An unusual move to bolster the prospects of its own narrow-body ambitions, Russia’s United Aircraft Corp. (UAC) is proposing to ease market access to Western aircraft. Russia has long slapped high import taxes on Western-built airliners to all but force domestic carriers to buy Russian products. The move has saddled airlines with inefficient fleets and stifled modernization plans. Now UAC itself, which the tax is intended to protect, is suggesting that it be waived, but with one caveat: the tax will be lifted only for airlines that also buy the UAC’s MS-21 – the twin-narrowbody on which the Russian aircraft maker is rest¬ing its commercial hopes—or the Sukhoi Superjet regional aircraft and/or Antonov An-148. The UAC proposal being put to the Kremlin would allow airlines to skirt the onerous tax for a certain number of aircraft, if the carriers agree to buy the same number of MS-21s or other new Russian aircraft.

Airlines are intrigued but also see some issues that need to be resolved first. Vladimir Gorbunov, the head of low-fare carrier AviaNova, notes that the contract would have to be signed soon, but he questions how UAC can “guarantee terms of delivery and system performance when the aircraft are still on the drawing board or, at best, in test.”

There’s another reason it would be in the interest of Russian manufacturers to see the tax abolished, says Marina Bukalova, the head of SkyExpress — to encourage fleet renewal. Once an airline has paid the high cost to lease an aircraft, it wants to amortize the cost over as a long a period as possible, rather than buying a replacement.

To further bolster the MS-21’s market potential, UAC also is considering setting up an aircraft financing arm. Russian airlines could benefit from the support of export credit agencies in the U.S. and Europe if they buy Boeing and Airbus aircraft, respectively. Initially, UAC planned the MS-21 as a replacement for the ubiquitous Tupolev Tu-154, but with that model now largely being phased out, the competition is much more head-to-head with Boeing and Airbus products.

The planning is still at an early stage and is unfolding as UAC finalizes the industrial infrastructure underpinning development and production of the MS-21, which is due to fly in 2014. To that end, UAC has begun development of a new polymer composite structures manufacturing plant, which is supposed to develop the firm carbon-fiber wings for series production of the MS-21, starting in 2015-16. First prototypes of the aircraft will use more traditional metallic wings.

The UAC enterprise complements the efforts of Aerocom-pozit, a joint venture of Sukhoi and Progrestech set up last year to build composite structures for the Russian narrowbody. After a long search process, Aerocompozit has selected Ulyanovsk, an industrial center on the Volga River, as its production home. Local authorities are offering to develop infrastructure to support the plant along with hefty tax breaks. The facility, which is being designed this year, is to be built at the site of the Aviastar-SP plant, which manufactures Tupolev Tu-204 passenger and cargo aircraft and will soon produce Ilyushin 11-476 freighters (successors to the 11-76 military and commercial airlifters).

First prototype structures should be delivered from the $250-million plant in 2013-14. Capacity is for up to 100 aircraft shipsets a year. “We are planning to produce wings and empennage structures at Ulyanovsk, and not just for the MS-21, but for the entire range of UAC’s commercial products, including Sukhoi Superjet upgrades,” says UAC President Alexey Fedorov. The goal is to have Aerocompozit attract foreign companies as customers as well as shareholding partners, he adds.

The first flight of the MS-21 prototype is tentatively scheduled for 2014, with certification to be completed in 2015. Recently, Irkut Corp., the project leader, reported achievement of the project definition milestone, with work transitioning to detailed design in collaboration with potential customers. Even as the MS-21 moves forward, Russian airlines continue to import commercial jets. Last year, they bought 100 aircraft from abroad, despite the 20% tax and the economic downturn, bringing to 390 the number of foreign commercial aircraft in the country, according to data released at the Aircraft Finance and Leasing in Russia and the Commonwealth of Independent States conference here. At the end of last year, over 75% of Russian passenger traffic was carried on foreign aircraft.

And, with Russia’s Superjet 100 development suffering delays, foreign companies see an opportunity to place more aircraft, although many are used models serving as a gap fillers. The state research institute of civil aviation estimates Russian airlines will acquire more than 90 narrow- and wide-body jets, as well as 40 regional Western-built aircraft, in 2011-15. During the same period, they are projected to buy 15 Russian narrowbodies and 90 regional jets.

Source: Yakovlev