maintenance check.

The Ukrainian company has prior pos-itive experience working with Dunlop,whose tires are used on its An-148 andAn-158 regional jets. The freezing of co-operation with Russia has critically af-fected Antonov’s production schedule forthese two types as well: not a single deliv-ery is planned for 2016. “The two aircraftbuilt in 2015, one An-148 and one An-158, were the last ones to leave the com-pany’s assembly facilities,” AndriyKhaustov, deputy director of the Antonovadvanced development division, said ear-lier this year in an interview to Ukrainianradio station Vesti. “Several airplanes arestill not completed. For the time being,we need to find alternatives to all theRussian components.” This also includesavionics, which will most likely be substi-tuted with products by Canadian manu-facturer Esterline.

Antonov hopes it will still be able tolaunch commercial production of itsAn-148 and An-158 passenger jets in2017. The manufacturer’s ambitionsare to commercialize the new An-178light transport aircraft in 2017, as wellas finalizing, by year-end, the first An-132D turboprop (D stands for demon-stration aircraft), which was exclusivelydesigned for Saudi Arabia. The compa-ny stresses that this aircraft will notcontain any Russian-supplied compo-nents.

Ukrainian manufacturerlooking for new partnersDeteriorating relations between Kyiv and Moscow are robbing Antonov of accessto the Russian market.

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The assembly of Antonov An-225freighters may be restored in China


Maria Ivanova

Russia’s VSMPO-AVISMACorporation, the world’slargest titanium producer, issuccessfully increasing the

share of machining in its output bothwithin its own projects and jointly withpartners. The company’s close ties withthe international aerospace industry al-low it to plan further production growth.

VSMPO-AVISMA and Alcoa Samara,the Russian subsidiary of US manufac-turer Alcoa, opened a joint venture inearly September. Located in Samara,AlTi Forge will produce large titaniumand aluminum forgings to be used insubsequent manufacture of aircraft land-ing gear beams and wing pylons.

The Russian titanium company seesits strategic goal in increasing the shareof value-added processing in overallproduction volumes. The company’smachining shop increased the output ofdie-forgings by more than 50% in 2015;in five years from now, 40% of all VSMPO-AVISMA produce is expectedto come in the form of die-forgings.

By investing in its production capacityand increasing the share of value-addedproducts VSMPO-AVISMA managedto demonstrate solid financial results inQ1 2016; this positive trend is expectedto continue. The company’s sales struc-ture changed this year, with less productssold on the Russian market and a greatershare of export deliveries. The latter hasfully compensated the losses incurred on

the domestic market thanks to the weakruble. VSMPO-AVISMA expects tokeep this year’s output of titanium prod-ucts at the 2015 level of 28,000 to29,000 t. By 2020, the corporation plansto bring annual titanium production upto 40,000 tons.

One of the company’s largest andmost significant investment projects is toset up a die-forging machining facilityfor Titanium Valley, a special economiczone in Russia’s Sverdlovsk Region. Theproject was launched in 2014; VSMPO-AVISMA is currently the most active ofTitanium Valley’s 11 residents.

The Titanium Valley facility, knownas VSMPO-New Technologies, will beresponsible for initial and final machin-ing of die-forgings for new aircraft

types. The production building has al-ready been erected; the company in-vested over 1.6 billion rubles ($25.4million at the current exchange rate) inits construction. The facility is expectedto be launched in 2018 with around 100highly qualified engineering personnel.

VSMPO-AVISMA is closely involvedwith the global aerospace industry, act-ing as the main strategic supplier of tita-nium products for a multitude of manu-facturers. In 2015, about 60% of all itstitanium produce was exported. Of thetotal amount of exported products, 46%

went to the US, 41% to Europe, 7% tocountries in North and South Americas,and 5% to the Middle East andSoutheast Asia, including Israel, China,India, Japan, South Korea, Singapore,and Taiwan.

The Russian company is a long-standing partner of the Chinese aero-space industry. Since 2004, it has beensupplying China Aviation Supplies Imp.& Exp. Corporation (CASC) with tita-nium billets used in the manufacture ofdie-forgings for Airbus programs. Thecompany’s cooperation with AVICInternational Holding Corporation,one of China’s largest aerospace manu-facturers, spans over 10 years.

VSMPO-AVISMA acts as a supplierfor China’s flagship commercial avia-

tion program of the C919 medium-hauljetliner. Under the agreement with theaircraft designer, Commercial AircraftCorporation of China (COMAC),VSMPO-AVISMA will be supplying 12different die-forging types through to2021. The company is already toolingup for the task. Certification of theChinese die-forgings is expected to becompleted in 2017. The company willsupply China with more than 20 differ-ent die-forging types to be used in themanufacture of aircraft wings, empen-nage, and pylons.

Titanium successRussian titanium producer VSMPO-AVISMAworking to increase share of value-added products

Titanium successRussian titanium producer VSMPO-AVISMAworking to increase share of value-added products

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VSMPO-AVISMA plans to bring annualtitanium production to 40,000 tons by 2020


DEFENSE

Alexey Sinisky

China remains an importantforeign customer forRussia’s Tactical MissilesCorporation (TMC). The

Russian missile manufacturer is show-casing some of its latest developmentsat Airshow China 2016.

Air-launched weaponsTMC works actively to develop newtypes of air-delivered precisionweapons. Over the past few years theRussian manufacturer has renewed itsentire range of air-to-air and air-to-surface missile types.

The new short-range (RVV-MD),medium-range (RVV-SD), and long-range (RVV-BD) air-to-air missiles,developed by TMC’s subsidiary —Vympel design bureau, feature new,more sensitive and ECM-resistantguidance systems. The new dual-bandinfrared seeker with a multicell sensorand digital signal processing capabilitygives the RVV-MD two times longerlock-on distance compared to the R-73E missile, and 1.3 times wider thetarget designation angles.

