№ 1 (43) November 2016

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

• AEROSPACE INDUSTRY Innovative electronic technologies Russia/CIS Observer is produced by: Russia and China move to industrial from Russia...... 14 Publisher partnerships ...... 2 Russian military to get improved Evgeny Semenov Russian government to support Mi-28NM helicopter ...... 16 Editior"in"Chief Maxim Pyadushkin aerospace manufacturers ...... 4 Art Director UAC CEO on new level • AIR TRANSPORT Andrey Khorkov Sales & Marketing Director of cooperation with Beijing ...... 5 Turbulent times for Russian Oleg Abdulov SSJ 100 in quest for efficiency ...... 6 air transport ...... 18 Commercial Director Sergey Belyaev Russian-assembled Il-114 Centripetal traffic in Ukraine ...... 22 Cover Photos to fly in 2019 ...... 9 Wind of change Artyom Anikeev, Fyodor Borisov, Marina Lystseva Ukrainian Antonov looking for Russian MRO ...... 24

All rights reserved. for new partners ...... 10 No part of this publication may be • BUSINESS AVIATION reproduced in whole or in part without Titanium success ...... 11 the written permission of Russian bizav market shrinks ...... 26 A.B.E. Media. • DEFENSE A.B.E. Media cannot be held responsible for any claim, error, omission or inaccuracy in advertising Guided weapons against aerial • SPACE BUSINESS material supplied by advertisers. and naval targets ...... 12 Second chance for Sea Launch ...... 27 © № 1 (43), November 2016 Tel.: +7 (495) 626 5356. E-mail: [email protected] Correspondence: P.O. Box 127, Moscow, 119048, Russia Visit our website at www.ato.ru/rco

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

From direct sales to industrial partnerships Russia and China have decided to join efforts under two major aircraft development programs

Maxim Pyadushkin m o c . o

ussia and China share a t o h P - t

long history of aerospace r o p s n a

cooperation. Beijing re- r T

g r

mains a major customer e b r e a

R F for Russian combat aircraft and mili- d i n o tary aviation technology. Some of them e L are transferable to indigenous programs. These time-honored relations registered in the Pudong district of the their conceptual designs for the new are now moving from direct sales to in- Shanghai free trade zone, COMAC’s aircraft family. These designs will now dustrial partnerships. Another mile- home region. have to be reconciled, an UAC official stone was passed this summer, when The assembly line for the future air- explained earlier this year: “The results Moscow and Beijing provided govern- liner, which is known in China as C929, of this will enable us to pass the Gate 2 ment-level support for the joint devel- will also be located in Shanghai. procedures this year.” The Gate 2 mile- opment of a new widebody commercial According to Slyusar, the location stone usually involves the approval of aircraft and a heavy helicopter. choice was caused by the necessity to the preliminary design. The relevant intergovernmental place the production line closer to the Earlier, UAC estimated the program agreements were signed during Russian potential markets which, apart from cost at $13-20 billion. The future wide- President Vladimir Putin’s visit to Russia and China, include Southeast body aircraft is expected to make its Beijing in June. Although both pro- Asian countries. maiden flight in 2021, with deliveries grams are being promoted as joint ef- UAC is prepared to perform most of projected to begin after 2025. The air- forts, they seem to differ in the way the the design work involved in the C929 de- liner will carry about 280 passengers to parties are planning to contribute. velopment. The company’s 2015 annual up to 12,000 km in the baseline config- report says its subsidiaries conducted uration. The other two planned ver- Widebody aircraft technical research on various aspects of sions are to accommodate 250 and 320 China’s COMAC and Russia’s United the future widebody long-range aircraft passengers. Aircraft Corporation (UAC) launched last year. This effort was financed by the The partners expect to start selecting the development of a new widebody air- Russian government, and included re- suppliers as soon as the preliminary de- craft back in 2014; the parties have now search on the airliner’s avionics, aero- sign has been approved. The aircraft will agreed that the program will be man- dynamics, composite wing, fuselage, need a modern engine with up to 35 t aged by a special joint venture, to be set landing gear, and fuel system. UAC sub- thrust. According to Slyusar, requests for up on a parity basis. According to UAC sidiary Tupolev also studied the feasibil- information had already been sent to CEO Yury Slusar, the company, to be ity of applying a more electric aircraft Rolls-Royce and General Electriс, the registered by the end of 2016, will be re- concept on the aircraft, while Ilyushin only two engine houses capable of sup- sponsible for the aircraft development, studied the possibility of heavily upgrad- plying powerplants in this thrust class. A sales, after-sales support, and also for ing its Il-96-300 jetliner. Russian engine is also a possibility, but investment and financing throughout UAC and COMAC put together en- development of the most suitable design, the project. The joint venture will be gineering teams, which came up with Aviadvigatel’s PD-35, has just begun.

2 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 ADVERTISMENT AEROSPACE INDUSTRY

As for suppliers of other subsystems, concentrating all its resources on the tion will be subsequently defined by a a representative of Russian specialist MS-21 single-aisle program. The new general contract and a development Technodinamika told Russia & CIS aircraft is expected to fly in early 2017. subcontract. Russian Heli copters is un- Observer his company expected to re- derstood to have hoped to develop the ceive a request for proposals in the sec- Advanced Heavy Lifter AHL’s main gear, tail rotor, and anti-ic- ond half of 2016. Technodinamika has The joint program to develop a new ing system. The intergovernmental recently been awarded a contract from heavy helicopter, known as Advanced agreement does not specify the develop- the Russian Ministry of Industry and Heavy Lifter (AHL), does not appear ment schedule, but Russian Heli copters Trade for developing eight subsystems to be offering equal participation terms says it expects the new helicopter to be for a widebody long-range aircraft; to Russia. Originally reported as a joint certified by 2025. these could be used by the Russian- effort by China’s Avicopter and The AHL development effort was of- Chinese program in the future. The Russian Helicopters, the AHL will in ficially launched in May 2015, with a systems are for power supply, air condi- fact be Chinese-developed and framework agreement signed between tioning and pressurization, inert gas Chinese-built. The intergovernmental Russian Helicopters and Aviation generation, fire protection, de-icing, agreement signed in June says the pro- Industry Cor poration of China (AVIC, and oxygen supply. gram will be fully managed by Avicopter’s parent company). The ro- UAC could use the joint program to Avicopter, including the design, proto- torcraft is expected to have a take-off complement its product range. UAC type assembly, testing, certification, se- weight of 38 tons, and to be able to car- still runs the assembly line for Ilyushin ries production, and marketing. ry 10 tons of cargo internally or 15 tons Il-96 widebody airliners, but produc- Russian Helicopters will be contract- on an external sling. In the fall of 2015, tion has dropped to several airframes ed to develop certain systems. Avicopter reported that the AHL would per year under a government contract. Representatives of the Russian manu- have a ceiling of 5,700 meters, a range Independent development of a new facturer explained to Russia & CIS of 630 km, and a maximum speed of widebody is quite difficult as UAC is Observer that the company’s contribu- 300 km/h.

Corporation (UAC), will burg. Up to 700 million likely receive a major part of rubles will be allocated for the planned funding. the effort to localize L-410 Up to 9.6 billion rubles will production under a franchis- be allocated for the program ing contract with Aircraft to resume production of the Industries, which itself is 64-seat Ilyushin Il-114 re- owned by Russia’s Ural gional turboprop. UAC is Mining and Metallurgical m o c . o t planning to transfer Il-114 Company. o h P - t

r assembly from Tashkent, The government’s aid to o p s n a

r Uzbe kistan to its facility in the sector in the form of T

United Aircraft Corporation o

s Russia’s Ulya novsk. Another 899.2 million rubles’ worth i r o

is likely to be a major recipient of B

r 5.3 billion is reserved for up- of guarantees for bond-se- o

government funding in 2017 d o y F grading the Ilyushin Il-96 cured loans will be extended widebody jetliner. The pro- to UAC for the new gram is facing a lack of com- Aviadvigatel PD-14 14-ton mercial orders, but the man- turbofan engine, which has Russian government ufacturer expects specialized been selected to power versions for government cus- Irkut’s MC-21 narrow-body to support aerospace tomers to help build its port- aircraft. The powerplant is folio. currently being flight-tested manufacturers Another project eligible on an Il-76LL testbed. he Russian government dustry in 2017. According to for state support involves Deliveries of PD-14-pow- T plans to allocate 16.5 the draft document specify- production of Czech Let L- ered MC-21s are expected to billion rubles ($262 million ing next year’s federal budg- 410 19-seat turboprops at begin in 2019. at the current exchange rate) et, the country’s largest Ural Works of Civil Aviation The aforementioned sums for supporting the country’s fixed-wing aircraft manufac- (UWCA, part of Rostec will be allocated in 2017- commercial aerospace in- turer, United Aircraft Corporation) in Yekaterin- 2019.

