www.ato.ru/rco RRuussssiiaa&&CCIISS OObbsseerrvveerr № 3 (38) november 2013

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Russia &CIS Observer from the publisher of № 3 (38) november 2013

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• INDUSTRY AIR TRANSPORT /CIS Observer is produced by: New challenges launches Publisher Evgeny Semenov for Superjet 100 ...... 2 a low cost subsidiary ...... 13 Editior"in"Chief Busy future for Ulyanovsk facility ...... 4 Russian passenger air traffic Maxim Pyadushkin Antonov jet enters foreign markets...... 6 Art Director continues to grow ...... 14 Andrey Khorkov MC-21 airliner readying for series Commercial Director Sergey Belyaev production ...... 8 •BUSINESS AVIATION Advertising Manager Rostec eyeing the regional aviation Oleg Abdulov Controversial stability on the market ...... 9 Cover Photos Russian bizav market...... 16 Leonid Faerberg, Fyodor Borisov, Novosti Kosmonavtiki Magazine •DEFENSE All rights reserved. SPACE BUSINESS No part of this publication may be Russian defense budget set to grow ....10 reproduced in whole or in part without The future of Russia’s launch the written permission of Sukhoi fighters will remain the A.B.E. Media. backbone of the Russian Air Force...... 11 vehicle fleet ...... 18 A.B.E. Media cannot be held responsible for any claim, error, omission or inaccuracy in advertising India to receive ex-Russian carrier Nuclear power material supplied by advertisers. in November ...... 12 for space applications ...... 20 © № 3 (38), November 2014 Tel./Fax: +7 (495) 933 0297 Correspondence: P.O. Box 127, , 119048, Russia Visit our website at www.ato.ru/rco

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 1 AEROSPACE INDUSTRY

New challenges for Sukhoi

100 I

Superjet J S

The Russian regional airliner program is ramping up production in a bid to attain financial stability

Maxim Pyadushkin Southeast Asia and the Middle East in for six SSJ100s through the VEB 2015. Leasing company with deliveries from he end of this summer and Another Russian lessor, Sberbank 2014. The deal is part of an MoU for 24 all of the fall were quite in- Leasing, used MAKS to sign a $700 aircraft signed by and SCAC in tense for the Sukhoi million preliminary agreement with November 2010. T Superjet 100 program. The SCAC for the delivery of 20 aircraft. Finally, Russia’s arms trade monop- new Russian regional airliner’s manu- The parties also announced during the oly Rosoboronexport became the facturer Sukhoi Civil Aircraft (SCAC) show that they will set up a joint ven- launch customer for the VIP-config- saw its backlog grow impressively, and ture to promote SSJ 100 sales in Russia ured SSJ100. The aircraft is based on received positive news about the initial and abroad. the SSJ100 Basic variant and features a operation results of its brainchild in Another customer at MAKS was luxurious cabin seating up to 19 passen- Latin America and Asia. AviaAm Leasing, a subsidiary of gers. Rosoboronexport’s single aircraft The total number of SSJ100 orders -based Avia Solutions Group, on order should be delivered later this reached 200 at the MAKS 2013 aero- which signed an MoU for the purchase autumn. SCAC is also working on a space exhibition in Zhukovsky, outside of five aircraft. The deal is valued at more specialized Sukhoi Business Jet Moscow, in August. On the first day of $100 million, with deliveries expected variant, which is expected to be ready the show, Finance Co. (IFC) to start in 2014. According to SCAC for market entry in 2015. firmed up 20 preliminary orders. Five President Andrey Kalinovsky, Avia In August this year, the Aviation of the aircraft, in the SSJ100LR long- Solutions Group’s other subsidiary, FL Register arm of CIS-wide Interstate range variant, are to be delivered to an Technics, has already set up a spare Aviation Committee certified the air- as-yet undisclosed customer from late parts warehouse in Malaysia to support craft’s SSJ100LR long-range version. 2015. Thinner seats will allow for ex- SSJ100 operations in Indonesia and This variant has a range of 4,578 km, tending these airliners’ capacity to 103 Laos. against the baseline version’s 3,048 km; passengers. The rest of the IFC aircraft In a yet another development, UTair its MTOW has been increased to 49.5 will come in the baseline variant; these Aviation, Russia’s third largest tons, and it has a reinforced wing. The will be delivered to customers in for passengers carried, placed an order LR version is powered by a pair of NPO

2 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 AEROSPACE INDUSTRY

Saturn-Snecma SaM146 1S18 engines, sity routes as well as some short-haul factors, including insufficient develop- which offer 5% higher take-off thrust international ones. ment of sales financing mechanisms, as (16,100 lbf) compared with the standard ’s SSJ100s have 99.03% well as losses incurred from sales to the SaM-146 design. , a sub- despatch reliability. Oscar Ruiz, launch customers,” the company sidiary of Russian gas giant Gazprom, Interjet Technical Director, says any notes. became the launch customer for the technical issues are rectified during the SCAC’s RAS net loss for the first long-range version; its first aircraft carry nighttime, so the aircraft is serviceable three quarters of the year amounted to 90 passengers in an all-economy con- again the next morning. The airline 7.285 billion rubles, or 2.8 times more figuration. The first example has already makes use of parts depots in Miami and than the same period in 2012. However, been delivered; the other nine aircraft Frankfurt. The former ships on the next UAC says the company’s financial situ- on order will follow by 2015. day, the latter takes two days to deliver. ation is within the approved business Other SSJ100 deliveries in 2013 in- Critical parts and no-go items are plan, which calls for the first operating cluded two to Aeroflot, one to Yakutia, stored in Mexico. revenue to be received in 2014, and for and one to Moskovia – all three are SCAC and SJI view Interjet’s oper- the business to break even in 2018. Russian carriers. Foreign deliveries, ating results as an essential component As a part of the rescue plan, Russian one each, went to Laos’ Lao Central of their drive to promote the SSJ100 on state-owned Vnesheconombank will and Indonesia’s Sky Aviation. The type the global market. SCAC is planning to become a participant in the SSJ100 also began revenue flights with have built 26 of the type in 2013. program through a stake in SCAC par- Mexican carrier Interjet, the first President Andrey Kalinovsky has pre- ent company Sukhoi. The decision was SSJ100 customer in the Americas. dicted earlier that the production cycle approved by the bank’s supervisory Interjet’s first aircraft was delivered per airframe would be brought down to board in September. “We will become by SuperJet International (SJI), 10 days by year-end, translating to an [a shareholder] to the extent and on the Sukhoi’s JV with , at output capacity of around three air- conditions that will not damage the fi- the Paris Air Show 2013. The second one followed in early August, and the Gazpromavia became the launch customer third made it to Mexico under its own for the SSJ100 long-range version steam in November. In all, Interjet ex- pects to receive eight of the type by the end of the year, out of the 20 on order. The remaining 12 airframes should be delivered during 2014. The carrier also has an option for 10 more. The first two Interjet SSJ100s entered service in mid-September. By the end of October they had performed over

580 revenue flights for a total of around a v e s t s

600 hours, or 9.74 hours per day on av- y L

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erage. a Interjet’s SSJ100s fly from Mexico M City to Torreon, Aguascalientes, frames per month. Green aircraft get nancial stability of Vnesh econom - Campeche, Minatitlan, Zacatecas, and delivered to two customization centres, bank”, VEB Chairman Vladimir Mazatlan. The airline estimates the av- either in Ulyuanovsk or in Venice, Dmitriev explained. Sukhoi currently erage sector length at about one hour’s where they are outfitted depending on holds 72% in SCAC; 25% belongs to flight time, and says the fleet’s maxi- the customer preferences. Russia’s Alenia Aermacchi of Italy, and 3% is mum combined time in the air exceeds United Aircraft Corporation (UAC), of held by Sukhoi Design Bureau. 11 hours per day. which SCAC is a subsidiary, forecasts Vnesheconombank can now convert “We are very proud of the new that SSJ100 output will grow by 54% to into the Sukhoi shares some of the $633 SSJ100: it is currently the only regional 40 airframes next year. million debt owed by SCAC as part of a aircraft with a five-abreast configura- Despite the ramp-up, SCAC so far $1 billion credit line opened in 2012. tion, enabling mainline comfort with cannot boast solid financial indicators. The Russian government has permitted reduced operating costs and the flexi- Its revenue for the first nine months of Vnesheconombank to spend some of bility of a to be operated in the year amounted to 3.518 billion the money received from the sale of its small airports,” says Interjet CEO Jose rubles ($110 million), or 14.2% down EADS stake on buying Sukhoi shares. Luis Garza, adding that these aircraft year-on-year from 2012. “This drop is As a result, the bank may end up con- will serve Mexico’s domestic mid-den- to a large extent explained by objective trolling up to 33% in Sukhoi.