The RVV-SD, for its part, has im-proved aerodynamics; its active radarseeker features a more powerful trans-mitter and a more sensitive receiver.The missile’s software has been com-pletely overhauled, increasing its rangeby 35% compared to the RVV-AE

missile and giving it the ability to en-gage targets maneuvering at up to+12g. The RVV-BD missile uses anadvanced digital active radar seeker, ahigh-precision inertial navigation sys-tem, and a new engine fuel type. Theseinnovations combine to double themissile’s maximum range as comparedto the predecessor.

TMC’s air-to-surface products in-clude the newest Kh-31PD (TMC’sown development) and Kh-58UShKE(developed by Raduga Design Bureau)anti-radiation missiles fitted with

broadband seekers. These missiles cansuccessfully engage any existing and fu-ture target types. The Kh-31PD’s rangeof up to 180-250 km makes it ideal forstand-off delivery.

The Russian manufacturer also offersthe Kh-38ME modular air-to-surface

missile, which may be fitted with com-bined guidance systems comprising aninertial navigation system and a varietyof terminal guidance options: laser (theKh-38MLE), heat-imaging (the Kh-38MTE), or active radar seeking (theKh-38MAE). Satellite-based naviga-tion is also possible, as is the use ofcluster-type multiple warheads (in theKh-38MKE version).

Another TMC subsidiary, RegionScientific and Production Enterprise,has developed new guided bombs, whichfollow a gliding trajectory with optimal

Guided weapons againstaerial and naval targetsRussia’s Tactical Missiles Corporation is prepared to offer China new missiles

New RVV-MD, RVV-SD andRVV-BD air-to-air missiles

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The effectiveness of guided bombs inmodern warfare has been proven by theresults of Russian troops’ operations againstterrorist groups in Syria

approach angles. The KAB-500S-Ebomb is fitted with a satellite guidancesystem and a HE warhead; the KAB-250LG-E has gyrostabilized laser guid-ance and a HE fragmentation warhead.

The effectiveness of guided bombs inmodern military operations has beenproven by the results of Russian troops’operations against terrorist groups inSyria.

Naval weaponryNaval weapon systems occupy a specialniche in the TMC product range. Atthe core of the company’s ship-basedand mobile coastal missile systems isthe 3M-55E Yakhont supersonic cruisemissile. The Bastion anti-ship coastalmissile system has a range of 600 km,and can engage naval ships of any classat up to 300 km away under enemy fireand in ECM environments.

The Bal-E coastal missile system isintended against sea-surface warshipsand sea transports displacing up to5,000 t. The Bal-E can engage up to

32 targets simultaneously with Kh-35E anti-ship missiles (the naval ver-sion of the missile is known as the 3М-24E). The Kh-35E is currently beingreplaced with the new-generation Kh-35UE version, also developed byTMC. The new missile features an in-ertial/satellite guidance system and anactive/passive seeker, allowing forhigher precision and better ECM re-

sistance. The Kh-35UE’s softwareprovides flexible, efficient guidanceand attack capability. The missile con-siderably increases the combat poten-tial of the Bal-E system and the Uran-E ship-based missile system. The Kh-35UE’s performance is on a par withthat of Western equivalents such as theHarpoon and Exocet, and even sur-passes them with regard to a number


DEFENSE

Bal-E coastal missile system withKh-35UE missile system

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of parameters. The Bal-E and Bastionsystems complement each other to en-sure effective coastal defenses.

The corporation’s range of navalweaponry products is not confined toanti-ship missiles. The TMC subsidiaryGidropribor develops and manufac-tures torpedoes, anti-torpedoes, navalmines, mine countermeasures, acousticcountermeasures, and also underwatersurveillance and protection systems.Gidropribor’s Mayak-2014B sonar isintended for protecting harbor areas

against the intrusion of small-sized un-derwater targets. The system detectstargets at up to 800 m away, classifiesand tracks them automatically with thehelp of sonobuoys, positioned at depthsof between 2 and 60 m, whose angle ofcoverage is between 900 and 3600.

Region Enterprise has developed thecompact, ship-based Paket-E/NKclose-in anti-submarine torpedo sys-tem, complete with an anti-torpedo.This all-weather system can provideclose-in attack against enemy’s sub-

marines and destroy torpedoes target-ing the ship. Another product byRegion is the Shkval-E high-speed su-percavitating anti-ship underwatermissile capable of traveling at up to 100m/sec. The missile is currently under-going modernization.

The TMC’s research, development,and production potential enables thecompany to offer a variety of advancedguided munition types both to theRussian Armed Forces and to foreigncustomers.


DEFENSE

Radio-Electronic Technologies Con -cern (abbreviated to KRET in Rus -

sian), one of Russia’s premier verticallyintegrated defense holding companies, isshowcasing at Airshow China 2016 over40 military and civilian products based onbreakthrough innovative technologies.

The company stand features an ad-vanced helicopter avionics demonstratoremulating real-life operation of a new

flight and navigation system. The systempresents the crew with information viaelectronic displays, and also supports ra-dio communications with other aircraftand air traffic control centers in keepingwith the modern requirements. Visitorscan also familiarize themselves with ademonstrator of an in-built export ver-sion of the President-S airborne defensesystem, one of the most efficient elec-

tronic warfare solutions designed for thepersonal protection of all types of aircraft.

KRET is also demonstrating export ver-sions of the Sukhoi Su-35 fighter’s avio -nics. These new generation radio-elec-tronic solutions are based on an informa-tion management system designed to helpthe pilot control onboard equipment; theyinclude the RSUO weapon managementsystem, the MZBN compact protectedairborne recorder, a family of small-sizedX- and Ka-band airborne radars, and anintegrated IBKO-152 system.