4 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 AEROSPACE INDUSTRY

praised the airliner for its high reliability and good performance. Our program to develop the MC-21 airliner is edging to- New level wards the first flight. The portfolio for the type is mainly represented by Russian customers, but we also have orders from of cooperation foreign companies. – Could you provide more details on UAC’s third project, the one to design a widebody airliner? – This is indeed our third global project; we are implementing it in partnership with COMAC. This way we hope to offer an internationally competitive solution in the most popular civilian airliner segments. We believe this cooperation to be very important: in order to be successful on m

o the highly competitive market, we are c . o t o

h joining intellectual and technological re- P - t r o

p sources with our partner. We will rely on s n a r T

/ our countries and the primary markets for

g r e b

r the aircraft. Both partners have comple- e a F

d i menting unique competencies to offer, n o e L allowing us to share the risks and, not less importantly, the financial costs involved. China is an established customer for Russian military aerospace products; recently, We are currently in talks over the dis- the two countries have also been developing successful cooperation on a number of tribution of development and produc- commercial aircraft programs. Yuri Slyusar, president of the United Aircraft tion workloads, and certain agreements Corporation (UAC), told Russia & CIS Observer about the joint projects presented have already been reached: in particu- at Arishow China 2016. lar, Russia could manufacture the wing and empennage with the use of an ad- – Mr Slyusar, how comfortable does including the rolling-out of the first vanced composite infusion technology, UAC feel on the Chinese market? Irkut MC-21 flying prototype, the de- whereas our Chinese colleagues could — This year we witnessed the signing of cision to resume Ilyushin Il-114 pro- be responsible for the fuselage and for an intergovernmental agreement on the duction, and the presentation of the final assembly. joint development of the new widebody first Taganrog-assembled Beriev Be- – What about the future airliner’s long-range aircraft, and the founding doc- 200ChS amphibious aircraft. The gen- characteristics? uments were finalized for a joint venture to eral trend, therefore, is towards boost- – It is too early to discuss any precise be registered in Shanghai shortly. These ing the civilian component of our over- performance specifications, size, and were important milestones demonstrating all output. weight; what is already known at this both parties’ commitment to long-term co- UAC plans to diversify the structure of stage is that the baseline version will operation for the benefit of the project. We deliveries and considerably increase the seat 280 passengers, and will have a are also working on military programs and share of revenues coming from civilian range of around 12,000 km. We are on a number of other commercial and spe- sales. Our aim is to bring this share up to planning to design a family of three air- cialized aviation projects, so more news are 40% or more in the future. Our Sukhoi liners; apart from the baseline, there to come. These developments indicate that Superjet 100 (SSJ100) aircraft have been will be an aircraft seating fewer passen- the level of cooperation between the two performing well with Mexican carrier gers and a stretched version. Deliveries countries is growing, and that Russia is in- Interjet, which currently operates 20 of are expected to begin beyond 2025; this creasingly focusing on the Chinese market the type. Irish regional airline CityJet will help us ensure the necessary level and on the Asia-Pacific region in general. has started operating the type on its of competitiveness. The COMAC stand – Could you expand on UAC’s civilian European flights, including in the inter- here at Airshow China 2016 features a programs? est of major EU carriers. At a recent model of the future airliner. — This year has seen several develop- conference of the European Regions This interview is prepared by ments related to our civilian products, Airline Association in Madrid, CityJet Maxim Pyadushkin

RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 5 AEROSPACE INDUSTRY

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

Maxim Pyadushkin Finmeccanica is also likely to mini- output volumes dropped to 17 in 2015, mize its stake in SuperJet International mainly due to a decline in demand he Sukhoi Superjet 100 (SJI), another joint venture with from Russian airlines. (SSJ 100) regional jet re- Sukhoi. The Venice-based company In the fall of 2014, the Russian gov- mains Russia’s major com- provides SSJ 100 maintenance services ernment decided to support SCAC by T mercial aviation program, and personnel training, as well as cus- injecting 36 billion rubles (around $880 but low sales are prompting the project tomizing and delivering aircraft to for- million at the time) into its share capi- partners Sukhoi and Finmeccanica to eign customers. The Russian media al- tal. The additional shares were pur- revise their participation and the cur- so reported that Finmeccanica could chased by Sukhoi, which brought its rent marketing approaches. They are cut its interest in the joint venture from stake in the company up to 94.47% and also planning to break into new foreign the current 51% to 10%. left Finmeccanica with just 5.53%. The markets, including China. Sukhoi’s parent company United partners agreed that, despite the share At the end of September, the Russian Aircraft Corporation (UAC) and SCAC dilution, the Italian company would re- authorities gave a final formal approval similarly declined to comment, saying tain a blocking stake in SCAC until to Sukhoi’s plan to consolidate 100% of the details would be released at a later 2017, and then invest at least $390 mil- SSJ 100 manufacturer Sukhoi Civil date. An industry source told Russia & lion to regain its share. Aircraft Company (SCAC). The coun- CIS Observer that the SCAC consolida- However, Finmeccanica itself is un- try’s antitrust body cleared Sukhoi to tion process might be completed before dergoing a restructuring process, in the purchase 25%+1 voting shares in year-end. course of which the group will have its SCAC, noting that the deal would not Talks to change the format of name changed to Leonardo and shed a affect market competition. Finmeccanica’s participation in SSJ number of loss-making projects; the The blocking stake was previously 100 have been on for about two years SSJ 100 is understood to be one of them. held by Finmeccanica (and before that, now. Finmeccanica is not satisfied with Despite these complications, the to Alenia Aeronautica), a strategic part- the program’s efficiency. SCAC rolled Russian program had made serious ner, which had invested $183 million in out 35 airframes in 2014, the all-time progress in 2016 with the first delivery to the SSJ 100 program back in 2009. record since production launch, but a European customer. Irish-based m o c . o t o h P - t r o p s n a r T

g r e b r

Irish-based CityJet became the first e a F

d European operator of SSJ 100 i n o e L

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

AEROSPACE INDUSTRY

CityJet received two aircraft earlier this ing, certification to the Chinese avia- Shaanxi Province, and Chinese lessor year, with 13 more on order. The third tion standards, and maintenance, as New Century International Leasing to aircraft is to be delivered in October, with well as arranging financial support for set up a joint venture that would lease delivery rates projected to speed up over aircraft deliveries and participation in Superjets to operators in China and time to one airframe per two months. industrial cooperation projects. Lee elsewhere across Southeast Asia. The CityJet used its SSJ 100s for charter identified both Chinese carriers and new entity was expected to purchase up flights and wet-lease operations this lessors as potential customers. to 100 SSJ 100s within a period of three summer. The airline also wants to oper- SCAC considers China to be a highly years, with deliveries to China expected ate the Russian aircraft on its scheduled promising and consistently growing to begin in 2016. services from London City as soon as the commercial aviation market. The com- In China, the SSJ 100 will be pitted aircraft is certified for steep approach pany estimates local demand for regional against both Western rivals and the lo- landings. According to SCAC, certifica- aircraft at between 1,000 and 1,300 units cally designed Comac ARJ21 passenger tion will require the addition of winglets for the next several decades. Lee says the jet, which commenced revenue opera- and certain adjustments to the flight Russian airliner could get at least 10% of tions in June this year. control system. The modified version is that market: “It is a long-term strategy Along with the export opportunities, to enter production after 2018. for the company involving a lot of work, SCAC is looking for more domestic Another new important customer for human resources, investment, and ef- clients. The Russian airframer plans to SCAC, the Royal Thai Air Force, took forts, and it will take time, but we have a have built 27 aircraft this year. According delivery of two extended-range very big commitment for this.” to the Russian Minister of Industry and SSJ 100LRs in VIP-configuration this According to the head of the Beijing of- Trade Denis Manturov, SSJ100 produc- July. The aircraft will be operated in the fice, there are plans to validate the EASA tion rates are expected to reach 34 air- interests of the country’s leadership, sen- certificates for both the aircraft and its frames in 2017 and 40 in 2018. ior officials, and military high command. powerplant locally. “We have already The Russian government effectively Their cabin interiors feature three areas: launched this work,” Lee said. re-launched the SSJ100 leasing system a four-passenger VIP zone, a six-passen- According to sources in Russia’s for Russian operators last year by re- ger business class, and a standard area United Engine Corporation (UEC), capitalizing GTLK State Transport seating up to 50 passengers. Both airlin- PowerJet, a joint venture between UEC Leasing Company with 30 billion ers come with multimedia and assorted subsidiary NPO Saturn and French rubles, which will enable the lessor to purchase 32 airframes and lease them SSJ 100 VIP configuration is used to domestic regional carriers. to carry Russia’s high-ranking GTLK has managed to find new op- government officials erators for already-assembled jets, including Siberia-based IrAero, which opted for four aircraft and has plans to add four more of the type. One of the m o c .