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 3 AEROSPACE INDUSTRY Busy future for Ulyanovsk facility

— How is work progressing to — This is part of the UAC launch series production of the plans. Resumption of produc- Il-76MD-90A aircraft? What tion would require significant is the planned annual produc- funding. However, before in- tion rate? vesting, we need to have a firm — The Russian government consolidated launch order. in 2006 decided to move Il-76 — What is the current de- production from Tashkent to velopment strategy for Ulyanovsk. Aviastar-SP the - Aviastar-SP? What are your re fore laun ched a massive re- priority programs? tooling and retraining pro- — Aviastar-SP positions it- gram to prepare for series pro- self as the primary manufac- duction of these aircraft with turer of transport aircraft. Our P S the use of advanced digital - main product is the Il- r a t s a i

technology. In these past six v 76MD-90A. We participate in A years, the facility has reached the production of the Russo- a totally new level of produc- The Ulyanovsk-based Aviastar-SP aviation facility used to Indian MTA transport. The tion efficiency, both in term of build Antonov An-124 Ruslan heavy-lifters. Now the plant is facility also works on several our technological capacity launching series production of the upgraded Ilyushin Il-76 civilian products. I have men- and personnel qualification. transport aircraft. General Director Sergey Dementyev told tioned the Tu-204 and An- The first Il-76MD-90A fly- Russia & CIS Observer about the plant’s current programs and 124 programs. Our other ac- ing prototype performed a plans for the future. tivity is installing interiors on demonstration flight on airliners. October 4, 2012. On the same a year. Under the instruc- — The latest modernization We are seriously involved in day, the Defense Ministry or- tions of the United Aircraft effort on the An-124 Ruslan the Irkut MC-21 program. dered 39 such aircraft. Corporation (UAC), we transport is entering its final — You will need more The flying prototype has must be able to build 18 air- phase. What is the status of hands to work on all these successfully completed fac- craft a year by 2018. this program, and what are programs. What is your per- tory tests and started on the — What is the status of the your plans for the future? sonnel policy? official testing program. We Tu-204 family of air- — Aviastar-SP has been — In January this year, after have also built an airframe liners? contracted by the Russian the signing of the Il-76MD- for endurance testing, which — At present, Aviastar-SP Defense Ministry to restore 90A contract, we launched a is currently at the Central provides airworthiness mainte- and upgrade its six Ruslan air- new recruitment campaign. Aero hydro dynamic Institute nance services on those exam- craft. Three airframes have al- This is of course a complex (TsAGI). We are building ples which have been built to ready been returned to the task, but we had been preparing three production examples, date. Tu-204-100V production customer. The fourth aircraft beforehand by training our ex- which will be part of the pilot has been suspended because will be ready by the year-end, isting personnel. Right now we batch. Factory tests on the the decision was made in 2010 and work on the remaining have around 2,000 regular staff. first production aircraft will to upgrade this modification to two will be completed in As production ramps up, their commence next January. We the Tu-204SM standard. We 2014. In parallel, we provide number should reach 5,000. are planning to deliver two were requested to build two airworthiness maintenance We will need even more if there production examples next such airframes, which under- services on the An-124 fleets are contracts for the Tu-204 year, one in April and the went a series of tests in 2011- operated by the Volga-Dnepr and other aircraft types. other in October. 12. The Interstate Aviation and Polet air carriers. We are already capable of Commit tee certified the Tu- — Will An-124 production This interview is prepared by building six to eight aircraft 204SM in May 2013. be resumed? Dmitry Churov.

4 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013

AEROSPACE INDUSTRY Antonov jet enters foreign markets

Since the first deliveries to St Petersburg-based launch customer Rossiya – complemented its six firm orders by an Russian in 2009, the Antonov An-148/158 family of regional jets has option for a further nine. However, the remained a niche product. Now, however, a new marketing strategy has evolved idea to further expand the An-148 fleet that may help expand the aircraft’s international presence as lessors are beginning was dropped after Rossiya became a to promote it as a replacement for the BAe146 and Avro RJ models. Although part of Aeroflot Group, losing VASO a unlikely to boost sales dramatically, this development could result in more Antonov potential nine-ship contract. jetliners operated around the world VASO reports that by mid-July 2013, the monthly flying time for Rossiya’s Polina Zvereva agreement signed in 2011 with the car- An-148 fleet averaged at 300 hours per rier’s Irkutsk-based parent company airframe. Polet’s figure was 200 hours; t the recent MAKS 2013 air Eastland. The contract covered five one of Angara’s An-148s clocked 250 show in Zhukovsky outside firm orders and an option for five more hours in June. To put this in context, Moscow, two airlines – An-148s. individual Russian carriers accumulate A Angara of Russia and Angara became the third Russian up to 400 flying hours per aircraft per Cuba’s Cubana de Aviacion – signed commercial carrier to operate An-148s month on their up for additional An-148/158 aircraft. after Rossiya, with six such airframes in medium-range jetliners. This makes The new contracts had been expected its fleet, and with two. 200-250 hours for the An-148 regional in both cases. Angara ordered two An- Rossiya became the launch customer jet quite a good figure, and 300 hours 148s from Russian lessor Ilyushin on the type in December 2009. The air- per month is very impressive indeed. Finance Co. (IFC), to be built at line’s An-148 fleet accumulated 18,628 Speaking of government operators, a -based VASO factory and de- flying hours in 2012, or around 5% up single An-148 has been delivered to the livered in 2014. The contract is under- on the 2011 figure (17,759 hours). The Russian president’s administrative de- stood to be worth over $60 million. 2010 flying time was just 6,500 hours, partment, and two more aircraft to the Angara already operates three of the but Rossiya back then had only three Russian Emergencies Ministry. As an- type, delivered by IFC in 2012 under an An-148s. The airline had originally nounced at the VASO general meeting

The monthly flying time for Rossiya’s An-148 fleet averaged at 300 hours per airframe m o c . o t o h P - t r o p s n a r T

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6 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 AEROSPACE INDUSTRY

of shareholders in June, the company landed an order in May to build 15 An- 148s for the Russian Defense Ministry. Deliveries are scheduled to begin by year-end and continue until 2017. The first An-148 under this deal is expected to be handed over to the Russian Defense Ministry shortly. The Aircraft Interiors Association (AIA) m o c announced a new order for a VIP con- . o t o h P

figured An-148 at MAKS 2013. The - t r o p s

formal customer is the airframe manu- n a r T

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facturer VASO. Under the contract, v o s i r o