KRET also boasts significant techno-logical advances in other areas. “We havedeveloped and implemented a number ofpromising projects,” says CEO NikolaiKolesov. “These include mass productionof strap-down inertial navigation systemsfor a variety of aircraft types. The systemenables continuous autonomous preci-sion positioning for more accurate navi-gation and weapons delivery”.

KRET is a dynamic business supplyingto more than 20 countries worldwide. Itranked 48th in Defense News’ 2015 sur-vey of the top 100 global defense compa-nies, ascending from the 52nd positionthe year before.

KRET will be granted the approvalshortly to work directly with foreign de-fense customers. “After-sales support forour previously delivered military productsis a priority for us; this includes repairsand modernization of avionics, friend-or-foe identification, and electronic war-fare systems,” Kolesov says.

Innovative electronic technologies from Russia

Advancedhelicopter

avionicsdemonstrator

designedby KRET

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DEFENSE

Maxim Pyadushkin

The Russian AerospaceForces expect to shortly getan improved version of theservice’s main attack heli-

copter, the Mil Mi-28N Night Hunter.The first modernized prototype, dubbedMi-28NM, performed a horizontal flightat the Russian Helicopters test facilityoutside Moscow in October. The manu-facturer reported at the time that hover-ing tests had begun in early September.

This is the first effort to modernize therotorcraft, which joined service with theRussian Air Force in 2008. “The up-graded Mi-28N is a highly effective at-tack helicopter capable of a broad rangeof tasks, from aerial reconnaissance andtarget designation to engaging differenttypes of ground and aerial targets,” saysRussian Helicopters CEO AlexanderMikheev. “Its main advantages includeagility, round-the-clock operation, andincreased firepower.”

The Mi-28NM carries advancedmast-mounted all-around-lookingradar with enhanced precision strike ca-pability, including with the use of guid-ed missiles, which significantly reducestimes spent in potentially dangerous sit-uations. This improvement allowed themanufacturer to do without the base-line’s nose-mounted missile guidanceradar. The new radar is manufactured atRyazan State Instrument-makingEnterprise, whose CEO Pavel Budagovwas cited by Russian media earlier thisyear as saying the device would be ableto track four targets simultaneously,against the current Mi-28N radar’s two.

The helicopter will get a new flightcontrol system and new cockpit equip-

ment. While the original model had noflight controls in the forward gunner’scockpit, the new version can be pilotedfrom both either workstations. Dualflight controls were first implementedin the Mi-28UB combat trainer versionin 2013.

Other cockpit improvements includea new armament and navigation systemand head-up displays. The avionicssuite allows the crew to search, detect,and identify ground and aerial targets,establish their coordinates, and providetarget designation for ground and air-borne command centers. The cockpitupgrades provide the crew with “moreinformation about the environmentand all the helicopter systems in a moreaccessible format, which will increasethe crew’s situational awareness, facili-tate interaction, and increase decision-making speeds in complex combat sit-uations,” says Russian Helicopters.

According to the manufacturer, theMi-28NM has new composite main ro-tor blades, which maintain structural in-tegrity if hit by 20-30 mm projectiles.The manufacturing facility, Rostvertol,said in its annual report for 2015 that thenew blades also increase the helicopter’s

cruise speed by 13%, and its maximumspeed by 10%. The baseline version hasa maximum speed of 340 km/h.

The upgraded rotorcraft has a visiblynew movable 30-mm gun mount. Themanufacturer says the Mi-28NM canalso be armed with guided and unguid-ed missiles and bombs.

The new helicopter is less visible toground-based air defenses. Its fuel sys-tem design now precludes the possibil-ity of a fuel tank explosion or fire.

Although the Russian military placedno orders for the improved helicopterso far, they expect to receive it verysoon. The commander of the RussianAerospace Forces Viktor Bondarev saidearlier this summer that Mi-28NM canbe taken into service as soon as in 2018.

The deliveries of the baseline modelstarted in 2009 after the military selectedthis type as a replacement of the ageingfleet of Mi-24s. Mi-28N has a maximumtake-off weight of 12 ton, a cruise speedof 270 km/h and a range of 450 km. Ithas all weather day-and-night opera-tional capabilities and can carry 1,605 kgtons of weapon load. This helicopter inMi-28NE export modification has beenordered by Iraq and Algeria.

Russian military to getimproved Mi-28NMhelicopter

The improved Mi-28NM takes off at theRussian Helicopters’ test range near Moscow

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AIR TRANSPORT

Turbulent timesfor Russian air transport

Turbulent timesfor Russian air transport

Fyodor Borisov

Stagnation of Russian airtransport last year has turnedinto a crisis in 2016, as the in-dustry continues to suffer vir-

tually no growth in all areas. The slumpin air transport, caused primarily byshrinking passenger numbers on inter-national routes, has been exacerbated

by a sharp domestic slowdown in thesummer of this year, with clear indica-tions that the internal air transport mar-ket is about to reach its growth limits.

Prior to 2014, the Russian air trans-port market benefited from the follow-ing positive factors:• a growing GDP, which reflected the

general state of the country’s econ-omy and business activity;

• increases in real incomes, whichdrove demand for tourism and ad-hoc air travel;

• the high exchange rate of the ruble,which enhanced demand for inter-national air travel;

• passengers switching from rail to air,partially stimulated by the lifting ofstate control over passenger rail tick-et prices; and

• government subsidies for regional airtransport services.

By 2016, four of these five factors hadeither exhausted their stimulating po-tential or developed into negativetrends. The GDP growth has beenslowing since 2015, matched by a de-cline in business activity. The latterprocess is particularly noticeable in in-ternational economic relations which,apart from macroeconomics, have beenseriously affected by adverse politicalfactors.