o existing domestic operators, Yakutia, t o h P - t has refinanced its SSJ 100 deal with r o p s n

a GTLK and is looking to expand its r T

/ n i Superjet fleet. h s i M

r SCAC also expects another major or- e d n a x der from Aeroflot, the Russian flag car- e l A rier and the local launch customer for telecommunications systems, including powerplant specialist Safran Aircraft the type. The airline has just taken de- IFE, which is a first for the SSJ 100. Engines, has put together a dedicated livery of the final airframes under the SCAC plans to boost Asian sales, and team that will take part in the Chinese initial contract for 30, and is now in is particularly eyeing China, which is the certification of the SSJ 100’s SaM146 talks with the manufacturer to firm up region’s largest market. The Russian engine. its option for 20 more. manufacturer announced in July that it The Beijing office’s announcement Another important new customer was planning to open its first overseas follows SCAC’s earlier effort to pro- for the program was Russia’s govern- client liaison office in Beijing by the end mote the airliner on the Chinese mar- mental air squadron Rossiya. This of the year. The office will report directly ket. In May 2015, its parent company company that provides the transporta- to the SCAC Moscow headquarters. UAC signed a framework agreement tion of the head of the state and other Lee Li, head of the Beijing office, with the Russia-China Investment country’s high-ranking officials, start- told Russia & CIS Observer the Chinese Fund, the Administrative Committee ed the operations of a pair of SSJ 100s operation will involve SSJ 100 market- of Xixian Fendong New Town of this summer.

8 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 AEROSPACE INDUSTRY

Russian-assembled Il-114 to fly in 2019 ussia’s United Aircraft to use the existing inventory m o c Corpo ration (UAC) is of the Tashkent factory. A . o

R t o h P

expanding its commercial fully Russian-made aircraft is - t r o p s

product range by way of re- to fly in 2019.” n a r T

suming production of the According to Velmozhkin, v o s i r o

Ilyushin Il-114, a Soviet-de- the Ilyushin Design Bureau l-114 may become the first turboprop B

r o d

aircraft in UAC product range o

signed passenger turboprop has already started accumu- y F model. The first flight of the lating design documentation Russian-assembled Il-114 is and readying the terms of ref- aiton plant in Nizhny (about $820 million). The scheduled for 2019; deliveries erence for the modernization Novgorod. UAC CEO Yuri Il-114, a 64-seat turboprop are expected to start in 2021. project. The all-new Slyusar explained earlier this with a maximum range of Prior to 2012 the aircraft was Ilyushin-114 will have to un- year the remaining Il-114 1,500 km, first flew in 1990 manufactured at the Chkalov dergo additional certification. fuselages stored at TAPO had and was certified in Russia TAPO facility in Tashkent, “We will make the first com- been inspected, and that talks in 1997. Before going bank- Uzbekistan. mercial delivery in 2021,” were on over the possibility to rupt in 2012, TAPO assem- “The first flight of the ren- Velmozhkin says, adding that use them: “This could speed bled 17 of the type. Two Il- ovated Il-114 is scheduled for the aircraft will also be offered up the aircraft’s first flight.” 114s, powered by 2,500 hp 2018,” Ilyushin CEO Sergey in medevac, patrol, and anti- Sokol will be able to build Klimov TV7-117S engines, Velmozhkin commented for submarine warfare versions. 12 aircraft per year. UAC were operated by Russian TASS news agency in Production will be puts the estimated program regional airline Vyborg in October. “We hope to be able arranged at the Sokol avi- cost at 55 billion rubles 2002-2010. T N E M S I T

R AEROSILA

E A world-wide known developer and manufacturer of air propellers and APUs V

D at the 11th China International Aviation & Aerospace Exhibition 2016 A

Today In the near future AEROSILA The APUs, developed by AEROSILA, are plans to develop: used in (being delivered now to China) Su- • advanced small size gas turbine engines 35 aircraft, Ka-31 helicopters, and propfans • high electric output board power units for an im- are used in hovercrafts. AEROSILA designs plementation of the “electric aircraft” concept and manufactures: • base gas generator for small size propul- • the new generation of APUs for new, mod- sion engine ernized and prospective aircraft and helicopters Tomorrow • air propellers and propfans ranging up to AEROSILA is ready to develop an APU for the 30,000 hp with aerodynamic efficiency up Russian-Chinese project of a Long-Range to 0.9 Wide-Body Commercial Aircraft (LRWBCA) and In the Past • lifting and propulsion mechanisms for has already submitted the relevant technical The Chinese market has known AEROSILA’s hovercraft proposal based on New Gen APU TA18-200MC. products since long time ago. The air pro- • power converters for supersonic aircraft pellers, such as AB-68, AB-72, and their The current China International Aviation & Aero - • influx and exhaust fans, jet axial fans for modifications, were installed on the aircraft space Exhibition 2016 has been also mar ked by tunnels and underground premises supplied from the Soviet Union to China for the signing a Protocol between AEROSILA, both civil and military aviation. Some of NEIAS and AVIC International on making the them were licensed to be produced in China On Customer’s APU for the Advanced Heavy-Lift (AHL) heli- for various Chinese-designed aircraft. demand AEROSILA provides: copter, being based on APU TA18-100. The auxiliary power units (APU), designed • Adaption of serial products to the and built by AEROSILA, such as the early Customer’s requirements TA-6A and later other “TA” models, were • Design and development of new products widely used on the Ilyushin, Tupolev, • Localization of manufacture under a li- Antonov aircraft, Mil helicopters. cense agreement

RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 9 AEROSPACE INDUSTRY

Ukrainian manufacturer looking for new partners Deteriorating relations between Kyiv and Moscow are robbing Antonov of access to the Russian market.

Valentin Makov The first and only example of the six- “Our cooperation on the Ruslan’s new engined An-225 was built in the mid- tires started successfully, as confirmed by he soured relations between 1980s as the transport for the Soviet the testing results,” Antonov President Kyiv and Moscow over an- Buran space shuttle and for compo- Oleksandr Kotsiuba remarked, adding nexed Crimea and the con- nents of the associated Energia launch that the Dunlop product’s advantages in- T flict in the east of Ukraine vehicle. After the space project fell clude an EASA authorization and com- are affecting bilateral aerospace coop- through, the aircraft was repurposed for petitive prices. The new equipment is to eration. Ukrainian airframer Antonov transporting outsize and heavy com- be installed on the first An-124 in the has lost access to the Russian market, mercial freights. The Mriya is currently course of a heavy maintenance check. and is now seeking new partners and operated by the OEM’s subsidiary car- The Ukrainian company has prior pos- suppliers for its programs. rier Antonov Airlines, whose fleet also itive experience working with Dunlop, China was considered as one of the ma- includes seven An-124-100 Ruslan su- whose tires are used on its An-148 and jor options. In August this year, Antonov per-heavy freighters. An-158 regional jets. The freezing of co- managed to secure a Chinese investor for Antonov is working to minimize its operation with Russia has critically af- reviving production of the An-225 Mriya, reliance on Russian parts suppliers for fected Antonov’s production schedule for the world’s heaviest transport aircraft. The both the An-225 and the An-124. The these two types as well: not a single deliv- Ukrainian manufacturer signed a cooper- company first announced plans to ery is planned for 2016. “The two aircraft ation agreement with Aerospace Industry westernize the two types in late 2015. built in 2015, one An-148 and one An- Corporation of China (AICC). The initial The first step in this process will involve 158, were the last ones to leave the com- phase of cooperation calls for completing finding news suppliers for the tires, pany’s assembly facilities,” Andriy the second An-225 airframe, which is brakes, and avionics. Khaustov, deputy director of the Antonov currently stored at about 70% completion New An-124 tires, developed by advanced development division, said ear- at Antonov’s production site. The aircraft Dunlop Aircraft Tyres, were trialed at lier this year in an interview to Ukrainian is then to be handed over to the Chinese Antonov’s testing facility in October. radio station Vesti. “Several airplanes are corporation. Subsequently, the partners The tests involved an An-124-100M- still not completed. For the time being, are planning to organize An-225 produc- 150 with take-off weights of 340 t, 360 we need to find alternatives to all the tion in China. Rather than selling its in- t, and 402 t, and with different CG po- Russian components.” This also includes tellectual rights to the aircraft, Antonov sitions. The take-offs and landings were avionics, which will most likely be substi- intends to launch fully licensed series pro- performed within the limits of expected tuted with products by Canadian manu- duction jointly with the Chinese partner. operational conditions. facturer Esterline. Antonov hopes it will still be able to launch commercial production of its An-148 and An-158 passenger jets in 2017. The manufacturer’s ambitions are to commercialize the new An-178 light transport aircraft in 2017, as well m o

c as finalizing, by year-end, the first An- . o t o h 132D turboprop (D stands for demon- P - t r o p

s stration aircraft), which was exclusively n a r T

designed for Saudi Arabia. The compa- g r e b r

e ny stresses that this aircraft will not a The assembly of Antonov An-225 F d i n freighters may be restored in China contain any Russian-supplied compo- o e L nents.

