Russia/CIS Observer, 29-30 by ABE Media

Russia & CIS Observer № 2–3 (29–30) july 2010

QUARTERLY

special focus on farnborough international 2010

Russia & CIS Observer

№ 2-3 (29-30) july 2010

from the publisher of

30 • AEROSPACE INDUST RY

The Military Transport Aviation

Russia/CIS Observer Quarterly is produced by:

is planning for new aircraft ................16

Russia’s MS-21 program awaits Publisher Evgeny Semenov Editior-in-Chief Maxim Pyadushkin Art Director Andrey Khorkov

launch orders ......................................2 • AIR TRANSPORT Regional aircraft for international market ......................4

Air transport relations between Russia

Superjet 100 completed water

and European Union..........................18

Director, Marketing & Advertising Konstantin Rogov

ingestion trials......................................6

Russia has specialized airlines now ....24

Commercial Director Sergey Belyaev

SaM146 engine gets EASA approval ....6

Translated By: Andrey Bystrov

Italian helicopters come to Russia ........8

• BUSINESS AVIATION Hip enough to upgrade ......................10

Recovery of the Russian bizav market

Unmanned Russian Helicopters ........12

gives hope to local operators ..............27 • SPACE BUSINESS

• DEFENSE

© № 2-3 (29-30), July 2010 Tel./Fax: +7 (495) 933 0297 Correspondence: P.O. Box 127, Moscow, 119048, Russia To subscribe e-mail to subscribe@ato.ru or contact «MK-Periodica» agency: e-mail: info@periodicals.ru http://www.periodicals.ru or one of its partners in your country.

The Russian Air Force wants to

Murky future for Sea Launch..............30

speed up the T-50 fighter testing ........14

ISS-Reshetnev offers next-generation

MiG-35 in radar testing......................15

comsats ............................................32

Visit our website at www.ato.ru/rco RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

A E RO S PAC E I N D U S T RY

Off the shelf

Russia’s MS-21 program awaits launch orders to begin prototype assembly Maxim Pyadushkin ussia’s new MS-21 shortto-medium range airliner remained on paper for quite a long time, but now customers seem to feel more confident about the program. In early June, Irkut Corporation, the MS-21 designer, signed a preliminary agreement with Malaysian Crecom Burj Bhd investment fund for 50 aircraft. The deal is estimated at $5 billion, with the first delivery to be made in 2016. Malaysian media have cited Crecom Burj representatives as saying that they plan to lease the MS21s to airlines from Southeast Asia. “It’s great that we have seen the first interest in our aircraft”, says Alexey Fedorov, president of Irkut’s parent company United Aircraft Corporation (UAC). A firm contract will be inked in a few months. Fedorov promises that by the first quarter of 2011, UAC will have landed the 50-70 firm orders needed to launch production of the first prototypes. According to Irkut, more clients are expected to be announced at Farnborough International 2010, where the designers will for the first time demonstrate full-size mock-ups of the MS-21 cockpit and passenger cabin. Talks are reportedly under way with both Russian and foreign customers.

Fedorov names the Russian Technologies state corporation as a possible Russian launch customer. This giant state-owned industrial holding controls several Russian air carriers, including the country’s fourth largest airline in terms of passenger kilometers, St Petersburg-based Rossiya. Earlier Russian Technologies wanted to merge its aviation assets into a single airline to rival Russia’s flag carrier Aeroflot, but eventually it agreed to hand these airlines over to Aeroflot. In exchange the corporation expects to get a stake in this largest domestic airline. UAC has previously run in a Russian Technologies tender for 50 short-tomedium range airliners, bidding with a mix of Tupolev Tu-204SM and MS-21 aircraft. But in May 2010 the corporation preferred the Boeing 737NG as a solution for renewing the fleets of its subsidiary airlines. Nevertheless, Fedorov hopes that Russian Technologies will support the MS-21 program with orders as some of the corporation’s industrial subsidiaries participate in the program as systems suppliers. For example, Russian Technologies-controlled Avionika and Aviapribor Holding were selected to develop the MS-21 avionics suite in cooperation with Rockwell Collins. Russia’s United Engine Corporation, which Russian

Irkut

At Farnborough International 2010 Irkut Corporation will for the first time demonstrate a full-size mock-up of the MS-21 cockpit