With the GDP slowdown resulting inlower real incomes and curtailedspending power, the falling ruble ex-change rate has further increased thecost of vacationing abroad by as muchas 100%. These factors combined todramatically drive down the number ofinternational air passengers.

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2010 2011 2012 2013 2014 1H 2015 2015 1H 2016

0

10

20

30

40

-8

-4

0

4

8

12

16

Total passengers Passenger turnoverDomestic cargo GDP

RUSSIA'S AIR TRANSPORT STATISTICS 2010 – 1H 2016

Source: Russia’s Higher School of Economics


AIR TRANSPORT

At the same time, the falling rubleproved detrimental to those air carrierswhose primary costs are denominatedin foreign currencies. This promptedairlines to raise fares, which only exac-erbated the already dire demand.

Prior to the first quarter of 2016, con-tinued growth in domestic passengernumbers had played a somewhat stabil-ising role. But the low-yield domestic

routes were merely helping the sectormaintain its physical indicators, eventhough its financial performance wassliding downhill (the sector’s combinedlosses on domestic routes amounted to44 billion rubles in 2015, or US$699.5million at the current exchange rate,against 35 billion in 2014).

In spring of this year, analysts firstnoted that air passengers were starting to

migrate back to rail travel, primarily dueto the rising cost of airfares on domesticroutes. This development is markedlyunusual in that, anywhere else in theworld, passenger numbers have beengrowing faster for air than rail, even dur-ing recessions.

These negative factors have been fur-ther exacerbated by a number of politi-cal developments, which resulted inbans on passenger operations to Turkey,Egypt, and Ukraine.

The only growth factor currently leftto the sector are regional subsidies to aircarriers, but even these have been shrink-ing due to budget constraints. In 2012,such subsidies were viewed as a way todevelop regional air transport infrastruc-ture. Now they are considered to be re-gional carriers’ only means of survival.

The crisis has not been affecting allRussian air carriers in the same way. Anumber of airlines have been reportingsignificant growth in both physical indi-cators and financial performance.According to Russia’s TransportClearing House, Aeroflot Group carried1.8 million more passengers year-over-

Russian Aviation Insider provides the globalaerospace community with timely and reliablebusiness news, insights and analysis on commercialaviation in Russia and the other post-Soviet states.Powered by Air Transport Observer (ATO.ru),Russia & CIS’ premier information provider oncommercial aviation with a 20-year legacy, RussianAviation Insider is an invaluable tool both forbusinesses already present in the CIS and thoselooking to enter the region’s air transport market.

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DIRECT ACCESS TO RUSSIAN & CIS CIVIL AVIATION INSIGHTSIN A LANGUAGE YOU UNDERSTAND

Top Russian airlines reported significant growth in both physical indicators and financialperformance in 1H 2016 picking up the passengers of the defunct Transaero

year in the first six months of 2016 (up10.3%), generating 2.5 billion rubles inprofit; the figures for S7 Group were 1.1million more passengers (up 23.2%) and1 billion rubles. Of the 30 largest Russiancarriers, about 50% saw an increase inpassenger numbers.

Under the circumstances, these growthfigures may appear extraordinary, but aremisleading in that they were greatly con-tributed to by the collapse of TransaeroAirlines, the country’s second largest car-rier, whose passengers then switched tothe largest and most active of the remain-ing market players. This factor is expectedto stop playing a role as the crisis contin-ues. To be able to predict the direction inwhich the market is going requires an as-sessment of the current competitive en-vironment. At present, Aeroflot Groupappears to be the single largest marketplayer. The group controlled 19% of theRussian market in 2006; its share exceed-ed 50% this past winter, and continues togrow. This is due exclusively to AeroflotGroup’s dominant position, as the topplayer has enough resources to throttleany of its rivals.

Although the Russian government haspledged its commitment to safeguardingmarket competition, delivering on this

promise in the current situation requiresactive and rather hard measures, each ofwhich would come with significant risksand limitations. Apart from directly reg-ulating the activity of Aeroflot Group,the government may consider a numberof other measures to support competi-tion in the sector. It could designate car-riers on international routes; improve theexisting lease mechanisms (including theintroduction of wet-lease schemes); per-mit airlines to deploy shorter routes if

cleared by ATC; force airports to chargeairlines lower handling fees; and increasethe efficiency of subsidising mechanisms(for example, by extrapolating long-range subsidies to regional routes).

The latter measure could be bolsteredby simultaneously developing feedernetworks at the existing Russian hub air-ports of St. Petersburg, Yekaterinburg,and Novosibirsk, thus helping preserveand develop the spread of regional airservices.


AIR TRANSPORT

Top 20 Russian airlines (international and domestic flights), January-August 2016

Ranking Airline Passengers carried, thous. Passenger kilometers, mln

Jan-Aug 2016 Change to Jan-Aug 2015, % Jan-Aug 2016 Change to Jan-Aug 2015, %

1 Aeroflot 19,033 +10.2 54,350.4 +10.62 S7 Airlines 6,500 +19.2 12,378.7 +18.13 Rossiya 5,126 +50.2 11,202.4 +76.84 UTAir 4,315 +13.7 7,110.3 +1.25 Ural Airlines 4,271 +16.5 10,110,8 +14.76 Pobeda 2,882 +58.2 4,503.9 +60.47 Globus 2,327 +43.1 5,767.0 +43.38 AZUR Air 1,457 -6.5 7,382.7 +35.39 VIM-AVIA 1,396 +25.6 3,204.2 +51.0