10 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 Titanium success A M S Russian titanium producer VSMPO-AVISMA I Russian titanium producer VSMPO-AVISMA V A - O P M workiing to iincrease share off vallue--added products S V

Maria Ivanova the domestic market thanks to the weak went to the US, 41% to Europe, 7% to ruble. VSMPO-AVISMA expects to countries in North and South Americas, ussia’s VSMPO-AVISMA keep this year’s output of titanium prod- and 5% to the Middle East and Corporation, the world’s ucts at the 2015 level of 28,000 to Southeast Asia, including Israel, China, largest titanium producer, is 29,000 t. By 2020, the corporation plans India, Japan, South Korea, Singapore, R successfully increasing the to bring annual titanium production up and Taiwan. share of machining in its output both to 40,000 tons. The Russian company is a long- within its own projects and jointly with One of the company’s largest and standing partner of the Chinese aero- partners. The company’s close ties with most significant investment projects is to space industry. Since 2004, it has been the international aerospace industry al- set up a die-forging machining facility supplying China Aviation Supplies Imp. low it to plan further production growth. for Titanium Valley, a special economic & Exp. Corporation (CASC) with tita- VSMPO-AVISMA and Alcoa Samara, zone in Russia’s Sverdlovsk Region. The nium billets used in the manufacture of the Russian subsidiary of US manufac- project was launched in 2014; VSMPO- die-forgings for Airbus programs. The turer Alcoa, opened a joint venture in AVISMA is currently the most active of company’s cooperation with AVIC early September. Located in Samara, Titanium Valley’s 11 residents. International Holding Corporation, AlTi Forge will produce large titanium The Titanium Valley facility, known one of China’s largest aerospace manu- and aluminum forgings to be used in as VSMPO-New Technologies, will be facturers, spans over 10 years. subsequent manufacture of aircraft land- responsible for initial and final machin- VSMPO-AVISMA acts as a supplier ing gear beams and wing pylons. ing of die-forgings for new aircraft for China’s flagship commercial avia- The Russian titanium company sees its strategic goal in increasing the share VSMPO-AVISMA plans to bring annual of value-added processing in overall production volumes. The company’s titanium production to 40,000 tons by 2020 machining shop increased the output of die-forgings by more than 50% in 2015; types. The production building has al- tion program of the C919 medium-haul in five years from now, 40% of all ready been erected; the company in- jetliner. Under the agreement with the VSMPO-AVISMA produce is expected vested over 1.6 billion rubles ($25.4 aircraft designer, Commercial Aircraft to come in the form of die-forgings. million at the current exchange rate) in Corporation of China (COMAC), By investing in its production capacity its construction. The facility is expected VSMPO-AVISMA will be supplying 12 and increasing the share of value-added to be launched in 2018 with around 100 different die-forging types through to products VSMPO-AVISMA managed highly qualified engineering personnel. 2021. The company is already tooling to demonstrate solid financial results in VSMPO-AVISMA is closely involved up for the task. Certification of the Q1 2016; this positive trend is expected with the global aerospace industry, act- Chinese die-forgings is expected to be to continue. The company’s sales struc- ing as the main strategic supplier of tita- completed in 2017. The company will ture changed this year, with less products nium products for a multitude of manu- supply China with more than 20 differ- sold on the Russian market and a greater facturers. In 2015, about 60% of all its ent die-forging types to be used in the share of export deliveries. The latter has titanium produce was exported. Of the manufacture of aircraft wings, empen- fully compensated the losses incurred on total amount of exported products, 46% nage, and pylons.

RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 11 DEFENSE

Guided weapons against aerial and naval targets Russia’s Tactical Missiles Corporation is prepared to offer China new missiles

Alexey Sinisky The RVV-SD, for its part, has im- broadband seekers. These missiles can proved aerodynamics; its active radar successfully engage any existing and fu- hina remains an important seeker features a more powerful trans- ture target types. The Kh-31PD’s range foreign customer for mitter and a more sensitive receiver. of up to 180-250 km makes it ideal for Russia’s Tactical Missiles The missile’s software has been com- stand-off delivery. C Corporation (TMC). The pletely overhauled, increasing its range The Russian manufacturer also offers Russian missile manufacturer is show- by 35% compared to the RVV-AE the Kh-38ME modular air-to-surface casing some of its latest developments at Airshow China 2016. The effectiveness of guided bombs in Air-launched weapons TMC works actively to develop new modern warfare has been proven by the types of air-delivered precision results of Russian troops’ operations against weapons. Over the past few years the Russian manufacturer has renewed its terrorist groups in Syria entire range of air-to-air and air-to- surface missile types. missile and giving it the ability to en- missile, which may be fitted with com- The new short-range (RVV-MD), gage targets maneuvering at up to bined guidance systems comprising an medium-range (RVV-SD), and long- +12g. The RVV-BD missile uses an inertial navigation system and a variety range (RVV-BD) air-to-air missiles, advanced digital active radar seeker, a of terminal guidance options: laser (the developed by TMC’s subsidiary — high-precision inertial navigation sys- Kh-38MLE), heat-imaging (the Kh- Vympel design bureau, feature new, tem, and a new engine fuel type. These 38MTE), or active radar seeking (the more sensitive and ECM-resistant innovations combine to double the Kh-38MAE). Satellite-based naviga- guidance systems. The new dual-band missile’s maximum range as compared tion is also possible, as is the use of infrared seeker with a multicell sensor to the predecessor. cluster-type multiple warheads (in the and digital signal processing capability TMC’s air-to-surface products in- Kh-38MKE version). gives the RVV-MD two times longer clude the newest Kh-31PD (TMC’s Another TMC subsidiary, Region lock-on distance compared to the R- own development) and Kh-58UShKE Scientific and Production Enterprise, 73E missile, and 1.3 times wider the (developed by Raduga Design Bureau) has developed new guided bombs, which target designation angles. anti-radiation missiles fitted with follow a gliding trajectory with optimal

New RVV-MD, RVV-SD and u

RVV-BD air-to-air missiles r . O T A

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

approach angles. The KAB-500S-E bomb is fitted with a satellite guidance system and a HE warhead; the KAB- 250LG-E has gyrostabilized laser guidance and a HE fragmentation warhead. The effectiveness of guided bombs in modern military operations has been proven by the results of Russian troops’ operations against terrorist groups in Syria.

Naval weaponry Naval weapon systems occupy a special niche in the TMC product range. At Bal-E coastal missile system with u r . Kh-35UE missile system O

the core of the company’s ship-based T A and mobile coastal missile systems is the 3M-55E Yakhont supersonic cruise 32 targets simultaneously with Kh- sistance. The Kh-35UE’s software missile. The Bastion anti-ship coastal 35E anti-ship missiles (the naval ver- provides flexible, efficient guidance missile system has a range of 600 km, sion of the missile is known as the 3М- and attack capability. The missile con- and can engage naval ships of any class 24E). The Kh-35E is currently being siderably increases the combat poten- at up to 300 km away under enemy fire replaced with the new-generation Kh- tial of the Bal-E system and the Uran- and in ECM environments. 35UE version, also developed by E ship-based missile system. The Kh- The Bal-E coastal missile system is TMC. The new missile features an in- 35UE’s performance is on a par with intended against sea-surface warships ertial/satellite guidance system and an that of Western equivalents such as the and sea transports displacing up to active/passive seeker, allowing for Harpoon and Exocet, and even sur- 5,000 t. The Bal-E can engage up to higher precision and better ECM re- passes them with regard to a number

RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 13 DEFENSE

of parameters. The Bal-E and Bastion against the intrusion of small-sized un- marines and destroy torpedoes target- systems complement each other to en- derwater targets. The system detects ing the ship. Another product by sure effective coastal defenses. targets at up to 800 m away, classifies Region is the Shkval-E high-speed su- The corporation’s range of naval and tracks them automatically with the percavitating anti-ship underwater weaponry products is not confined to help of sonobuoys, positioned at depths missile capable of traveling at up to 100 anti-ship missiles. The TMC subsidiary of between 2 and 60 m, whose angle of m/sec. The missile is currently under- Gidropribor develops and manufac- coverage is between 900 and 3600. going modernization. tures torpedoes, anti-torpedoes, naval Region Enterprise has developed the The TMC’s research, development, mines, mine countermeasures, acoustic compact, ship-based Paket-E/NK and production potential enables the countermeasures, and also underwater close-in anti-submarine torpedo sys- company to offer a variety of advanced surveillance and protection systems. tem, complete with an anti-torpedo. guided munition types both to the Gidropribor’s Mayak-2014B sonar is This all-weather system can provide Russian Armed Forces and to foreign intended for protecting harbor areas close-in attack against enemy’s sub- customers.