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Technologies controls through the Oboronprom investment fund, is developing the PD-14 engine for the future airliner. The MS-21 development effort started in the early 2000s. This new singleaisle aircraft, with a passenger capacity of between 150 and 200 and a range of 5,000 km, is targeted at the most popular segment of Russian air transport. It will replace ageing Soviet designs, mainly the Tupolev Tu-154. In 2009 the program passed the Gate 3 milestone, which involved the approval of the aircraft’s preliminary design. Also by the end of last year, Irkut selected the major subsystems suppliers, including the alternative engine designer. Now customers can choose between a Russian and a foreign powerplant. The domestic option is the PD14, while Pratt & Whitney will develop a special version of its PW1400G geared turbofan engine with a thrust of 14 tons. The US company Hamilton Sundstrand and Zodiac Aerospace of France are some of the other major suppliers. The Americans will supply the APU, the wing de-icing system, and the integrated air-conditioning and fire protection system. Zodiac and its subsidiaries will develop the electric, fuel and oxygen systems and interior design. The MS-21’s hydraulic system will be designed by Eaton Corporation, but more than 50% of work on its components and assembly parts will be outsourced to Russian manufacturers. Russia’s Hydromash company will produce the landing gear. The program is currently at the working design stage, with production of the first prototypes expected in 2011. The smallest, 150-seat MS-21-200 family member is to make its first flight in 2014, and should achieve Russian and EASA certification in 2015 and 2016, respectively.

A E RO S PAC E I N D U S T RY

Regional aircraft for international market — The certification program is nearing completion. To what extent has the aircraft confirmed the advertised economic advantages? — It’s no secret that during the design phase, we targeted lower direct operating costs about 10% compared to our key competitor, the Embraer 190/195. So far, we have managed to reach good fuel efficiency, lift-drag ratio and weight characteristics, so that now the certification tests are confirming that our direct operating costs are 6-8% lower. That’s not yet the 10% we are after, but it still means serious savings for operators. — What markets, apart from Russia, is the aircraft aimed at? Can it really break into the segments already occupied by competition? — Our aircraft was conceived as a regional airliner not only for Russia, but also for the international market. This is why its runway performance, range and other capabilities allow for unrestricted operations in Siberia and the Middle East, from short European runways and in the AsiaPacific region, covering distances of up to 4,500 km. This aircraft is designed to the highest international standards, and we expect it to be a market success. This success must be secured, first of all, through the aircraft’s highly attractive operating costs and economic efficiency. In terms of specific cost per passenger and cost pre flight, we are better than the Embraer 190 by 6-8%. 4

SCAC

The upcoming completion of the Sukhoi Superjet 100’s certification program – and the startup of deliveries – are expected to give a big boost to its promotion in the international regional aircraft marketplace. Dmitry Matsenov, the senior vicepresident for strategic development at Sukhoi Civil Aircraft Corporation (SCAC), reviews the Superjet 100’s competitive advantages, current marketing plans, and prospects for further evolvement of the Superjet model range.

In terms of total fuel burn per sector we are at the same level as the Antonov An-148, but it accommodates 22 fewer passengers. Also, we have better noise and emissions margins than our competitors. At present, all our rivals are within ICAO Chapter 4 standards, whereas we have a margin of about 10-13 EPNdB. So if Chapter 5 materializes, we will be comfortably within it, while our competition will have to think seriously about re-engining their existing products. We also have a serious margin under CAEP 6 emission standards. In terms of passenger comfort, the Superjet 100 offers levels that are comparable to those of mainline air-

RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

craft. This will become evident if we compare its passenger cabin crosssection and ceiling height to other mainline and regional models. — What are the current development plans for the Superjet model range? — First of all, in the framework of the ongoing program, we must complete certification of our baseline aircraft. By 2012, the Long Range variant will hit the market. Therefore, we will complete the creation of the baseline platform for our civil aviation programs. In parallel with this, we will launch a development of the Sukhoi Business Jet (SBJ). It will be derived from the baseline aircraft. Redesigning the wing and fuel system will increase its range to 7,500-8,000 km. There will be other changes unique to business aviation, such as built-in airstairs and businessclass passenger cabin but overall, the baseline model allows for a fairly quick launch of the SBJ model — we are aiming for around 2013. For further developments, we believe the most promising future product will be a larger aircraft that could be dubbed SSJ100 New Generation at the moment. In this segment, the market is awaiting the advent of our Canadian competitor’s CSeries aircraft, but even after it emerges, there still will be a window of opportunity in this market niche. The passenger capacity of our new aircraft is being defined at the moment, but I can already say that it will make wider use of composite materials and new technologies. — Will the new model require new engines? Yes, we study current options and new offers at the moment. We expect to give this project a conceptual framework this year, and present it to the market in 2011.