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for the airliner’s cabin should have been y F completed by late September 2013. AIA is not disclosing the name of the Line maintenance is performed in At this year’s MAKS air show Cubana airline end customer, but there are indications Cuba; further plans call for offering firmed up its option for three more An-158s that the aircraft may be intended for the heavy maintenance forms in that coun- Defense Ministry. try. Cubana technical personnel will countries. Unlike the four-engined A VASO conference last fall dis- travel to Russia next year to receive rel- BAe 146 and Avro RJ, the An-148 has cussed the possibility of accommodat- evant training. only two powerplants, which consid- ing a consolidated government order SAAL head Ralph Dieter Montag- erably reduces the associated mainte- for the type. Russia’s United Aircraft Girmes says his company “hopes that nance costs. Corporation (of which VASO is a sub- Cubana’s passenger numbers will con- “The An-148 family is definitely sidiary) said at the time that up to 20 tinue grow, and does not rule out that niche aircraft with an incredible un- such aircraft might be ordered. the carrier will place additional orders paved runway capability,” says IFC Cuba’s major carrier Cubana became in the next two years”. At Farnborough International Sales and Marketing another customer for the Antonov re- air show in 2012, SAAL signed an Director Stewart Cordner. “I know that gional family at this year’s MAKS. agreement to deliver 15 Antonov air- some BАе 146 and Avro RJ operators South American Aircraft Leasing craft to Latin America, including three are seriously looking to upgrade their (SAAL), a subsidiary of International An-158 firm orders and an option for fleets with An-148s, and we are in talks Aircraft Leasing Holding, used the air 12 An-148/158s. with them. BAe146 and Avro RJ oper- show to hand over to the Cuban carrier IFC sees a potential market for the ators are forced to look for replace- its third An-158 under a contract An-148/158 among the current oper- ments because their airliners have been signed at the previous MAKS in 2011. Production of the batch at the Ukrainian OEM Antonov was organ- IFC sees a potential market for the ized by IFC; a group of Russian banks An-148/158 among the current operators of led by Roseximbank financed the deal. Also at this year’s MAKS, Cubana the BAe 146 regional jetliner and its Avro RJ firmed up its option for three more An- 158 aircraft, which was signed in spring modification 2013 following the first delivery. The An-158 is a stretch of the An-148 ators of the BAe 146 regional jetliner out of production for nearly 13 years, formerly known as the An-148-200. The and its Avro RJ modification, which the size of the operational fleet contin- version was rolled out in April 2010; cer- were built in the UK between 1983 and ues to shrink, and maintenance costs tification was completed in 2011. The 2002 and seat 70 to 112 passengers. keep rising. Therefore, we believe that An-158 unit cost is estimated at $28-30 These aircraft are currently flown [the An-148] will prove an ideal alter- million, depending on options. The total commercially around the world, in- native for those carriers not wishing to value of Cubana’s six-ship order may cluding in Australia, New Zealand, operate in the low-fares segment, and therefore reach $180 million. Belgium, Bulgaria, , Great also for operators serving the oil-and- Cubana de Aviacion chooses Britain, Ghana, and Botswana. They gas sector or working under govern- Russian- and Ukrainian-built airliners are also operated in transport roles by ment contracts in the interests of secu- for their balance of price and quality. government agencies in a number of rity agencies.”

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 7 AEROSPACE INDUSTRY MC-21 airliner readying for series production Irkut is tooling up to accommodate all orders for its new aircraft design

Alexei Sinitsky

s demonstrated at the MAKS 2013 air show this August, Russia’s new Irkut A MC-21 mainline narrow- body passenger aircraft is enjoying strong demand from lessors and carri- ers, despite the fact that the airliner is still under development. A total of 82 MC-21 commercial operation t such airliners were ordered during u is expected to start in 2017 k r MAKS alone, for a combined value of I nearly $6.7 billion. In particular, tions. Irkut currently supplies 12 shipsets operation with Airbus, Irkut has gained Russian lessor VEB-Leasing firmed up per month, corroborating the statement valuable experience and introduced ad- its 30-ship contract at the show; by Christopher Buckley, Airbus vanced managerial methods applicable Ilyushin Finance Co. (IFC) did the Executive Vice-President Europe, Asia, to large-scale production for commer- same with its option for 22 aircraft. and the Pacific, that every third airliner cial aviation components, which can be Irkutsk-based carrier IrAero signed up of the A320 family contains Russian- used in international and Russian pro- for 10 aircraft, while Sberbank Leasing made components. grams alike.” committed to 20. Depending on con- This cooperation raises a number of Alexander Veprev, general manager figuration, the unit cost under these questions. The MC-21 is being targeted of and Irkut contracts varies between $72 million at the same narrowbody segment as vice-president, says the corporation is and $85 million. Airbus’s A320 family and future now actively applying its Airbus com- Prior to this year’s MAKS, the MC- A320NEO model. “We will be compet- ponentry production experience in 21 portfolio stood at 256 units, includ- ing with Airbus, but this does not pre- preparing for the MC-21 production ing 135 firm orders. Commercial oper- clude our mutually beneficial industrial launch. All the requisite technological ation of the type is expected to com- cooperation,” says Irkut President Oleg processes have been developed, includ- mence in 2017. It is obvious that such a Demchenko. “In the course of this ing the procurement cycle, forging and hefty backlog must be met with appro- program our corporation has demon- machining processes, structural assem- priate production capacities, or deliv- strated the international-level quality of bly, quality control, and process man- eries will slip. its products.” agement. The corporation is refurbish- Another MAKS event, one that would Airbus stresses that Irkutsk is in- ing its manufacturing tools: a flow as- at first appear to have no connection to volved in mass production of A320 air- sembly line has been purchased from the MC-21 program, was the delivery to liners, because 12 shipsets per month Durr Systems. Airbus of the 500th A320 nose landing translates to 144 sets per year. “There is In confirmation of Demchenko’s gear bay shipset for A320 manufactured no other program to manufacture statement that competition with Airbus by . Airbus has been structural components within the won’t hamper the on-going partner- outsourcing to Irkut since 2004; the Russian commercial aircraft industry ship, Raphael Duflos, head of procure- Russian company manufactures nose that could boast equally high produc- ment and quality supply chain at landing gear bays, flap tracks, and keel tion rates and international-level qual- Aerolia, has reported that his company beams for the A320 family. Since 2009, ity standards,” says Alexander intends to develop cooperation with these components have been delivered Gaponyuk, Airbus’s manager for in- Irkut both in terms of ramping up the to Airbus via aerostructures specialist dustrial cooperation with Eastern production output and expanding the Aerolia, which builds A320 fuselage sec- Europe and Russia. “Thanks to its co- range of products manufactured.

8 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 AEROSPACE INDUSTRY Rostec eyeing the regional aviation market

Polina Zvereva locally built Bombardier aircraft, structures should be produced by RT- Rostec in October 2013 successfully Chemcomposite. The aircraft’s 450 ussia’s Rostec State lobbied against the initiative of the and 750 hp diesel engines will also be Corporation has by now Ministry of Industry and Trade to lift built in Russia eventually. In the final come to control virtually the 20% import duty on imported tur- phase, by 2016, a new production line R all the domestic aerospace boprops seating up to 72 passengers. capable of building up to 60 diesel- component vendors, from engine hous- In the meantime, Rostec is in talks powered composite aircraft per year es to avionics specialists. Now the avia- with other potential partners including will be built in Russia. tion giant is planning to have an indige- EADS, whose subsidiary ATR builds Fyodorov says cooperation with nous final assembly capability for re- turboprops of Q400 size. The decision Diamond will help dramatically reduce gional turboprop airliners. on a type to be assembled in Russia may the price and operating costs of GA air- In August Rostec signed a MoU with be taken by the year-end. craft, while increasing their fuel effi- Canadian manufacturer Bombardier to The Russian corporation also signed ciency. The new facility may be built at set up a Russian assembly line for Q400 a deal with Austrian manufacturer Rostec’s Yekaterinburg-based Ural turboprop aircraft. The CIS-wide Diamond Aircraft this summer to joint- Works of Civil Aviation (UWCA). This Interstate Aviation Committee certified ly develop and build a smaller aircraft. facility already assembles Diamond this model in mid-2012; three of the The presidential commission for gener- DA-40NG-Tundra single-engine air- type are already in service with al aviation approved the project in craft, the assembly of another model – Yakutsk-based . October. Rostec estimates overall in- DA-42 Twin can be a next step. The Russian project is set to become vestments in the future joint venture at Rostec explains its interest in region- Bombardier’s first assembly line out- around 10 bln rubles ($310 mln) al airliners by the fact that Russia’s key side North America. The 50/50 joint through to 2018. The program covers aerospace manufacturer, the United venture is estimated to cost $100 mln. two twin-engined models to be devel- Aircraft Corporation, does not build Bombardier will contribute with pro- oped from scratch. One will seat nine any aircraft in this class, nor is it plan- duction technology, design documen- passengers, the other will seat 19. In the ning to start building them any time tation, and intellectual property rights. first phase, both the airframes and en- soon. Virtually no regional-class airlin- Rostec, for its part, undertakes to build gines will be built entirely in Austria. ers get built in Russia, for the exception an assembly facility in the Ulyanovsk The second phase will see production of small batches of 50-seat Antonov port special economic zone in 2014. of some components moved to Rostec An-140 turboprops produced by the Russian assembly of Q400s should enterprises. In particular, composite Samara-based Aviacor plant. begin in 2015, followed by the launch of local airframe components produc- Rostec and Diamond Aircraft will tion in 2016. The Ulyanovsk facility is jointly develop new regional aircraft expected to build up to 24 airliners per year. Alexei Fyodorov, Rostec’s manag- ing director for aviation projects, says there is a market for 250 aircraft of the Q400 class in Russia through to 2030, and that the design capacity of the Russian assembly line would be enough to meet the potential demand. Russian-assembled Q400s will spare domestic carriers the necessity of hav- ing to pay a hefty import duty on for- u r eign-made airliners of this size. In or- . O T der to up the competitive advantage of A