10 Nord Wind 1,130 -41.4 3,861.8 -33.511 Yamal 1,015 -2.4 2,032.9 -8.212 Aurora 916 +20.2 1,492.0 +16.313 NordStar 884 +16.2 1,910,6 +5.414 Red Wings 668 -5.4 1,218.7 +6.215 Nordavia 624 +26.1 929.2 137.116 Ikar 620 -17.5 3,173.2 -4.317 Royal Flight 611 +1.9 2,623.2 +37.718 Orenair* 491 -75.2 1,494.3 -65.919 Yakutia 442 +1.5 1,185.5 +8.120 RusLine 393 +1.6 391.9 +11.1

Top 20 airlines, total 55,101 +9.0 136,323.7 +12.0Russian commercial aviation, total 58,473 -8.6 141,161.9 -10.8Top 20 airlines,% 94 97

Note: *- merged with Rossiya since May 2016 Source: Russia’s Federal Air Transport Agency

Key performance indicators for Russian civil aviation, by typeof service, January-August 2016

Indicators Total (scheduled and unscheduled flights)

Jan-Aug 2016 Change to Jan-Aug 2015, %

Passenger traffic, mln passenger km 141,161.9 -10.8on international routes 71,224.0 -21.1on domestic routes 69,937.8 +2.9

Freight traffic, mln ton km 16,791.2 -5.7on international routes 9,971.2 -10.8on domestic routes 6,820.0 +2.8

Passengers carried, thous. 58,472.8 -8.6on international routes 20,745.5 -26.5on domestic routes 37,727.3 +5.7

Freight and mail carried, thous. ton 600.2 +1.3on international routes 434.8 +0.8on domestic routes 165.4 +2.6

Passenger load factor, % 81,6 +0.9on international routes 82,7 -0.8on domestic routes 80,6 +3.3

Sources: Russia’s Federal Air Transport Agency.


Serhiy Khyzhnyak, Kyiv

Several Ukrainian regionalairports made the news thispast summer. Vinnytsya andChernivtsi reopened for

scheduled air traffic. UkraineInternational Airlines (UIA) launchedservices between Kyiv and Chernivtsi,and also from Vinnytsya to Warsaw andTel Aviv. Rivne airport started servingcommercial passengers again after along break, with Bravo Airlines operat-ing charter flights to Antalya. All theseairports had long been used exclusivelyby bizav operators.

The overall situation, however, re-mains far from satisfactory. According tothe State Aviation Administration ofUkraine, commercial flights currentlyoperate out of 20 Ukrainian airports.Two of these, Boryspil and Zhulyany,serve Kyiv. That leaves 18 regional air-ports, of which only five handle over100,000 passengers per year each; all fiveserve the country’s largest regional cen-ters: Odesa, Lviv, Kharkiv, Dnipro, andZaporizhzhya. The remaining airportsare mostly used by business aviation andinfrequent charter services. Scheduledflights are only operated from Ivano-Frankivsk, Kherson, Uzhhorod, andnow also from Vinnytsya and Chernivtsi.

The combined number of passengershandled by the regional airports last

year stood at 2.5 million people, or 23%of the country’s total passenger traffic.That was the lowest number since 2008;to compare, the 2013 regional passen-ger numbers amounted to 4.8 millionpeople, or 36% of overall traffic.

Such a significant decline in the num-ber of regional airline passengers is onlylogical in times of crisis. In 2008-2010,for example, Kyiv’s Boryspil saw its pas-senger traffic peak similarly compared tothe regions. This is mainly due to the factthat the capital city commands higherlevels of business activity and purchasingpower, so weathers crises better. What aremore relevant to the problem at handthough are the market situation and thestate of airport infrastructure.

Market forcesSince 2013, the Ukrainian airports havelost a third of passenger traffic to crisis-related shifts in the air transport mar-ket. A number of foreign carriers, suchas Emirates and Alitalia, left the coun-try’s scheduled passenger market.Others, including Flydubai andAustrian Airlines, cut their frequencies.The cessation of air services betweenUkraine and Russia saw someUkrainian airlines, including UTairUkraine and Windrose, discontinuescheduled operations or downsize theirroute networks dramatically. Finally,Budapest-headquartered no-frills car-

rier Wizz Air closed its Kiev office andmoved part of the Ukrainian flights toWizz Air Hungary.

UIA availed of the situation tostrengthen its position both in the sched-uled and charter market segments. Theairline carried 77% of all Ukrainian pas-senger traffic last year. It currently is thelargest carrier not only at its Boryspilbase but also at Odesa, Kharkiv, Lviv,Ivano-Frankivsk, Vinnytsya, as well as atDnipro via the local carrier Dniproavia.

Only two Ukrainian regional airportshave home-base carriers: apart fromDnipro-based Driproavia, there is alsoMotor Sich Airlines at Zaporizhzhya.The rest largely depend for their oper-ating revenues on UIA, and also on ahandful of foreign carriers, mostlyTurkish ones, including TurkishAirlines, Pegasus, and AtlasGlobal.This shaky business model complicateslong-term planning and infrastructuredevelopment.

InfrastructureApart from Boryspil, only threeUkrainian airports boast modern infra-structure. As part of the preparationsfor the UEFA Euro 2012 finals, newpassenger terminals, runways andaprons were built at Lviv and Kharkiv;Zhulyany received two passenger ter-minals and had its only runway was re-inforced and extended by 150 m. A new

Centripetal trafficPassenger numbers at Ukraine’s regional airports continue to decline amid thecrisis as prosperous Kyiv pulls ahead

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passenger terminal is under construc-tion at Odesa; the completion deadlinehas been moved forward several times,and is now set for early 2017. TheZhulyany and Kharkiv terminals werebuilt with private funds, and the Odesaproject is also a private initiative.

The other regional airports’ infra-structure mostly dates from the 1970’and 1980s, is substantially worn, andoften restricts the aircraft types that canuse the airfields.