Innovative electronic technologies from Russia adio-Electronic Technologies Con - flight and navigation system. The system tronic warfare solutions designed for the R cern (abbreviated to KRET in Rus - presents the crew with information via personal protection of all types of aircraft. sian), one of Russia’s premier vertically electronic displays, and also supports ra- KRET is also demonstrating export ver- integrated defense holding companies, is dio communications with other aircraft sions of the Sukhoi Su-35 fighter’s avio - showcasing at Airshow China 2016 over and air traffic control centers in keeping nics. These new generation radio-elec- 40 military and civilian products based on with the modern requirements. Visitors tronic solutions are based on an informa- breakthrough innovative technologies. can also familiarize themselves with a tion management system designed to help The company stand features an ad- demonstrator of an in-built export ver- the pilot control onboard equipment; they vanced helicopter avionics demonstrator sion of the President-S airborne defense include the RSUO weapon management emulating real-life operation of a new system, one of the most efficient elec- system, the MZBN compact protected airborne recorder, a family of small-sized X- and Ka-band airborne radars, and an integrated IBKO-152 system. KRET also boasts significant technological advances in other areas. “We have developed and implemented a number of promising projects,” says CEO Nikolai Kolesov. “These include mass production of strap-down inertial navigation systems for a variety of aircraft types. The system enables continuous autonomous precision positioning for more accurate navigation and weapons delivery”. KRET is a dynamic business supplying to more than 20 countries worldwide. It ranked 48th in Defense News’ 2015 sur- vey of the top 100 global defense companies, ascending from the 52nd position the year before. KRET will be granted the approval shortly to work directly with foreign defense customers. “After-sales support for Advanced helicopter our previously delivered military products avionics is a priority for us; this includes repairs demonstrator and modernization of avionics, friend- designed

by KRET T or-foe identification, and electronic war- E R K fare systems,” Kolesov says.

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

DEFENSE

Russian military to get improved Mi-28NM helicopter

Maxim Pyadushkin

he Russian Aerospace Forces expect to shortly get an improved version of the service’s main attack heli- m o c .

T o copter, the Mil Mi-28N Night Hunter. t o h P - t

The first modernized prototype, dubbed r o p s n

Mi-28NM, performed a horizontal flight a r T

n at the Russian Helicopters test facility i h s i M

outside Moscow in October. The manu- e

The improved Mi-28NM takes off at the d n a x facturer reported at the time that hover- Russian Helicopters’ test range near Moscow e l A ing tests had begun in early September. This is the first effort to modernize the ment. While the original model had no cruise speed by 13%, and its maximum rotorcraft, which joined service with the flight controls in the forward gunner’s speed by 10%. The baseline version has Russian Air Force in 2008. “The up- cockpit, the new version can be piloted a maximum speed of 340 km/h. graded Mi-28N is a highly effective at- from both either workstations. Dual The upgraded rotorcraft has a visibly tack helicopter capable of a broad range flight controls were first implemented new movable 30-mm gun mount. The of tasks, from aerial reconnaissance and in the Mi-28UB combat trainer version manufacturer says the Mi-28NM can target designation to engaging different in 2013. also be armed with guided and unguid- types of ground and aerial targets,” says Other cockpit improvements include ed missiles and bombs. Russian Helicopters CEO Alexander a new armament and navigation system The new helicopter is less visible to Mikheev. “Its main advantages include and head-up displays. The avionics ground-based air defenses. Its fuel sys- agility, round-the-clock operation, and suite allows the crew to search, detect, tem design now precludes the possibil- increased firepower.” and identify ground and aerial targets, ity of a fuel tank explosion or fire. The Mi-28NM carries advanced establish their coordinates, and provide Although the Russian military placed mast-mounted all-around-looking target designation for ground and air- no orders for the improved helicopter radar with enhanced precision strike ca- borne command centers. The cockpit so far, they expect to receive it very pability, including with the use of guid- upgrades provide the crew with “more soon. The commander of the Russian ed missiles, which significantly reduces information about the environment Aerospace Forces Viktor Bondarev said times spent in potentially dangerous sit- and all the helicopter systems in a more earlier this summer that Mi-28NM can uations. This improvement allowed the accessible format, which will increase be taken into service as soon as in 2018. manufacturer to do without the base- the crew’s situational awareness, facili- The deliveries of the baseline model line’s nose-mounted missile guidance tate interaction, and increase decision- started in 2009 after the military selected radar. The new radar is manufactured at making speeds in complex combat sit- this type as a replacement of the ageing Ryazan State Instrument-making uations,” says Russian Helicopters. fleet of Mi-24s. Mi-28N has a maximum Enterprise, whose CEO Pavel Budagov According to the manufacturer, the take-off weight of 12 ton, a cruise speed was cited by Russian media earlier this Mi-28NM has new composite main ro- of 270 km/h and a range of 450 km. It year as saying the device would be able tor blades, which maintain structural in- has all weather day-and-night opera- to track four targets simultaneously, tegrity if hit by 20-30 mm projectiles. tional capabilities and can carry 1,605 kg against the current Mi-28N radar’s two. The manufacturing facility, Rostvertol, tons of weapon load. This helicopter in The helicopter will get a new flight said in its annual report for 2015 that the Mi-28NE export modification has been control system and new cockpit equip- new blades also increase the helicopter’s ordered by Iraq and Algeria.

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

AIR TRANSPORT

TTuurrbbuulleenntt ttiimmeess ffoorr RRuussssiiaann aaiirr ttrraannssppoorrtt m o c . o t o h P - t r o p s n a r T

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Fyodor Borisov by a sharp domestic slowdown in the • increases in real incomes, which summer of this year, with clear indica- drove demand for tourism and ad- tagnation of Russian air tions that the internal air transport mar- hoc air travel; transport last year has turned ket is about to reach its growth limits. • the high exchange rate of the ruble, into a crisis in 2016, as the in- Prior to 2014, the Russian air trans- which enhanced demand for inter- S dustry continues to suffer vir- port market benefited from the follow- national air travel; tually no growth in all areas. The slump ing positive factors: • passengers switching from rail to air, in air transport, caused primarily by • a growing GDP, which reflected the partially stimulated by the lifting of shrinking passenger numbers on inter- general state of the country’s econ- state control over passenger rail tick- national routes, has been exacerbated omy and business activity; et prices; and • government subsidies for regional air transport services. RUSSIA'S AIR TRANSPORT STATISTICS 2010 – 1H 2016 By 2016, four of these five factors had 40 16 either exhausted their stimulating potential or developed into negative Total passengers Passenger turnover trends. The GDP growth has been 30 Domestic cargo GDP 12 slowing since 2015, matched by a decline in business activity. The latter 20 8 process is particularly noticeable in in-

% % ternational economic relations which, 10 4 apart from macroeconomics, have been seriously affected by adverse political factors. 0 0 With the GDP slowdown resulting in lower real incomes and curtailed -10 -4 spending power, the falling ruble exchange rate has further increased the -20 -8 cost of vacationing abroad by as much 2010 2011 2012 2013 2014 1H 2015 2015 1H 2016 as 100%. These factors combined to Source: Russia’s Higher School of Economics dramatically drive down the number of international air passengers.