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 9 DEFENSE Russian defense budget set to grow again m o c . o t o h P - t r o p s n a r T

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Maxim Pyadushkin 2014, 3.8% in 2015, and 3.9% in 2016 er but more effective and combat-ready – a significant increase from the 3.2% structure in the reform process which ven the current economic level reported in 2013. was launched at the end of the 2000s. stagnation in Russia won’t Despite its growing size, Russia’s de- The current size of the Russian military force the government to cut fense budget is growing increasingly less is officially put at 1 million people, but E military spending. A draft transparent. The parliamentary defense the real figure is even smaller than that. federal budget for 2014 and for 2015- committee reports that less than 50% of According to a recent report by the 16, which passed its first reading in par- defense spending for the year 2014 (just Russian Accounts Chamber, the actual liament this October, calls for yet an- 1,012 billion rubles) is open to public strength of the armed forces stood at other double-digit hike in national de- scrutiny, and this proportion will be- 766,055 as of January 1, 2013, including fense expenditures. These are set to come even smaller in the coming years. 10,000 civilian personnel. The Defense grow by 18.4% to 2,489 billion rubles According to the committee, “the Ministry is planning to reach 95-100% ($76.6 billion at the current exchange budget funding allocated [for defense staffing levels by the end of 2014. rate) next year, and by a further 21.6% purposes, while being] on the whole This force restructuring is accompa- (to 3,027 billion rubles) and 11.6% (to sufficient for the accomplishment of nied by massive re-armament efforts 3,378 billion rubles) in 2015 and 2016, major strategic goals in developing the under a 10-year defense procurement respectively. Russian armed forces”, does not suc- program launched in 2010. The pro- Defense expenditures will grow cumb to proper analysis, including the gram is estimated at 19 trillion rubles; steadily as a proportion of the country’s money earmarked for re-armament apart from the armed forces, it caters overall budget from 15.6% in 2013 to with new weaponry and equipment. for the needs of the Interior Ministry 17.8% in 2014, 19.7% in 2015, and Despite their opaque spending prac- and other government paramilitary or- 20.6% in 2016. The defense budget will tices, it is clear that the national armed ganizations. The current economic un- amount to 3.4% of Russia’s GDP in forces will continue to turn into a small- certainty has forced the government to cut some civil budget expenditures, but RUSSIA'S DEFENSE EXPENDITURES a proposed 5% slash to the defense pro- curement program never took place. 3500 National defense expenditures 28 Instead, according to the parliamentary 3000 % of Russia’s overall budget 24 defense committee, some of the pro-

s curement plans under the program e

l 2500 20 b

u were postponed until 2017-2020. r

2000 16 n %

o This postponement is seen not only i l

l 1500 12 i

b as a temporary budget saving solution 1000 8 but also as a brief break for the coun- 500 4 try’s defense industry, which has sud- 0 0 denly found itself inundated with do- 2012 2013 2014 2015 2016 mestic orders.

10 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 DEFENSE Reciprocal affection Sukhoi fighters will remain the backbone of the Russian Air Force

Maxim Pyadushkin phase is expected to be finished and formance parameters for the airframe, blueprints issued for the manufacture of powerplants, navigation system, and ussian jet maker Sukhoi the gas generator and engine demonstra- other equipment. The aircraft demon- continues the development tors. Engine prototypes should be built strated a maximum near ground air- of the T-50 fifth-genera- and enter into testing in 2016. speed of 1,400 km/h and 2,400 km/h at R tion fighter for the national Earlier, Russian Air Force Com - altitude, and its maximum demonstrat- air force under the PAK FA program. mander-in-Chief Lt-Gen Viktor Bon- ed altitude is 18,000 m. The fifth prototype of this aircraft made darev said that the flying phase of the The Russian Air Force has also ordered its hour-long maiden flight at joint evaluation trials should begin in two more warplane types from Sukhoi: Komsomolsk-on-Amur on October 28. 2013. Series production of the new the Su-30M2 twin-seat fighter and the The manufacturer is not explaining fighter is expected to be launched in Su-34 bomber. The latter are being as- how the T-50-5 differs from the previ- 2016. According to Mikhail Pogosyan, sembled at another Sukhoi facility, in ous prototypes, nor does it disclose head of Sukhoi’s parent company Novosibirsk. The military has inked two what kind of tests the airframe is in- United Aircraft Corporation (UAC), 25 contracts with Sukhoi for a combined tended for. After the factory trials, T- billion rubles (about $780 million) will 124 of the type. Deliveries started in 2010. 50-5 will join the other four prototypes, be invested in setting up a T-50 assembly The Russian Defense Ministry ex- which are currently being test-flown at line at Sukhoi’s Komsomolsk-on-Amur pects Sukhoi to deliver 14 more Su-34 Zhukovsky outside Moscow. Two more facility, which already houses the assem- this year. The first bomber was delivered airframes are involved in the ground bly line for Russian Air Force Su-35S in May, two more batches followed in test: one of them is used as a ground rig, multirole fighters. July and October. The 2014 production the other one is undergoing static tests. The Su-35S generation 4++ multi- plan for the Novosibirsk facility stands The T-50 is intended to replace 4th role combat aircraft is expected to be at 16 aircraft, the military reports. generation Sukhoi Su-27/30 aircraft in operated by the Russian Air Force According to Pogosyan, the Komso - the Russian Air Force. It will also serve as alongside the T-50. The Russian mili- molsk-on-Amur facility is planning to the baseline for the Russo-Indian Fifth tary placed an order for 48 of the type in deliver 27 fighters to the Russian Air Generation Fighter Aircraft, being devel- 2009. The first two airframes were deliv- Force this year, and 19 more fighters in oped jointly by Sukhoi and Hindustan ered in 2011, another eight followed last 2014. Joint deliveries by the two Sukhoi Aeronautics Limited. year. The type is now undergoing join facilities are expected to reach 51 fighters The first T-50 prototype flew in evaluation trials. Sukhoi reported earlier in 2015. Pogosyan says this is more than January 2010; the flight test program that the results of the flight testing pro- one half of all the aircraft the Defense started in April same year. The T-50-3 gram had corroborated the design per- Ministry has ordered from UAC. prototype, equipped with an AESA m o c .

radar, joined the trials in 2012, the same o t o

h In the three years of testing the P -

year as tests began on the fighter’s in- t r T-50 prototypes completed more o p s flight refueling capability. According to n than 450 flights a r T