The Ukrainian governments in early2016 adopted a program to develop thecountry’s airport network through 2023.The program calls for refurbishing theexisting infrastructure and building newfacilities at 15 regional airports. Thegovernment expects to fund the effort tothe tune of 8.7 billion hryvnyas, oraround $335 million at the current ex-change rate, over the next eight years,primarily from the state budget.

The program also implies private in-vestments in the construction of pas-senger terminals under private-publicpartnership contracts. The question iswhether private capital will take an in-terest in most of the regional airports,given their modest passenger traffic anduncertain prospects. On the otherhand, the probability of governmentsubsidies actually being allocated forthe program in sufficient amounts isfairly low, given the current state budgetshortages and the IMF-imposed re-strictions on budget spending.

The majority of Ukraine’s regionalairports are municipally owned; itwould, therefore, be in the local au-thorities’ best interest to maintain and

develop them. If no funding comes ei-ther from the state or from the localbudgets, then regional air services inUkraine may well become history.

952

941

567

374

342

128

64

54

.

20102009

2008

KYIV BORYSPIL

ODESA

KYIV ZHULYANY

LVIV

KHARKIV

DNIPRO

ZAPORIZHZHYA

KHERSON

OTHERSCOMBINED

201120122013

2014

2015

THE REGIONAL AIRPORTS' SHARE IN OVERALL PASSENGER TRAFFIC, MLN PAX

TRAFFIC THROUGH UKRAINIAN AIRPORTS, THOUS. PAX

REGIONAL AIRPORTS KYIV ZHULYANY KYIV BORYSPIL

0 4 8 12 16

4.0 / 37%

3.1 / 35%

3.5 / 34%

4.0 / 32% 0.5

6.7

5.8

6.7

8.0

8.5

7.9

6.9

7.3

0.9

0.9

1.1

1.8

4.8 / 34%

5.4 / 6%

2.9 / 27%

2.5 / 23%

0 1000 2000 3000 4000 5000 6000 7000 8000

7273

OPERATIONAL RESULTS OF UKRAINIAN AIRPORTS

Source: State Aviation Administration of Ukraine

Ukraine International Airlines carried 77% of allthe country’s passenger traffic in 2015

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Wind of changeArtyom Korenyako

The weakening ruble and theintroduction of new servicesare stimulating the Russianaviation MRO sector. The

leading providers continue to expandtheir business despite a nearly 20%shrinkage of the active airliner fleet in2015. More varieties of maintenanceservices become available domestically.

Market leaderSetting the trend on the Russian MROmarket is Engineering Holding, the par-ent company of the country’s mainte-nance providers Novosibirsk-based SibirTechnics and S7 Engineering fromMoscow. The introduction of new serv-ices, such as cabin modifications, andalso the falling prices denominated inUS dollars, have enabled Engineering to

attract a number of new clients, includ-ing Aeroflot, VIM Airlines, the KazakhDefense Ministry, Air Kyrgyzstan, AzurAir, and IFLy, as well as Rossiya Airlines,Ural Airlines, and Air Astana.

Engineering’s paint shop atMineralnye Vody airport was launched inSeptember 2014. In April and May 2016,Engineering repainted several aircraft ofUral Airlines, Air Astana, and Rossiya.For the former two carriers, this was thefirst time their Western-built airliners hadbeen given a paint job in Russia. Newlymerged Rossiya turned to Engineeringafter having its new livery applied by anumber of foreign specialists.

CompetitionOther major domestic MRO players in-clude the maintenance arms of AeroflotGroup and Volga-Dnepr Group.

Aeroflot Group’s MRO subsidiary A-Technics launched at Vnukovo in thespring of 2016. Its primary customer willinitially be the group subsidiary Rossiya,which has seen its fleet grow through theaddition of Transaero, Orenair, andDonavia aircraft. The company could al-so service its sister carrier Pobeda in thefuture. The combined Rossiya andPobeda fleet stands at nearly 100 air-frames. Then there is Aeroflot: the EASAPart 145 certificate enables A-Technics towork on 120 of the flag carrier’s airliners.

Another large domestic carrier UralAirlines launched its MRO arm inJanuary 2015. In the first year of opera-tion, the service performed nine С-checks, 118 A-checks, and 11 enginereplacement jobs, saving the carrier inexcess of 100 million rubles. “Our 2016plans include increasing the volume ofin-house MRO work by 60% and start-ing to do D-checks, the heaviest main-tenance form,” says Ural Airlines CEOSergey Skuratov.

Volga-Dnepr Technics Moscow re-portedly attempted to land a mainte-nance contract with Pobeda Airlines,but the latter eventually preferred tohave its 737-800 C-checked byVnukovo-based Vostok TechnicalServices (VTS). VTS, however, has runinto difficulties related to certainchanges at Vnukovo: the airport alsohosts fast-growing MRO provider UTGmaintenance and engineering, whichgained the approval in spring 2016 toperform C-checks on Boeing 737Classics and do certain types of main-tenance work on Boeing 777-200/300s.

Best practicesThe Russian MRO sector has beenworking on Western-made aircrafttypes for about 10 years now. In orderto catch up with the international levelof services, Russian providers have beendoing their best to replicate global bestpractices.

Engineering Holding signed agree-ments with Zodiac Aerospace and TATTechnologies this year to set up repairfacilities for aircraft toilets and heat ex-change units respectively, the first suchcenters of competence in Russia andthe CIS. In June S7 Engineeringopened the CIS-only MRO center forCFM56-5B/7B engines in partnershipwith the European provider SRTechnics.

