President Vladimir Putin yesterday ordered his government to overhaul Russia's ailing aviation industry, warning that without private investment...
MOSCOW — President Vladimir Putin yesterday ordered his government to overhaul Russia’s ailing aviation industry, warning that without private investment the sector will continue to founder.
The gulf in competitiveness between Russia’s military and civilian aircraft is vast, Putin said, noting that the “low attractiveness” and “level of comfort” offered by Russian airlines leave them struggling to compete even in former Soviet republics.
In an industry where new designs either compete globally or not at all, international demand for Russia’s noisy, fuel-guzzling civilian aircraft is nearly nonexistent.
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“It’s impossible to depend exclusively on protectionist measures in the struggle for the market,” Putin said in televised remarks. “It’s a sure way toward stagnation and lower quality in one of the high-tech domestic production areas.”
Just three fighter-jet manufacturers — Sukhoi, MiG and Irkut — accounted for 90 percent of sales of both civilian and military aircraft last year, according to Troika Dialog, a Moscow-based brokerage.
“Private investments can and should be given access to the aviation industry,” Putin said. “The competition here is not only between individual national companies, but also between entire aviation powers.”
Speaking at a session of his advisory State Council at the Central Aerodynamic Institute in Zhukovsky, outside Moscow, Putin ordered the creation of a giant holding company that would consolidate civilian and military aircraft builders under one roof.
While welcoming the announcement as a clear step toward diversifying Russia’s raw-materials dependent economy, aviation experts warned that without massive subsidies and talented management any holding company could turn into a rusting “mass grave” of Soviet-era plants.
Vladimir Kulakov, head of the Voronezh regional administration and chairman of the working group that organized yesterday’s meeting, said that for Russia to compete on international markets, $35 billion would need to be injected into the sector over the next 10 years.
“This sum cannot be taken from state coffers alone, therefore the government should work out a strategy for attracting investments,” he said.
Russia’s Industry and Energy Minister Viktor Khristenko said that over the coming years the state could contribute up to $1.8 billion annually in the sector, Interfax reported.
If such money materializes, it will go a long way toward reforming the sector, said Gairat Salimov, an industry analyst at Moscow’s Troika Dialog brokerage.
“You need two things: management and investment,” he said. “Without subsidiaries uniting all these companies would be like uniting a crowd of dead men.”
Russia has long touted the need for consolidation to reinvigorate an industry that in its Soviet heyday rolled out 700 aircraft a year and accounted for a quarter of the world’s civilian fleet.
Today Russia’s civilian manufacturers produce just a handful of planes a year and the industry employs less than a third of its original 1.5 million work force, according to the Industry and Energy Ministry.
More than 75 percent of Russian planes were inherited from the Soviet Union, Yuri Koptev, who heads the ministry’s military-industrial department, said last summer. If they are not replaced, the industry could face a crisis as early as next year as aircraft become antiquated.
The biggest names in Soviet aviation design — Alexei Tupolev, Pavel Sukhoi and Sergei Ilyushin — all passed through the institute, founded in the 1930s.