/

Sukhoi, in the three years of testing the v o s i r o B

T-50 prototypes completed more than r o d o

450 flights in total. y F The T-50 prototypes involved in the flight tests are currently powered by a pair of Item 117 engines, which repre- sent a radical upgrade of the NPO Saturn AL-31F design. Russia’s United Engine Corporation is looking to complete the development of a production engine for the Sukhoi T-50 fighters by late 2015. This is when the engineering design

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 11 DEFENSE India to receive ex-Russian carrier in November

Maxim Pyadushkin a received a ski-jump ramp for MiG-29K variant has an upgraded airframe with ex- STOBAR capability. The Russian ship- tensive use degree of composites, a digital he long-delayed program to builder de-facto created a new ship, as fly-by-wire system, in-flight refueling ca- retrofit the Indian Navy’s the Vikramaditya also received advanced pability and new avionics, including a full Vikramaditya (formerly the navigation and radar systems, as well as glass cockpit and a Zhuk-ME slot array T Russian Navy’s Admiral new aviation control and communica- radar. The MiG-29K features reduced Gorshkov) Kiev-class aircraft carrier is tions equipment. radar signature and can carry greater finally nearing completion. According to The refurbished ship’s displacement weapons loads, which include air-to-air Russian Deputy Prime Minister Dmitry will exceed 45,000 tons. With a length and air-to-ground munitions. Rogozin, the ship “will leave our waters of 283 m and a width of 59.8 m, the Flight testing of the MiG-29K ver- and head for India on November 30”. carrier can accommodate a 1,924- sion for the Indian Navy started in 2007 The handover ceremony took place in strong crew, as well as 24 MiG-29K and was completed two years later with Severodvinsk, where the Vikramaditya fighters and six helicopters. a test landing on the Russian Navy was overhauled, on November 16. India in 2004 ordered 16 MiG- Admiral Kuznetsov aircraft carrier. The program to repair and upgrade the 29K/KUB fighters from Russia, in- Deliveries started in 2009; the type was Vikramaditya has been on at the Sevmash cluding 12 single-seaters and four twin- officially put into service with the wharf since 2004. The carrier was given seaters. This deal, valued at $730 mil- Indian Navy in February 2010. In May to the Indian Navy free of charge, but the lion, was followed in 2010 by a $1.2 bil- this year, the Indian Navy commis- cost of its refurbishment — initially esti- lion contract for 29 more of the type. sioned its first MiG-29K squadron at mated at $800 million – eventually The MiG-29K is a profoundly mod- Hansa naval air station in Goa. At pres- reached $2.3 billion. The modernization ernized version of the Soviet-era fighter ent the Indians operates about two effort included the removal of all of the same designation. The current dozen of these fighters. weaponry from the ship’s foredeck, The Vikramaditya was initially ex- which was then extended and fitted with pected to be handed over to the cus- tomer in December 2012. The delivery INS Vikramaditya date slipped one year after the ship suf- MiG-29K fighter takes off from the fered a malfunction in the steam boilers carrier’s ski-jump ramp of its propulsion system during sea trials in summer 2012. A new round of trials in Russia’s White and Barents seas was completed this September. According to Sevmash, the ship reached a maximum speed of 29.2 knots up on the design speed of 29 knots, proving the reliability of its powerplants. In the course of the trials MiG-29K fighters performed 57 test flights from the Vikramaditya with 47 subsequent land- ings on the carrier’s deck, including 12 night-time take-off and landings. Kamov Ka-31R and Ka-27PL coaxial-rotor hel- . p r o C

icopters flew 30 sorties. Sevmash repre- G i M sentatives say that since the beginning of the sea-trial phase in June 2012, the h s a

m Vikramaditya has spent 108 days at sea, v e S covering 12,650 nautical miles.

12 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 AIR TRANSPORT Aeroflot launches a low cost subsidiary

Maxim Pyadushkin

ussia’s largest air carrier Aeroflot announced in October it was setting up a R 100% low-cost subsidiary to be known as . The new car- rier is named for the first Soviet com- mercial air transport organization of the 1920s, which later served as the ba- sis for the creation of Aeroflot. Dobrolet is expected to begin revenue flights in spring 2014. Aeroflot also gave a name Dobrolet to one t o l f

of its A320s in historical livery o

Aeroflot has not yet decided on a r e Moscow airport from which Dobrolet A would be operating, but it is clear that Aerospace Leasing, and SMBC ties. During their last year these two op- the parent company wants to avoid Aviation Capital. The fleet will be sub- erators carried 942,000 and 1,049,000 competition at its Sheremetyevo home sequently expanded by 8 aircraft per passengers, respectively, coming 15th base. Domodedovo and Ramenskoe are year, says an Aeroflot news release. and 13th in the top ranking of Russian currently being discussed as possible Aeroflot CEO Vitaly Savelyev earlier airlines. Since that time, Russia has had options. The former is the largest air- mentioned that Dobrolet may also start no national low cost carriers. port in Russia, and home to Aeroflot’s operating Airbus A320 family airliners. Aeroflot says it is planning to invest main rivals and , Aeroflot announced its discounter $100 million in the new subsidiary in while the latter is used as a testing facil- plans in December 2012, saying that the the first two years of its operation. ity and a cargo hub, as well as hosting government should first accommodate Meanwhile, Aeroflot Group’s IFRS the biennial MAKS air show. the project by amending the country’s air revenue grew by 14% in the first six Dobrolet has no air operator’s certifi- regulations to decrease the future carri- months of 2013 to $4,132.6 million. cate as yet, but Aeroflot has already re- er’s operating costs. Savelyev reiterated Operating profit increased by 70% to ported that its low-cost subsidiary will be this requirement at a recent Dobrolet $167 million. The release says the initially flying across the European por- presentation: “Low-cost carrier will not group’s net income totaled $1.5 million tion of Russia. Eight destinations are take off in Russia if we do not harmonize over that period, compared to $7.1 mil- planned for the first year of operations: our legislation with the global standards lion in the first half of 2012. Aeroflot St Petersburg, Krasnodar, Yekaterin - such as non-refundable tickets, paid on- explains the net profit decrease by non- gburg, Samara, Makhachkala, Ufa, board meals and luggage, and [revocation cash revaluation of finance lease liabil- Kaliningrad, and Novy Urengoy. In of the current ban on hiring] foreign pi- ities denominated in foreign currency. 2015, Dobrolet plans to expand domes- lots. We expect the appropriate legislative Besides Dobrolet and Aeroflot prop- tic operations to 19 destinations. decisions to be taken by the end of this er, Aeroflot Group includes several oth- Foreign cities such as Kiev, , and year. By doing so, the government will er sister air carriers: St Petersburg- Istanbul may be added in 2016. contribute greatly to the launch of the based Rossiya, Rostov-on-Don-based In the first year, Dobrolet’s fleet will project of huge importance to Russia.” , and Orenburg-based . comprise eight brand-new all-economy Dobrolet will be headed by Vladimir Two more subsidiaries, Air -800 narrowbodies. Gorbunov, former CEO of now-de- and SAT Arilines, are in the process of Aeroflot’s board on October 16 ap- funct Russian LCC Avainova. Like the merging to produce a new carrier, proved the lease of these aircraft country’s first budget airline that will be performing domes- through several lessors, namely AWAS, SkyExpress, ceased opera- tic and international flights from BBAM Aircraft Management, Avolon tions in 2011 due to financial difficul- Russia’s Far East.