The Russian MRO sector still has ahuge growth potential. “We expect theshare of local services to grow on theback of the weak ruble,” EngineeringCFO Roman Fyodorov said earlier thisyear. “Those carriers whose aircraft arestill serviced abroad will switch to do-mestic providers in the near future.According to our estimates, the share oflocally available maintenance serviceswill reach its ceiling shortly. Furthergrowth will largely be dependent onRussian providers’ ability to secure in-ternational contracts.”

The weak ruble will motivate Russian MROproviders to localize more maintenanceservicesLe

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BUSINESS AVIATION

Russian bizav market shrinksLocal operators are availing of the recession to boost their market presence

Anna Nazarova andEkaterina Sorokovaya

For the past two or three years,international analysts havebeen observing a reduction inRussia’s share on the global

business aviation market. The trend is be-ing explained, among other factors, by themilitary aggression in Ukraine, the overallpolitical situation, the strong US dollar ascompared to the Russian national curren-cy, and most importantly, the falling oiland gas prices. Russian players are also re-porting a decline in bizav passenger num-bers, and are using the situation to boosttheir market presence.

One of the most prominent indicatorsof a changing global attitude towardsRussia and the CIS comes in the form ofBombardier Aerospace’s annual fore-casts. The Canadian manufacturer isknown for its overly positive, sometimesevidently overrated 10-year forecasts forglobal business jet deliveries. However,when it comes to Russia and the CIS,these predictions have been growingconsistently more conservative of late.In 2009, Bombardier projected 600 newbusiness jet deliveries to the region; in2015, that figure dropped to 510 and thisyear, to 400.

Even so, Bombardier, whose positionsin Russia are historically strong, continuesto believe that the market will recover.Jean-Christophe Gallagher, Bombar dierVice-President for Strategy, Mar ketingand Innovation, says the company’s sharein the total number of new business-jet de-liveries to Russia and the CIS will exceed50% in the next 10 years, mostly in themost expensive and spacious Large CabinJets and Heavy Jets classes. Bombardierhopes that the oil and gas prices willbounce back, but admits that business avi-ation deliveries to Russia have reached thelowest position across the world, with themarket expected to grow by a meager0.6% this year.

Other experts also hope that the oilprices will start growing again. Says BrianFoley, head of Brian Foley Associates:“Oil-dependent businesses and regionsprefer large airplanes, particularly in thedeveloping markets whose geographiclocation requires super-long-range jettransports. However, this sector has so farbeen seeing low oil prices.”

The slumping oil prices are evidentlyaffecting not just the actual and forecastbusiness jet deliveries to Russia but alsothe global interest in the country in gen-eral: analytical firms like Teal Group,Brifo, and Rolland Vincent have

dropped the country from their forecastsaltogether. Russian operators have alsobeen concerned about the shrinking bizavmarket. In early September, the RussianUnited Business Aviation Association(RUBAA) reported that Russian airportshad served 65,138 bizav passengers in thefirst six months of the year, against 73,692and 88,052 for the same period in 2015 and2014, respectively. In August, a total of5,960 passengers were carried on interna-tional bizav flights originating or terminat-ing in Russia, compared to 7,290 in August2015 and 7,800 in 2014. The domestic fig-ures for the same months stood at 4,362 for2016 and 4,800 for 2015.

Russian bizav operators are trying toavail of the crisis and increase theirmarket presence, says RUBAA chair-man Alexander Kuleshov. A total of5,062 Russian operators were present atthe Moscow airports in the first sixmonths of 2016, or 20% more than in2015 and 22% more than in 2014. Thenumber of foreign operators is stillmuch greater at 14,169, but the figurehas shrunk by 20% compared to 2015and by 34% compared to 2014.

RUBAA says 80% of all Russian bizavtraffic passes through Moscow, Yekate -rin burg, Samara, Nizhny Novgorod,Ros tov-on-Don, and Sochi, with trafficvia the Moscow airports periodicallyreaching 75% of all bizav flights operat-ed in the country.

Kuleshov says the most popular inter-national destinations for bizav flightsfrom Moscow this year have been Nice(10% of all flights), London (7.3%), andGeneva (2.6%). The top 10 also includesRiga, Paris, Vienna, Homel, Olbia,Minsk, and Zurich. Domestically, themost frequent bizav flights from Moscoware to St. Petersburg (18%), Sochi (7%),Simferopol (2.8%), as well as to Kazan,Kaluga, Yekaterinburg, Anapa, andKrasnodar.

Traffic via the Moscow airports periodicallyreaches 75% of all bizav flights operated in Russia

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SPACE BUSINESS

Second chancefor Sea LaunchThe owners of Russia’s second largest airline invest into a space project

Maxim Pyadushkin

The Sea Launch project hasbeen given a new lease of lifewith a new investor, Russia’sS7 Group, whose sub-

sidiaries include the country’s secondlargest carrier S7 Airlines. “I can’t be firstin aviation, there is Aeroflot (Russia’slargest airline – ed.), so I will become firstin space,” S7 Group owner VladislavFilev commented when asked to explainhis investment, which appears to be apromising but risky start-up.Nevertheless, S7’s success in the Russianairline business could contribute to radi-cal changes in the space launch sector.

Under the agreement signed at theInternational Astronautical Congressin Guadalajara, Mexico in lateSeptember, S7 Group will acquire all ofSea Launch’s material assets, includingthe vessel Sea Launch Commander, thelaunch platform Odyssey, and theground equipment in the US port ofLong Beach, as well as the Sea Launchtrade mark.

The deal is to be closed within sixmonth of obtaining the approval fromthe US Directorate of Defense TradeControls and the Committee onForeign Investment for transferring thecommand vessel and launch platformunder Russian control. Putting thelaunch pad back into operation andpreparing for the first launches will takeanother 18 months, Filev explained.The project will be managed by S7Group’s newly created subsidiary S7Space Transport Systems.