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

AIR TRANSPORT

migrate back to rail travel, primarily due to the rising cost of airfares on domestic routes. This development is markedly unusual in that, anywhere else in the world, passenger numbers have been growing faster for air than rail, even during recessions. These negative factors have been further exacerbated by a number of political developments, which resulted in bans on passenger operations to Turkey, Egypt, and Ukraine. The only growth factor currently left to the sector are regional subsidies to air Top Russian airlines reported significant growth in both physical indicators and financial carriers, but even these have been shrink- performance in 1H 2016 picking up the passengers of the defunct Transaero ing due to budget constraints. In 2012, such subsidies were viewed as a way to develop regional air transport infrastruc- At the same time, the falling ruble routes were merely helping the sector ture. Now they are considered to be re- proved detrimental to those air carriers maintain its physical indicators, even gional carriers’ only means of survival. whose primary costs are denominated though its financial performance was The crisis has not been affecting all in foreign currencies. This prompted sliding downhill (the sector’s combined Russian air carriers in the same way. A airlines to raise fares, which only exac- losses on domestic routes amounted to number of airlines have been reporting erbated the already dire demand. 44 billion rubles in 2015, or US$699.5 significant growth in both physical indi- Prior to the first quarter of 2016, con- million at the current exchange rate, cators and financial performance. tinued growth in domestic passenger against 35 billion in 2014). According to Russia’s Transport numbers had played a somewhat stabil- In spring of this year, analysts first Clearing House, Aeroflot Group carried ising role. But the low-yield domestic noted that air passengers were starting to 1.8 million more passengers year-over-

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20 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 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 +10.6 2 S7 Airlines 6,500 +19.2 12,378.7 +18.1 3 Rossiya 5,126 +50.2 11,202.4 +76.8 4 UTAir 4,315 +13.7 7,110.3 +1.2 5 Ural Airlines 4,271 +16.5 10,110,8 +14.7 6 Pobeda 2,882 +58.2 4,503.9 +60.4 7 Globus 2,327 +43.1 5,767.0 +43.3 8 AZUR Air 1,457 -6.5 7,382.7 +35.3 9 VIM-AVIA 1,396 +25.6 3,204.2 +51.0 10 Nord Wind 1,130 -41.4 3,861.8 -33.5 11 Yamal 1,015 -2.4 2,032.9 -8.2 12 Aurora 916 +20.2 1,492.0 +16.3 13 NordStar 884 +16.2 1,910,6 +5.4 14 Red Wings 668 -5.4 1,218.7 +6.2 15 Nordavia 624 +26.1 929.2 137.1 16 Ikar 620 -17.5 3,173.2 -4.3 17 Royal Flight 611 +1.9 2,623.2 +37.7 18 Orenair* 491 -75.2 1,494.3 -65.9 19 Yakutia 442 +1.5 1,185.5 +8.1 20 RusLine 393 +1.6 391.9 +11.1 Top 20 airlines, total 55,101 +9.0 136,323.7 +12.0 Russian commercial aviation, total 58,473 -8.6 141,161.9 -10.8 Top 20 airlines,% 94 97 Note: *- merged with Rossiya since May 2016 Source: Russia’s Federal Air Transport Agency year in the first six months of 2016 (up Key performance indicators for Russian civil aviation, by type 10.3%), generating 2.5 billion rubles in of service, January-August 2016 profit; the figures for S7 Group were 1.1 Indicators Total (scheduled and unscheduled flights) million more passengers (up 23.2%) and 1 billion rubles. Of the 30 largest Russian Jan-Aug 2016 Change to Jan-Aug 2015, % carriers, about 50% saw an increase in Passenger traffic, mln passenger km 141,161.9 -10.8 passenger numbers. on international routes 71,224.0 -21.1 on domestic routes 69,937.8 +2.9 Under the circumstances, these growth Freight traffic, mln ton km 16,791.2 -5.7 figures may appear extraordinary, but are on international routes 9,971.2 -10.8 misleading in that they were greatly con- on domestic routes 6,820.0 +2.8 Passengers carried, thous. 58,472.8 -8.6 tributed to by the collapse of Transaero on international routes 20,745.5 -26.5 Airlines, the country’s second largest car- on domestic routes 37,727.3 +5.7 rier, whose passengers then switched to Freight and mail carried, thous. ton 600.2 +1.3 on international routes 434.8 +0.8 the largest and most active of the remain- on domestic routes 165.4 +2.6 ing market players. This factor is expected Passenger load factor, % 81,6 +0.9 to stop playing a role as the crisis contin- on international routes 82,7 -0.8 on domestic routes 80,6 +3.3 ues. To be able to predict the direction in which the market is going requires an as- Sources: Russia’s Federal Air Transport Agency. sessment of the current competitive environment. At present, Aeroflot Group promise in the current situation requires cleared by ATC; force airports to charge appears to be the single largest market active and rather hard measures, each of airlines lower handling fees; and increase player. The group controlled 19% of the which would come with significant risks the efficiency of subsidising mechanisms Russian market in 2006; its share exceed- and limitations. Apart from directly reg- (for example, by extrapolating long- ed 50% this past winter, and continues to ulating the activity of Aeroflot Group, range subsidies to regional routes). grow. This is due exclusively to Aeroflot the government may consider a number The latter measure could be bolstered Group’s dominant position, as the top of other measures to support competi- by simultaneously developing feeder player has enough resources to throttle tion in the sector. It could designate car- networks at the existing Russian hub air- any of its rivals. riers on international routes; improve the ports of St. Petersburg, Yekaterinburg, Although the Russian government has existing lease mechanisms (including the and Novosibirsk, thus helping preserve pledged its commitment to safeguarding introduction of wet-lease schemes); per- and develop the spread of regional air market competition, delivering on this mit airlines to deploy shorter routes if services.

RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 21 AIR TRANSPORT t r o p r i A

l a n o i t a n r e t n I

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Centripetal traffic Passenger numbers at Ukraine’s regional airports continue to decline amid the crisis as prosperous Kyiv pulls ahead

Serhiy Khyzhnyak, Kyiv year stood at 2.5 million people, or 23% rier Wizz Air closed its Kiev office and of the country’s total passenger traffic. moved part of the Ukrainian flights to everal Ukrainian regional That was the lowest number since 2008; Wizz Air Hungary. airports made the news this to compare, the 2013 regional passen- UIA availed of the situation to past summer. Vinnytsya and ger numbers amounted to 4.8 million strengthen its position both in the sched- S Chernivtsi reopened for people, or 36% of overall traffic. uled and charter market segments. The scheduled air traffic. Ukraine Such a significant decline in the num- airline carried 77% of all Ukrainian pas- International Airlines (UIA) launched ber of regional airline passengers is only senger traffic last year. It currently is the services between Kyiv and Chernivtsi, logical in times of crisis. In 2008-2010, largest carrier not only at its Boryspil and also from Vinnytsya to Warsaw and for example, Kyiv’s Boryspil saw its pas- base but also at Odesa, Kharkiv, Lviv, Tel Aviv. Rivne airport started serving senger traffic peak similarly compared to Ivano-Frankivsk, Vinnytsya, as well as at commercial passengers again after a the regions. This is mainly due to the fact Dnipro via the local carrier Dniproavia. long break, with Bravo Airlines operat- that the capital city commands higher Only two Ukrainian regional airports ing charter flights to Antalya. All these levels of business activity and purchasing have home-base carriers: apart from airports had long been used exclusively power, so weathers crises better. What are Dnipro-based Driproavia, there is also by bizav operators. more relevant to the problem at hand Motor Sich Airlines at Zaporizhzhya. The overall situation, however, re- though are the market situation and the The rest largely depend for their oper- mains far from satisfactory. According to state of airport infrastructure. ating revenues on UIA, and also on a the State Aviation Administration of handful of foreign carriers, mostly Ukraine, commercial flights currently Market forces Turkish ones, including Turkish operate out of 20 Ukrainian airports. Since 2013, the Ukrainian airports have Airlines, Pegasus, and AtlasGlobal. Two of these, Boryspil and Zhulyany, lost a third of passenger traffic to crisis- This shaky business model complicates serve Kyiv. That leaves 18 regional air- related shifts in the air transport mar- long-term planning and infrastructure ports, of which only five handle over ket. A number of foreign carriers, such development. 100,000 passengers per year each; all five as Emirates and Alitalia, left the coun- serve the country’s largest regional cen- try’s scheduled passenger market. Infrastructure ters: Odesa, Lviv, Kharkiv, Dnipro, and Others, including Flydubai and Apart from Boryspil, only three Zaporizhzhya. The remaining airports Austrian Airlines, cut their frequencies. Ukrainian airports boast modern infra- are mostly used by business aviation and The cessation of air services between structure. As part of the preparations infrequent charter services. Scheduled Ukraine and Russia saw some for the UEFA Euro 2012 finals, new flights are only operated from Ivano- Ukrainian airlines, including UTair passenger terminals, runways and Frankivsk, Kherson, Uzhhorod, and Ukraine and Windrose, discontinue aprons were built at Lviv and Kharkiv; now also from Vinnytsya and Chernivtsi. scheduled operations or downsize their Zhulyany received two passenger ter- The combined number of passengers route networks dramatically. Finally, minals and had its only runway was re- handled by the regional airports last Budapest-headquartered no-frills car- inforced and extended by 150 m. A new