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 13 AIR TRANSPORT

Against all odds v e e g r e S y e g r e S

Maxim Pyadushkin airlines. The industry on the whole has Russian airlines carried only 8.5 mil- seen a threefold increase in traffic vol- lion people that month, just 9.7% up on ussian passenger air traffic umes for the last 10 years since 2003, September 2012. Passenger turnover continues to grow despite when a total of 34.6 million passengers grew by 7% to 21.7 billion passenger- the persisting nationwide was carried, says TCH Vice-President kilometers. R economic recession. Marina Bukalova. She also notes that the All of the top five Russian carriers — Expectations are for the figure to ex- share of international traffic will hit 63% Aeroflot, Transaero, UTair, S7 Airlines, ceed 100 million passengers in 2013, in 2013 against 61% a year before, and is and Aeroflot’s subsidiary Rossiya — according to a forecast by Russia’s likely to continue its domination in fu- showed an increase in passenger traffic. Transport Clearing House (TCH), the ture as more direct international flights Aeroflot remains the country’s largest national agency charged with collecting get launched from Russian regions thus airline, with 15.7 million passengers air transport-related statistics. Russian taking Moscow as the country’s major carried by itself and almost 24 million airlines are projected to carry 38.2 mil- hub out of the equation. passengers as a group, which also in- lion passengers domestically and 46.7 The TCH expectations have so far cludes Rossiya, OrenAir (8th in the million people on international routes been confirmed by industry statistics. ranking), Donavia (12th), Vladivostok this year. A further 18.9 million passen- According to the Federal Air Transport Air (14th), and SAT Airlines. The latter gers should be carried into or from Agency, Russian airlines carried 65.2 two carriers are in the process of being Russia by foreign airlines. million passengers on domestic and in- merged into a new company named This means that the Russian air trans- ternational routes in January through Aurora, which will operate domestic port industry will demonstrate a double- September, or 14.7% up year-on-year. and international routes across Russia’s digit growth compared to 2012, when the Passenger turnover saw a 16% increase Far East. volume of passenger traffic totaled 91.6 to to 172.9 billion passenger-kilome- The fastest growth among the top five million, including 35.4 million people on ters; the passenger load factor grew by has been demonstrated by Transaero. domestic routes, 38.6 million on inter- 1.4%, reaching 80.8%. However, according to its 2013-18 de- national flights carried by Russian carri- The growth in passenger transporta- velopment strategy, the airline is now ers, and 17.6 million carried by foreign tion slowed down a bit in September: planning to focus on improving its fi-

14 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 AIR TRANSPORT

nancial performance at the expense of Key performance indicators for Russian civil aviation network expansion plans. The carrier’s Indicator Jan-Sep 2013 Year-on-year Sep 2013 Year-on-year IFRS revenues in the first half of 2013 change to 2012, % change to 2012, % have reached 45.5 billion rubles (about Passenger traffic, mln pax-km 172,926 +16.0 21,678 +7% $1.4 billion), and its net profit stands at Including: 464 million rubles. International routes 113,277 +20.4 13,831 +5.6 Of the top 20 Russian airlines, the Domestic routes 59,649 +8.4 7,847 +9.4 most impressive growth has been Cargo turnover, mln ton-km 3,696 -0.7 423 -7.6 demonstrated by charter operators such Including: as Kolavia, IFly, and Nordwind. This International routes 2,967 -0.2 328 -6.9 looks like the result of a successful sum- Domestic routes 728 -2.5 94 -9.8 mer vacation season. Passengers carried, thousand 65,239 +14.7 8,552 +9.7 At the same time, Russian cargo traf- Including: fic is evidently stagnating. The volume International routes 35,487 +18.8 4,703 +7.9 of cargo and mail carried in the first Domestic routes 29,752 +10.2 3,848 +12 nine month of the year grew just by Freight and mail carried, thousand ton 730 +1.6 85 -2.6 1.6% year on year to 730,322 tons, Including: while the cargo turnover figure dropped International routes 508 +2.5 57 -1.9 by 1% to 3.7 billion ton-kilometers. Domestic routes 222 -0.3 28 -3.9 September saw a 2.2% decrease in the Passenger load factor, % 80.8 +1.4 83.2 +0.4 volume of cargo carried (85,481 tons), Including: and a 10.3% slump in cargo turnover to International routes 83.3 +0.7 85.2 -1.1 410 million ton-kilometers. Domestic routes 76.5 +2.1 79.9 +2.6 In the meantime, air traffic in neigh- Source: Federal Air Transport Agency boring Ukraine continues to shrink. According to the Ukrainian Statistics through September, down 4.3% on the passenger-kilometers. In 2012, air traf- Service, the country’s airlines carried same period in 2012. Passenger fic in Ukraine totaled 8.1 million pas- 6.1 million passengers in January turnover dropped 17.3% to 9.4 billion sengers.

Top 20 Russian airlines, by passengers carried in January through September 2013 (international and domestic routes)

Ranking Airline Passengers carried, thousand Passenger km, million Passenger load factor, % Jan - Sep 2013 Year-on-year Jan - Sep 2013 Year-on-year Jan - Sep 2013 Year-on-year change to 2012, % change to 2012, % change to 2012, % 1 Aeroflot 15,732 +18.4 45,362 +20.1 79.7 +1.2 2 Transaero 9,823 +21.6 36,294 +16.0 85.3 +1.4 3 UTair 6,352 +6.3 12,859 +10.8 78.9 +3.2 4 S7 Airlines 5,355 +12.2 10,730 +9.2 82.8 +1.6 5 3,589 +6.7 7,241 +4.6 78.1 -0.5 6 3,427 +26.6 9,092 +24.7 75.8 +2.8 7 Nordwind 2,656 +60.4 9,930 +54.9 88.0 -2.7 8 OrenAir 2,547 +4.6 8,873 +15.1 82.8 -4.6 9 Globus 1,723 +16.7 4,219 +23.5 84.5 +1.9 10 VIM-Avia 1,113 -6.1 2,451 -9.9 84.3 +2.0 11 Yamal 1,063 +54.0 2,136 +61.3 74.5 +6.7 12 Donavia 1,004 +37.1 1,506 +40.6 68.1 -2.7 13 NordStar 982 +10.6 2,632 +16.5 76.7 +2.9 14 930 +1.9 2,190 -14.7 69.6 +1.1 15 Kolavia 915 +70.0 2,584 +88.8 89.8 -0.6 16 I Fly 870 +67.4 2,713 +55.1 91.1 -1.5 17 Yakutia 858 -6.1 2,660 -8.9 75.1 -0.2 18 Tatarstan 624 +64.7 1,559 +93.7 86.5 +12.0 19 Nordavia 589 -7.7 789 -7.8 74.1 +4.1 20 Rusline 411 -8.3 548 -28.5 72.6 -5.7 Source: Federal Air Transport Agency

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 15 BUSINESS AVIATION Controversial growth Stability on the Russian bizav market is good for everyone except the Russian market

Elizaveta Kazachkova are not directly linked to actual flights, Wingx Advance data shows that because the “look-to-book” ratio for Moscow’s Vnukovo is one of the busiest he Russian clientele, his- Russian charter brokers is much lower airports in Europe, behind Luton, torically one of the drivers than for their European colleagues, Geneva, and Le Bourget. The behind business aviation the statistics still correlates nicely with Vnukovo 3 bizav terminal handled T growth globally, has be- the big picture: Russia is one of the 19,587 flights in 2012, translating to come crucial both for the European strongest and fastest-growing single- about 60 flights per day on average. The private charter market and for major country bizav markets in the world, number of business passengers serviced OEMs in the challenging post-crisis and its position is as stable as ever. totaled 137,874 people. In the first six environment. Whereas other Stable not only in terms of strong month of 2013 the terminal reported European countries are reporting a 3- demand, but also in the market’s typ- around 9,375 flights and 64,916 passen- 5% year-on-year decrease in flight ac- ical features and in the persistent gers serviced. tivity, or struggling to overcome the drawbacks that inhibit natural devel- Russians traditionally prefer large- stagnation curve, Russian demand for opment of the industry, which should cabin, long-range jets for their private private charters has been growing at a normally accompany such impressive travel. The list of popular aircraft mod- more or less constant rate for the past growth. According to Avinode, the els opens with the Embraer Legacy 600, three years. According to the Avinode vast majority of private flights in and includes the Bombardier online bizav charter system, the trend Russia link Moscow with destinations Challenger 604 and Global Express, is here to stay: charter requests abroad, the most popular being Nice, the Cessna Citation XLS, and a variety through the system grew 44% in 2011- Geneva, Dubai, Chambery, and of larger Gulfstreams and Falcons, 2012, while in 2013 the growth London. The only domestic destina- Avinode notes. Heavy jets account for “slowed” to a sound 21%. Even tion that made it to the Top 10 is 60% of all departures: 770 charter though Avinode warns these numbers St Petersburg (ranked 9th). flights out of Russia were operated by ACJs in May 2013. These figures from the Wingx Advance monthly monitor Russians traditionally prefer large-cabin, long-range jets are a good illustration of the sheer for their private travel Russian scale. Many OEMs confirm these estima- tions. According to Dassault Aviation, the Falcon fleet in Russia and other CIS countries has doubled over the past five years, with more than 60 Falcon jets now in operation. Seven new aircraft were delivered to the region in the first half of 2013 alone, accounting for some 15% of Dassault Falcon’s worldwide de- liveries. Gulfstream Aerospace Pre - sident Larry Flynn has told Russia & CIS Observer that 53 Gulfstream jets are now m o