According to Filev, the Odyssey stillhas between 15 and 20 more years ofservice life left: “We hope we can per-form up to 70 more launches without

major investments in upgrading the SeaLaunch [platform].” The Odyssey canaccommodate a maximum of sixlaunches per year.

Sea Launch was founded in 1995 touse mobile a maritime platform forequatorial launches of Ukrainian-madeZenit-3SL rockets. The liquid propel-lant launch vehicle can deliver 6,160kilograms of payload to a standard geo-synchronous transfer orbit.

The initial partners on the projectwere Boeing (40%), Energia (25%),Norwegian shipbuilder Aker Kvaerner(20%), and also Ukrainian rocket man-ufacturers Yuzhmash (10%) andYuzhnoe Design Bureau. The firstdemonstration launch was performedin 1999; since then, the company hasmade a total of 36 launches, 32 of themsuccessfully.

Sea Launch filed for Chapter 11bankruptcy protection in 2009. As a re-

sult, Energia managed to increase itsstake to 95%, with Boeing and Aker leftto share the remaining 5%. The com-pany resumed launches in 2011, butsuspended operations again in 2014.

The program has a spinoff project,Land Launch, with modified Zenit-2SLB and Zenit-3SLB rocketslaunched from Russia’s main spaceportBaikonur in Kazakhstan.

S7 will now partner with EnergiaCorporation, one of Russia’s largestlaunch vehicle manufacturers, to joint-ly operate the program. Energia willprovide the necessary engineering assis-tance for the launches and associatedintegration services. S7 will deal withmarketing and sales, Filev noted: “Thecapability to perform a launch is not akey technology today. What matters isthe skill to sell that launch.”

Filev plans to offer a new approach tothe space launch sector. His company

The Sea Launch new investorVladislav Filev hopes the platform

can perform up to 70 morelaunches without major investments

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SPACE BUSINESS

will sell launch services with the use ofthose rockets which have already beenassembled. “First comes the rocket, andonly then the customer,” he stresses. Thenew investor suggests applying a leasemechanism to the space sector, the wayit works in the air transport world: “Morethan 50% of all the aircraft in the worldare being operated through leasing, soairlines enjoy low acquisition costs. I be-lieve that in the future, launch vehicleswill be purchased through financial in-stitutions, just as it is done with airlinersnow.” Filev is convinced such an ap-proach can help cut launch preparationtimes significantly. This, in turn, wouldattract new clients, and the growingbacklog of orders would enable the com-pany to bring the launch costs down.

Sea Launch has a small reserve ofrockets left over from cancelled launch-es, Filev says. However, finding newlaunch vehicles may present a majorproblem for the Russian investor.

The latest launch from the Odysseywas performed in May 2014, and theLand Launch project was suspended inSeptember 2013. Russian-Ukrainianaerospace cooperation has since beenfrozen due to the deteriorating relationsbetween Moscow and Kiyv over theRussian annexation of Crimea and thearmed conflict in the east of Ukraine.So it is not clear now whether

Yuzhmash will be willing to supplymore Zenit rockets for future launches.

Nevertheless, the new Sea Launchowner hopes to strike a deal with theUkrainian manufacturer for new deliv-eries. “If they (Yuzhmash –ed.) cansupply us with a rocket, then we will

buy it; if not, then it will be their loss,”Filev explains, noting that other launchvehicle types might also be used.

An alternative launch vehicle is likelyto come from Russia. Energia CEOVladimir Solntsev says his companycould offer a new rocket to the SeaLaunch investor. Energia is prepared todesign a medium launch vehicle in fiveyears under what is provisionallyknown as the Phoenix project; thisrocket could also be used as a boosterfor future heavy launch vehicles.

The Phoenix launch vehicle is viewedas a possible replacement for Zenit; itsdevelopment would be funded underthe federal space program through2025. The design phase is expected tostart in 2018.

Another solution would be to useAngara 1.2, the light version of Russia’s

new Angara launch vehicle, whose triallaunch was performed from Russia’sPlesetsk spaceport in July 2014.However, in order to be used for SeaLaunch the rocker needs to be modifiedto enable Zenit-like automated launchcountdown. Zenit counts down and

launches fully automatically after thepersonnel has been evacuated from theOdyssey to the Sea Launch Commander.

Filev says S7’s cooperation withEnergia will not be limited to the SeaLaunch project, but will also involvethe creation of space transportation in-frastructure: “The acquisition of alaunch platform is our entry ticket forthe space industry. Space infrastructureis developing rapidly. From our point ofview, this is a very interesting businesswith good long-term prospects.” Filevhas a space background: he graduatedfrom Military Space EngineeringAcademy in St. Petersburg and did hismilitary service in the Russian StrategicMissile Forces in 1985-1993.

Sea Launch is not the first non-corebusiness for S7 Group. Privately-owned S7 Airlines, together with its sis-ter carrier Globus, are facing growingdomestic market pressure from the gov-ernment-owned giant Aeroflot. This isforcing the S7 Group owners to lookfor other development opportunities.Among their non-core investments areRussian MRO provider EngineeringHolding, US-based general aviationmanufacturer Epic Aircraft, and aCypriot start-up, Charlie Airlines,which has recently been granted theright to use the trademarks and brandof bankrupted Cyprus Airways.

All these projects, however, werepurely business investments, while theSea Launch effort could serve as ademonstration to the Russian govern-ment that the private company is pre-pared to share the burden of expandingthe country’s industrial and technolog-ical capabilities.

S7 Group acquires all of Sea Launch’s materialassets, including the commander vessel, the

launch platform, and the ground equipment

Boe

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An alternative rocket for the Sea Launchprogram is likely to come from Russia

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