22 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 AIR TRANSPORT

passenger terminal is under construc- PERATIONAL RESULTS OF KRAINIAN AIRPORTS tion at Odesa; the completion deadline O U has been moved forward several times, THE REGIONAL AIRPORTS' SHARE IN OVERALL PASSENGER TRAFFIC, MLN PAX and is now set for early 2017. The Zhulyany and Kharkiv terminals were 2008 4.0 / 37% 6.7 . built with private funds, and the Odesa 2009 3.1 / 35% 5.8 project is also a private initiative. 2010 3.5 / 34% 6.7 The other regional airports’ infra- 2011 4.0 / 32% 0.5 8.0 structure mostly dates from the 1970’ and 1980s, is substantially worn, and 2012 4.8 / 34% 0.9 8.5 often restricts the aircraft types that can 2013 5.4 / 6% 1.8 7.9 use the airfields. 2014 2.9 / 27% 1.1 6.9 The Ukrainian governments in early 2015 2.5 / 23% 0.9 7.3 2016 adopted a program to develop the country’s airport network through 2023. 0 4 8 12 16 The program calls for refurbishing the TRAFFIC THROUGH UKRAINIAN AIRPORTS, THOUS. PAX existing infrastructure and building new KYIV BORYSPIL 7273 facilities at 15 regional airports. The ODESA 952 government expects to fund the effort to the tune of 8.7 billion hryvnyas, or KYIV ZHULYANY 941 around $335 million at the current ex- LVIV 567 change rate, over the next eight years, KHARKIV 374 primarily from the state budget. DNIPRO 342 The program also implies private investments in the construction of pas- ZAPORIZHZHYA 128 senger terminals under private-public KHERSON 64 partnership contracts. The question is OTHERS 54 COMBINED whether private capital will take an in- 0 1000 2000 3000 4000 5000 6000 7000 8000 terest in most of the regional airports, given their modest passenger traffic and REGIONAL AIRPORTS KYIV ZHULYANY KYIV BORYSPIL uncertain prospects. On the other Source: State Aviation Administration of Ukraine hand, the probability of government subsidies actually being allocated for the program in sufficient amounts is The majority of Ukraine’s regional develop them. If no funding comes ei- fairly low, given the current state budget airports are municipally owned; it ther from the state or from the local shortages and the IMF-imposed re- would, therefore, be in the local au- budgets, then regional air services in strictions on budget spending. thorities’ best interest to maintain and Ukraine may well become history.

Ukraine International Airlines carried 77% of all the country’s passenger traffic in 2015 m o c . o t o h P - t r o p s n a r T

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RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 23 AIR TRANSPORT

Wind of change

Artyom Korenyako attract a number of new clients, includ- Volga-Dnepr Technics Moscow re- ing Aeroflot, VIM Airlines, the Kazakh portedly attempted to land a mainte- he weakening ruble and the Defense Ministry, Air Kyrgyzstan, Azur nance contract with Pobeda Airlines, introduction of new services Air, and IFLy, as well as Rossiya Airlines, but the latter eventually preferred to are stimulating the Russian Ural Airlines, and Air Astana. have its 737-800 C-checked by T aviation MRO sector. The Engineering’s paint shop at Vnukovo-based Vostok Technical leading providers continue to expand Mineralnye Vody airport was launched in Services (VTS). VTS, however, has run their business despite a nearly 20% September 2014. In April and May 2016, into difficulties related to certain shrinkage of the active airliner fleet in Engineering repainted several aircraft of changes at Vnukovo: the airport also 2015. More varieties of maintenance Ural Airlines, Air Astana, and Rossiya. hosts fast-growing MRO provider UTG services become available domestically. For the former two carriers, this was the maintenance and engineering, which first time their Western-built airliners had gained the approval in spring 2016 to Market leader been given a paint job in Russia. Newly perform C-checks on Boeing 737 Setting the trend on the Russian MRO merged Rossiya turned to Engineering Classics and do certain types of main- market is Engineering Holding, the par- after having its new livery applied by a tenance work on Boeing 777-200/300s. ent company of the country’s mainte- number of foreign specialists. nance providers Novosibirsk-based Sibir Best practices Technics and S7 Engineering from Competition The Russian MRO sector has been Moscow. The introduction of new serv- Other major domestic MRO players in- working on Western-made aircraft ices, such as cabin modifications, and clude the maintenance arms of Aeroflot types for about 10 years now. In order also the falling prices denominated in Group and Volga-Dnepr Group. to catch up with the international level US dollars, have enabled Engineering to Aeroflot Group’s MRO subsidiary A- of services, Russian providers have been Technics launched at Vnukovo in the doing their best to replicate global best spring of 2016. Its primary customer will practices. initially be the group subsidiary Rossiya, Engineering Holding signed agree- which has seen its fleet grow through the ments with Zodiac Aerospace and TAT addition of Transaero, Orenair, and Technologies this year to set up repair Donavia aircraft. The company could al- facilities for aircraft toilets and heat ex- so service its sister carrier Pobeda in the change units respectively, the first such future. The combined Rossiya and centers of competence in Russia and Pobeda fleet stands at nearly 100 air- the CIS. In June S7 Engineering frames. Then there is Aeroflot: the EASA opened the CIS-only MRO center for Part 145 certificate enables A-Technics to CFM56-5B/7B engines in partnership work on 120 of the flag carrier’s airliners. with the European provider SR Another large domestic carrier Ural Technics. Airlines launched its MRO arm in The Russian MRO sector still has a January 2015. In the first year of opera- huge growth potential. “We expect the tion, the service performed nine С- share of local services to grow on the checks, 118 A-checks, and 11 engine back of the weak ruble,” Engineering replacement jobs, saving the carrier in CFO Roman Fyodorov said earlier this excess of 100 million rubles. “Our 2016 year. “Those carriers whose aircraft are plans include increasing the volume of still serviced abroad will switch to do- m o

c in-house MRO work by 60% and start- mestic providers in the near future. . o t o h ing to do D-checks, the heaviest main- According to our estimates, the share of P - t r o p

s tenance form,” says Ural Airlines CEO locally available maintenance services n a r T

Sergey Skuratov. will reach its ceiling shortly. Further g r e b r

e growth will largely be dependent on a F

The weak ruble will motivate Russian MRO d i

n Russian providers’ ability to secure in-

o providers to localize more maintenance e L services ternational contracts.”

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

BUSINESS AVIATION

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

Anna Nazarova and Even so, Bombardier, whose positions dropped the country from their forecasts Ekaterina Sorokovaya in Russia are historically strong, continues altogether. Russian operators have also to believe that the market will recover. been concerned about the shrinking bizav or the past two or three years, Jean-Christophe Gallagher, Bombar dier market. In early September, the Russian international analysts have Vice-President for Strategy, Mar keting United Business Aviation Association been observing a reduction in and Innovation, says the company’s share (RUBAA) reported that Russian airports F Russia’s share on the global in the total number of new business-jet de- had served 65,138 bizav passengers in the business aviation market. The trend is be- liveries to Russia and the CIS will exceed first six months of the year, against 73,692 ing explained, among other factors, by the 50% in the next 10 years, mostly in the and 88,052 for the same period in 2015 and military aggression in Ukraine, the overall most expensive and spacious Large Cabin 2014, respectively. In August, a total of political situation, the strong US dollar as Jets and Heavy Jets classes. Bombardier 5,960 passengers were carried on interna- compared to the Russian national curren- hopes that the oil and gas prices will tional bizav flights originating or terminat- cy, and most importantly, the falling oil bounce back, but admits that business avi- ing in Russia, compared to 7,290 in August and gas prices. Russian players are also re- ation deliveries to Russia have reached the 2015 and 7,800 in 2014. The domestic fig- porting a decline in bizav passenger num- lowest position across the world, with the ures for the same months stood at 4,362 for bers, and are using the situation to boost market expected to grow by a meager 2016 and 4,800 for 2015. their market presence. 0.6% this year. Russian bizav operators are trying to One of the most prominent indicators Other experts also hope that the oil avail of the crisis and increase their of a changing global attitude towards prices will start growing again. Says Brian market presence, says RUBAA chair- Russia and the CIS comes in the form of Foley, head of Brian Foley Associates: man Alexander Kuleshov. A total of Bombardier Aerospace’s annual fore- “Oil-dependent businesses and regions 5,062 Russian operators were present at casts. The Canadian manufacturer is prefer large airplanes, particularly in the the Moscow airports in the first six known for its overly positive, sometimes developing markets whose geographic months of 2016, or 20% more than in evidently overrated 10-year forecasts for location requires super-long-range jet 2015 and 22% more than in 2014. The global business jet deliveries. However, transports. However, this sector has so far number of foreign operators is still when it comes to Russia and the CIS, been seeing low oil prices.” much greater at 14,169, but the figure these predictions have been growing The slumping oil prices are evidently has shrunk by 20% compared to 2015 consistently more conservative of late. affecting not just the actual and forecast and by 34% compared to 2014. In 2009, Bombardier projected 600 new business jet deliveries to Russia but also RUBAA says 80% of all Russian bizav business jet deliveries to the region; in the global interest in the country in gen- traffic passes through Moscow, Yekate - 2015, that figure dropped to 510 and this eral: analytical firms like Teal Group, rin burg, Samara, Nizhny Novgorod, year, to 400. Brifo, and Rolland Vincent have Ros tov-on-Don, and Sochi, with traffic via the Moscow airports periodically Traffic via the Moscow airports periodically reaching 75% of all bizav flights operat- reaches 75% of all bizav flights operated in Russia ed in the country. Kuleshov says the most popular international destinations for bizav flights from Moscow this year have been Nice (10% of all flights), London (7.3%), and Geneva (2.6%). The top 10 also includes m o Riga, Paris, Vienna, Homel, Olbia, c . o t o h Minsk, and Zurich. Domestically, the P - t r o p most frequent bizav flights from Moscow s n a r T