c operated in Russia, and 23 more aircraft . o t o h elsewhere in the CIS, comprising almost P - t r o p

s 40% of the OEM’s European fleet. n a r T

/

Airbus Corporate Jets reports it has de- g r e b r

e livered more than 25 business jets to a F

d i

n Russia and the CIS, or some 15% of o e L global Airbus business fleet.

16 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 BUSINESS AVIATION

The number of business airliners sup- posedly owned by Russians but regis- BIZAV TRAFFIC THROUGH VNUKOVO 3, 2002 - 6 MONTH 2013 tered, operated, and serviced outside 150000 the country is estimated at anywhere Passengers between 350 and 550 units. The num- Flights ber of Western-built aircraft officially 120000 operated in Russia is below 50. High import taxes and VAT remain the 90000 largest impediment to bringing Western aircraft models to Russia and operating 60000 them under Russian jurisdiction. Nevertheless Bombardier forecasts 525 30000 new business-jet deliveries to the region between 2012 and 2021. 0 Inside the country, a lack of oversight 6M leads to an across-the-board practice 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 of domestic commercial flights on for- Source: VIPPORT eign-registered aircraft being passed off as “private” (up to 75% of all domestic Russia of all the benefits of developing lating competition among FBOs by de- charters). This is in breach of all possi- this segment? manding that at least two different or- ble national and international cabotage “Several Russian owners have told ganizations offer services in each sector regulations. me that they would strongly prefer to of every airport (commercial passenger The local infrastructure has not im- register their aircraft in Russia, except airlines, cargo carriers, and business proved much over the years. Apart for the single reason that they cannot charters). from the new FBOs in St. Petersburg afford to ‘waste money’ paying Russia’s This is not to say that nothing is being (which is about time, to say the least, 18% import VAT,” Bloom says. done to change the situation. The local since Russia’s northern capital is home “Russia’s import VAT may be easily industry body, the Russian United to the annual Economic Forum) and avoided by registering their aircraft in Business Aviation Association Sochi (getting ready for the 2014 Europe instead. If a Russian individual (RUBAA), is doing what it’s there for. Winter Olympic Games), no major im- were to import an aircraft to Russia, the “We are working on three things,” says provements have been made in terms cost of the import VAT may become an Executive Director Anna Serejkina, of dedicated business aviation termi- unrecoverable cost for him or her. In “These are lifting import taxes for air- nals and ground handling facilities contrast, if a Russian business earns craft with an empty weight of under 2 across Russia’s vast territory. A lack of significant VAT from the domestic sale tons [the import taxes for aircraft with competition among FBOs at the of goods and services, it can recover the empty weights between 2 and 20 tons Moscow airports results in unreason- cost of import VAT by offsetting its VAT have already been abolished – ed.], ably high prices. inputs against this VAT expense. creating a dedicated set of regulations So, absurd as it may sound, this state- “Further, the supporting businesses for business aviation, and simplifying ment by Derek Bloom, Partner, Capital for business aviation in Russia have customs procedures for business air- Legal Services (the agency helps geared themselves around servicing craft.” Russian clients solve legal issues asso- transient foreign-registered aircraft, However, there is one factor extrinsic ciated with acquiring and operating and earn quite high fees for doing so. to aviation per se which Bloom does business jets in the country) best de- Accordingly, Russian regulators and not calculate into his projections (and scribes the actual status quo: the busi- leading industry players have gotten of which RUBAA is probably very well ness aviation industry in Russia is large- quite used to things as they are, though aware): the overall climate in Russia — ly nonexistent. Huge amounts of mon- things as they are may not be in stitched with details such as the security ey in the form of ownership fees, oper- Russia’s best interests,” he argues. of ownership rights, the fairness of jus- ating expenses, FBO, handling and Bloom, with his extensive experience tice, people’s trust in the incumbent, maintenance costs, catering, staff interpreting the Russian legislation, be- business transparency, social stability, wages and what not, end up outside lieves the recipe to solving the problem etc. — is quite unfavorable. This is why Russia and never reach the Russian comprises three steps: introducing an it is safe to predict that even if certain economy on the whole, nor its business exemption from import VAT (which improvements finally occur, the major- aviation sector in particular. In his re- would be a very welcome regulatory re- ity of high-net-worth individuals will port, Bloom estimates the sum at nearly form indeed); clamping down on cab- still prefer to keep their expensive assets 1 billion euros per year. What is robbing otage flights within Russia; and stimu- outside the country.

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 17 SPACE BUSINESS The future of Russia’s launch vehicle fleet

Igor Afanasyev, Dmitry Vorontsov technical capabilities of these vehicles Medium+, $150-180 million for the necessitate the development of new- Atlas V, and some $220 million for the aving a national fleet of generation rockets. ESA Ariane 5. It should be noted that launch vehicles is one of Russia’s light launch vehicles are all these figures come from different the key factors in ensur- represented by the Rockot, Dnepr, sources, including unofficial ones, H ing a country’s inde- and Strela designs; its medium-class and are therefore fairly approximate. pendent guaranteed access to space. launchers are the Soyuz family and the However, Russian rockets have a Russia at present possesses a necessary Russo-Ukrainian Zenit model; the number of shortcomings that affect and sufficient variety of expendable country’s heavy vehicle is the Proton- their competitiveness. The primary launchers to achieve all the current M. In the first nine months of this shortcoming is their insufficient capa- space exploration goals, but the ageing year, Russia performed 21 space bility of inserting spacecraft in high- launches. Two Rockots together in- energy orbits and departure trajecto- serted six communications satellites in ries. Due to the medium energy per- orbit; nine spacecraft were orbited in formance of the fuel components used 11 Soyuz launches, alongside three (such as liquid oxygen plus kerosene Soyuz TMA manned ships and three or nitrogen tetroxide plus unsymmet- Progress M resupply vehicles; six ric dimethylhydrazine), and also be- Protons delivered a total of eight satel- cause of the relatively low structural lites (one of these launches failed); efficiency of their upper stages, the one Dnepr carried a South Korean performance of Russian launch vehi- satellite to orbit, and one Strela lofted cles quickly degrades with the increase a Kondor-E radar satellite. A Zenit or- of the required launch speeds. In the bited Israel’s Amos-4 telecom satel- meantime, modern telecom satellites lite. Another 13 launches are planned are growing increasingly heavier, before the end of the year. pushing the capabilities of Russian Russian launch vehicles have suffi- launch vehicles to the limit. cient thrust-to-weight ratios, relatively Another factor is that the current high reliability, and come with an Russian rocket designs are based on agreeable launch price tag. These fac- technology of the 1950s and 1960s, tors, as well as the high frequency of and incorporate components manu- launches (by Western standards), make factured across the country with ex- them internationally competitive. As a tensive use of mechanical processing result, Russia leads the world in the operations on specialized tools. As a number of commercial space launches rule, readying a rocket for launch re- with 40% of the market. quires significant manual labour in- The cost of launching a Soyuz in puts by a large group of specialists at different modifications, depending on the launch site. As wages grow, so whether the mission is commercial or does the cost of manufacturing and in Russia’s government interests, operating these launch vehicles, par- varies between $35 million and $85 ticularly in the situation when their e n

i million. For the less powerful US production rates have stayed un- z a g a

m Delta II rocket, the price range is $65 changed for many years. Certain i k i

t Russia leads the v

a million to $95 million. A Proton-M components have already gone out of n

o world in the number m s o of commercial space commercial launch costs around $90 production, or they cost too much to K i t s launches o mln, against $150 million for the sim- manufacture (this concerns, in par- v o N ilar-payload US-made Delta IV ticular, instruments based on 50-

18 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 SPACE BUSINESS

year-old components). This factor al- so brings the launch costs up. One more oft-criticized deficiency of certain Russian launchers is that they run on toxic fuels. Finally, due to the general skill fade in the industry and continuing degra- dation in process discipline, the relia- bility of Russian rockets has recently been raising concerns. Suffice it to re- call the loss of three Glonass satellites in the failed launch of a Proton-M on July 2, 2013. It is obviously high time the Russian e n i

fleet of launch vehicles got renovated. z a g a m

For this purpose, a comprehensive i k i t v a

modernization program has been on n o

m Flight tests of modular s since the mid-1990s. However, unsys- o K

i Angara launch vehicle t s o tematic funding has resulted in massive v should start in 2014 o delays in implementing this effort. The N slipping schedule is affecting not just and in order to implement others, the Samara-based TsSKB-Progress is de- the image of the design houses involved upper stages have had to be redesigned signing a family of rockets codenamed but also the competitiveness of Russian in a departure from the very principles Soyuz-5, to be based on newest tech- launchers on the international market. on which the entire Angara concept nology including engines running on The Angara family of new modular rests. The size of the modules consti- liquefied natural gas. If the project is rockets is designed to launch light, tuting the Angara family, as well as the approved and enough funding becomes medium, and heavy satellites into high- parameters of the launch site (which is available, flight tests of the first variant energy orbits from a new launch site at built on a Zenit launch site whose con- may begin in 2020-22. Plesetsk Cosmodrome. Flight tests struction was abandoned in the 1990s), One promising program is should start in 2014, so that the Angara put a cap on any further increase in the Khrunichev Centre’s MRKS-1 could replace the Proton-M after the performance of these launch vehicles. reusable launcher. Khrunichev says its year 2020 (the Proton-M would then be Critics note in this connection that the partially reusable launch vehicles with retired). A heavy-class oxygen-hydro- effectiveness of the Angara family is not high payload capacity (originally 25-35 gen booster will help preserve Angara’s that obvious. tons, and eventually up to 60 tons) will competitive advantages in launching The Soyuz-2.1 implements palliative offer two to five times greater efficiency massive geostationary satellites even solutions based on a combination of than the existing vehicles. from Plesetsk, thus making the rocket’s obsolete technology and a relatively The next phase in the development of performance comparable to foreign new (but still four-decades-old) NK-33 Russian launch vehicles is linked to equivalents. The booster is expected to engine with advanced instrumentation. possible future manned missions to the enter flight tests in 2015. The projected launch cost for this rock- Moon and Mars. It is obvious that such The light-class Soyuz-2.1 launch ve- et is in no way appropriate for a light- missions, expected to be implemented hicle is set to begin flight trials in late class launch vehicle. beyond 2020, will require the creation 2013. This rocket could be launched The now-defunct Rus-M program of super-heavy launch vehicles capable from the existing launch pads at was an attempt to develop a principally of inserting over 60-70 tons of payload Plesetsk, and also possibly from new launch vehicle, but exorbitant in low Earth orbits. Research in this Kourou in French Guiana. costs involved in the development, and area is being conducted by all Russian On the other hand, these new vehi- also the fact that the Rus-M’s function- space enterprises. What is required is an cles are not going to resolve all the ac- ality would partially overlap that of the open-architecture rocket whose pay- cumulated problems of Russia’s space Angara family, resulted in the program load capacity could be upgraded to industry. Work to develop the Angara getting scrapped in October 2011. 130-180 tons. A final decision has not family, for one, is taking too long. Therefore, the problem of developing been taken yet, because the technical Many of the technical solutions imple- a future Russian fleet of launch vehicles specifications of the future interplane- mented in the program were decided remains pretty much unresolved. tary missions are still unclear, as is the on at the spur of the moment; a number Hence are the current active R&D ef- composition of possible participants in of options were never realized at all, forts in this area. such programs.

RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 19 SPACE BUSINESS Nuclear power for space applications

Igor Afanasyev August, a team of Russian companies thrust for a brief period of time, a reac- incorporated under the umbrellas of tor malfunction may contaminate the early all the current the Federal Space Agency escaping gases. In addition, heating hy- launch vehicles used for (Roscosmos) and the State Nuclear drogen to 2,500-3,000°C is not a trivial inserting satellites into Energy Corporation (Rosatom) pre- task and requires first solving numerous N Earth orbits and placing sented a project to develop a problems related to material engineer- spacecraft on interplanetary trajecto- megawatt-class nuclear power propul- ing, radiation tolerance, environmental ries utilize rocket engines which run sion system that would be used for in- safety, etc. Owing to these complica- on chemical fuels. This technology is terplanetary missions and for deliver- tions, further work in this area was already exhausting its upgrade poten- ing satellites into high-energy orbits. eventually abandoned. tial, especially in terms of fuel effi- Research into this technology was or- The current proposal is to use a nu- ciency, so experts believe that switch- dered by the Russian president back in clear reactor for power generation; gas ing to nuclear-powered launchers is June 2010. N.A. Dollezhal Scientific is fed through the reactor core and ro- the way to go. Research and Design Institute of tates a turbine, which drives an electric At the MAKS 2013 air show held in Energy Technologies (NIKIET) is generator and a compressor. The com- Zhukovsky outside Moscow this working to develop the reactor in con- pressor provides for closed-loop circu- junction with the Podolsk Research lation of the working medium, elimi- A prototype of Russia’s Institute of Technology (PNITI), nating any possibility of environmental nuclear power propulsion Kurchatov Institute, Obninsk Institute contamination. The generator provides system should be built by 2018 for Physics and Power Engineering, power for a plasma electric thruster, and other Rosatom subsidiaries. The which consumes at least 20 times less rest of the propulsion system will be working medium than chemical equiv- designed by the Keldysh Centre, alents. Energia Corporation, Chemical The project pioneers a host of inno- Engineering Design Bureau, Chemical vative technology solutions, including Automatics Design Bureau, and other a highly efficient energy conversion Roscosmos subsidiaries. The project’s scheme; a compact high-temperature, 2010-2018 budget exceeds 17 bln fast-neutron reactor with gas cooling rubles ($527 million). systems and nuclear/radiation safety Work has already progressed to rig ensured in all phases of operation; uti- tests on individual components of the lization of high-density fuel; a service propulsion system, whose prototype is propulsion system comprising several to be built by 2018. The system will be powerful, highly efficient electric designed to travel to a low-earth orbit thrusts; high-temperature turbines on board Proton or Angara launch ve- and compact heat exchangers with a hicles. design service life of 10 years; power- The USA and the Soviet Union used ful, high-rpm electric generator con- to actively research nuclear-powered verters; and large-area structures space propulsion technology in the (heat exchange radiators) deployable 1960s and 1970s. The original idea was in space. to create an engine in which hydrogen The project to develop a megawatt- would be heated in a nuclear reactor class nuclear power propulsion system and then escape through a nozzle, thus will help the Russian space industry producing thrust. This option was later create a new generation of powerful u r

. scrapped as inefficient: although the propulsion modules for future space O T A technology can produce considerable exploration programs.

20 RUSSIA/CIS OBSERVER № 3 (38) NOVEMBER 2013 The official on-site publication for the most important Russian aerospace exhibitions

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