/ are to St. Petersburg (18%), Sochi (7%), v e e k i Simferopol (2.8%), as well as to Kazan, n A m o Kaluga, Yekaterinburg, Anapa, and y t r A Krasnodar.

26 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 SPACE BUSINESS

Second chance for Sea Launch The owners of Russia’s second largest airline invest into a space project

Maxim Pyadushkin

he Sea Launch project has been given a new lease of life with a new investor, Russia’s T S7 Group, whose subsidiaries include the country’s second largest carrier S7 Airlines. “I can’t be first in aviation, there is Aeroflot (Russia’s largest airline – ed.), so I will become first in space,” S7 Group owner Vladislav Filev commented when asked to explain his investment, which appears to be a promising but risky start-up. m o c .

Nevertheless, S7’s success in the Russian o t o h P - airline business could contribute to radi- t r o p s cal changes in the space launch sector. n a r T

/ The Sea Launch new investor g

Under the agreement signed at the r e b

Vladislav Filev hopes the platform r e

International Astronautical Congress a F can perform up to 70 more d i n o in Guadalajara, Mexico in late launches without major investments e L September, S7 Group will acquire all of Sea Launch’s material assets, including major investments in upgrading the Sea sult, Energia managed to increase its the vessel Sea Launch Commander, the Launch [platform].” The Odyssey can stake to 95%, with Boeing and Aker left launch platform Odyssey, and the accommodate a maximum of six to share the remaining 5%. The com- ground equipment in the US port of launches per year. pany resumed launches in 2011, but Long Beach, as well as the Sea Launch Sea Launch was founded in 1995 to suspended operations again in 2014. trade mark. use mobile a maritime platform for The program has a spinoff project, The deal is to be closed within six equatorial launches of Ukrainian-made Land Launch, with modified Zenit- month of obtaining the approval from Zenit-3SL rockets. The liquid propel- 2SLB and Zenit-3SLB rockets the US Directorate of Defense Trade lant launch vehicle can deliver 6,160 launched from Russia’s main spaceport Controls and the Committee on kilograms of payload to a standard geo- Baikonur in Kazakhstan. Foreign Investment for transferring the synchronous transfer orbit. S7 will now partner with Energia command vessel and launch platform The initial partners on the project Corporation, one of Russia’s largest under Russian control. Putting the were Boeing (40%), Energia (25%), launch vehicle manufacturers, to joint- launch pad back into operation and Norwegian shipbuilder Aker Kvaerner ly operate the program. Energia will preparing for the first launches will take (20%), and also Ukrainian rocket man- provide the necessary engineering assis- another 18 months, Filev explained. ufacturers Yuzhmash (10%) and tance for the launches and associated The project will be managed by S7 Yuzhnoe Design Bureau. The first integration services. S7 will deal with Group’s newly created subsidiary S7 demonstration launch was performed marketing and sales, Filev noted: “The Space Transport Systems. in 1999; since then, the company has capability to perform a launch is not a According to Filev, the Odyssey still made a total of 36 launches, 32 of them key technology today. What matters is has between 15 and 20 more years of successfully. the skill to sell that launch.” service life left: “We hope we can per- Sea Launch filed for Chapter 11 Filev plans to offer a new approach to form up to 70 more launches without bankruptcy protection in 2009. As a re- the space launch sector. His company

RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 27 SPACE BUSINESS

will sell launch services with the use of Yuzhmash will be willing to supply new Angara launch vehicle, whose trial those rockets which have already been more Zenit rockets for future launches. launch was performed from Russia’s assembled. “First comes the rocket, and Nevertheless, the new Sea Launch Plesetsk spaceport in July 2014. only then the customer,” he stresses. The owner hopes to strike a deal with the However, in order to be used for Sea new investor suggests applying a lease Ukrainian manufacturer for new deliv- Launch the rocker needs to be modified mechanism to the space sector, the way eries. “If they (Yuzhmash –ed.) can to enable Zenit-like automated launch it works in the air transport world: “More supply us with a rocket, then we will countdown. Zenit counts down and than 50% of all the aircraft in the world are being operated through leasing, so airlines enjoy low acquisition costs. I be- An alternative rocket for the Sea Launch lieve that in the future, launch vehicles will be purchased through financial in- program is likely to come from Russia stitutions, just as it is done with airliners now.” Filev is convinced such an ap- buy it; if not, then it will be their loss,” launches fully automatically after the proach can help cut launch preparation Filev explains, noting that other launch personnel has been evacuated from the times significantly. This, in turn, would vehicle types might also be used. Odyssey to the Sea Launch Commander. attract new clients, and the growing An alternative launch vehicle is likely Filev says S7’s cooperation with backlog of orders would enable the com- to come from Russia. Energia CEO Energia will not be limited to the Sea pany to bring the launch costs down. Vladimir Solntsev says his company Launch project, but will also involve Sea Launch has a small reserve of could offer a new rocket to the Sea the creation of space transportation in- rockets left over from cancelled launch- Launch investor. Energia is prepared to frastructure: “The acquisition of a es, Filev says. However, finding new design a medium launch vehicle in five launch platform is our entry ticket for launch vehicles may present a major years under what is provisionally the space industry. Space infrastructure problem for the Russian investor. known as the Phoenix project; this is developing rapidly. From our point of The latest launch from the Odyssey rocket could also be used as a booster view, this is a very interesting business was performed in May 2014, and the for future heavy launch vehicles. with good long-term prospects.” Filev Land Launch project was suspended in The Phoenix launch vehicle is viewed has a space background: he graduated September 2013. Russian-Ukrainian as a possible replacement for Zenit; its from Military Space Engineering aerospace cooperation has since been development would be funded under Academy in St. Petersburg and did his frozen due to the deteriorating relations the federal space program through military service in the Russian Strategic between Moscow and Kiyv over the 2025. The design phase is expected to Missile Forces in 1985-1993. Russian annexation of Crimea and the start in 2018. Sea Launch is not the first non-core armed conflict in the east of Ukraine. Another solution would be to use business for S7 Group. Privately- So it is not clear now whether Angara 1.2, the light version of Russia’s owned S7 Airlines, together with its sister carrier Globus, are facing growing S7 Group acquires all of Sea Launch’s material domestic market pressure from the gov- assets, including the commander vessel, the ernment-owned giant Aeroflot. This is launch platform, and the ground equipment forcing the S7 Group owners to look for other development opportunities. Among their non-core investments are Russian MRO provider Engineering Holding, US-based general aviation manufacturer Epic Aircraft, and a Cypriot start-up, Charlie Airlines, which has recently been granted the right to use the trademarks and brand of bankrupted Cyprus Airways. All these projects, however, were purely business investments, while the Sea Launch effort could serve as a demonstration to the Russian government that the private company is prepared to share the burden of expanding g n i the country’s industrial and technolog- e o B ical capabilities.

28 RUSSIA/CIS OBSERVER № 1 (43) NOVEMBER 2016 22001177

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