A E RO S PAC E I N D U S T RY

Superjet 100 completed water ingestion trials n early June, Russia’s new Sukhoi Superjet 100 regional airliner made another important step towards certification. The second prototype aircraft, number 95003, successfully completed the test program aimed at evaluating engine protection against runway water ingestion at a full range of speeds (from 10 to 150 knots) and different engine settings preceding take-off. The tests took place in a special pool constructed on a runway of the Gromov flight research institute in Zhukovsky. The aircraft accomplished a total of 27 runs along the 70-meter-long pool filled to 40 mm with water. Special attention was paid to the engine performance at low speeds and take-off power settings as well as at maximum reverse thrust. The Superjet 100 program has often been criticized for its lowhanging underwing engine design. This, opponents argued, could lead to foreign objects getting into the air intakes from the runway. But the trials in Zhukovsky demonstrated that that water does not hit either the engine air in-

Sukhoi Civil Aircraft

The trials in Zhukovsky demonstrated that that water does not hit the Superjet 100’s engine air intakes

takes or the auxiliary power unit while the aircraft runs along a wet runway. The absence of water ingestion was confirmed by standard cockpit engine performance indication, by video and photo output from cameras mounted at varying distances from the pool, and from mini-cameras attached to the landing gear of the aircraft. Moreover, the tests confirmed that the aircraft goes steadily along a wet runway at

speeds of up to 150 knots (275 km/h) and can be easily handled by an averagely skilled pilot. According to Sukhoi Civil Aircraft, the developer of the Superjet 100, the certification program is close to completion. The designers hope to obtain a Russian certificate by the end of this year, after which first deliveries can start. EASA certification is expected in the first half of 2011.

SaM146 engine gets EASA approval

n June 23, the SaM146 turbofan engine jointly developed by Russia’s NPO Saturn and Snecma of France exclusively for the Sukhoi Superjet 100 regional aircraft, received a type certificate from the European Aviation Safety Agency

(EASA). Thus it became the first Russian-built aero engine certified under the European regulations. Receiving the certificate, Jean-Paul Ebanga, Chairman and CEO of the RussoFrench Powerjet joint venture that runs the SaM146 program, said: “This is a landmark in relations between the European and Russian aerospace industries. We are now looking forward

EASA

Patrick Goudou, Executive Director of EASA (left), presents the SaM146 type certificate to Jean-Paul Ebanga, Chairman and CEO of PowerJet

RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

to seeing the SaM146 enter revenue service in the next few months.” The SaM146 completed its certification tests at the end of May by passing the final medium bird ingestion test. During the certification test program the engine logged 7,100 hours, including 3,500 hours in flight. According to NPO Saturn, the engine’s approval from the Russian aviation authorities is expected within several weeks. The end of certification will make it possible to ramp up SaM146 production. The shortage of powerplants has

seriously delayed the certification trials of the Superjet 100 itself. But now the Russian government plans to support NPO Saturn. When visiting the company in mid-June, Prime Minister Vladimir Putin told about the possibility to allocate additional budget funding to launch the engine’s serial production. NPO Saturn intends to deliver 13 powerplants to Sukhoi Civil Aircraft by the end of the year, and to increase its output to 33 engines in 2011. According to Putin, the annual production rate should grow up to 140 by the year 2014.

A E RO S PAC E I N D U S T RY

Italian helicopters come to Russia Vladimir Dolotov he Italian helicopter manufacturer AgustaWestland continues its active expansion into Russia. A joint project with Russian Helicopters was launched on June 22 in the town of Tomilino, Moscow region, to build an assembly facility for AW139 light twinengine helicopters. The facility should open in 2011, and is expected to assemble five airframes during its first year.

the year 2015. Total investment in the project stands at some 40 million euros. The joint venture should break even in eight years from launch. Its products will be marketed in Russia and CIS countries, and also will be distributed via AgustaWestland’s international sales network. There are as yet no firm orders for Russian-assembled AW139s, but undisclosed customers have together committed to some 10 aircraft. The partners expect the demand for the AW139 in Russia to grow after the

AgustaWestland

HeliClub has placed the first Russian order for AW139 that will join another Italian helicopter AW109 (on the photo) already operated by the company

The partners started their cooperation few years ago. The assembly line will be operated by the HeliVert joint venture, in which Russia holds 40% and Italy owns 60%. Russian Helicopters General Director Andrey Shibitov says the HeliVert paperwork should be signed this summer. “Almost all the documents have been initialed, now lawyers on both sides are ironing out the final details of the shareholders’ agreement,” he says. The partners are planning to ramp up annual production to 24 airframes by 8

type receives local certification for a full ice-protection system in mid-2010. At the Moscow HeliRussia 2010 exhibition in May, AgustaWestland announced its first Russian AW139 customer – the Aviaservice company operating under the HeliClub brand. HeliClub currently has one AgustaWestland AW109 light helicopter, which has clocked 350 flight hours over the 18 months of operation in a variety of weather conditions, says General Director Alexey Barkhotov. The company plans to use its new

RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

AW139 that will be still imported, for charter passenger services from its heliport outside Moscow. As of late May 2010, AgustaWestland had sold in Russia nearly 20 new-generation helicopters of different models. In 2009 only four of them were used by commercial operators that rest is evidently registered in general aviation sector. A company representative has told Russia & CIS Observer that under an agreement signed with Russia’s largest helicopter operator UTair Aviation in December 2009, AgustaWestland will assist the carrier with putting the AW139 in service over the next few years. UTair pilots and technical personnel have already done type training. Rather than buying the helicopters from AgustaWestland, the airline will most likely operate the rotorcraft in the interest of other Russian companies. AgustaWestland has appointed commercial helicopter operator Aerosouz, based outside Moscow, as its authorized service center for Russia. Aerosouz will provide maintenance and repair services and maintain a spares inventory, helping the manufacturer provide an even higher level of service to its Russian customers. As the Russian fleet of AgustaWestland helicopters keeps growing, new service centers will be inaugurated across the country to maximize the fleet’s operational effectiveness. Aerosouz, for its part, plans to expand to other Russian cities. Its services include light commercial helicopter operations, rotorcraft sales, after-sales support and pilot training.

A E RO S PAC E I N D U S T RY

Hip enough to upgrade Maxim Pyadushkin he Russian Helicopters holding company, the umbrella organization for the country’s rotorcraft industry, has unveiled plans to modernize its bestselling Mil Mi-8/Mi-17 Hip medium helicopter family. A mock-up of the upgraded model, dubbed Mi-171M, was revealed at HeliRussia 2010 exhibition in Moscow in May. The improved rotorcraft should make its first flight in 2011 and enter service in 2013. The manufacturer hopes that the new model will find both civil and military customers. The Mi-171M will be a further development of the 11-ton class Mi-17 rotorcraft. In 2009 Russian Helicopters delivered to Russian and foreign customers 139 Mi-8/Mi-17 family helicopters, accounting for 76% of total sales for that year. The designers promise to apply more than 80 innovations in the new version. It will receive the more powerful Klimov VK-2500 turboshafts, modernized APU, main gearbox, swash plate, main rotor head and transmission, as well as composite main rotor blades and an X-type tail rotor. Another focus will be on onboard

equipment that will enable the aircraft to be piloted by a crew of two. The Mi-171M in basic configuration will be equipped with digital autopilot, with a glass cockpit offered as an option. Russian Helicopters already retrofits current modifications of this family with new avionics. Earlier this year the manufacturer reported the first delivery, to India, of the modernized Mi17V5 version with new onboard equipment and digital autopilot. These innovations should improve the helicopter’s performance. Its range with the main tanks will grow from the current 610 km to 850 km, and its externally carried load capacity will increase from 4,000 to 5,000 kg compared to the current Mi-171 version. The new helicopter is expected to have better directional control and hover at higher side wind speeds. The designers also promise to increase the aircraft’s life cycle and time between overhauls. Andrey Shibitov, head of Russian Helicopters, has told Russia & CIS Observer that the Mi-171M will be assembled in several versions: for transport, passenger and search-and-rescue applications. “We may also have a modification for offshore operations for such customers as, for example, Gazpromavia,” he says.

ATO.RU

The modernized Mi-171M will be assembled in several versions: for transport, passenger, search-and-rescue and off-shore applications

RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

The new model may find military applications as well. Now more than one half of exported Mi-8/Mi-17 helicopters are purchased by foreign militaries, mainly by former Soviet allies. Russian Helicopters has recently delivered several of these aircraft to the Czech Republic and Croatia, Shibitov says, adding that contracts with some Balkan countries are being discussed at the moment. Another potential customer for the modernized helicopter is the international forces in Iraq and Afghanistan. Now the coalition forces widely use Mi-8 family rotorcraft, delivered by the Russian manufacturer through the UAE-based Airfreight Aviation company. The aircraft are supplied in civil transport configuration, with their navigation and communications equipment adapted to the coalition standards. The latest such deal was signed in August 2009, and calls for delivery of 20 Mi-171s. In November 2009 Russian Helicopters and Airfreight Aviation opened the International RotorCraft Services joint venture in Sharjah that will provide customization and maintenance services for the Russianbuilt helicopters in the Middle East. The Mi-171M model will be certified under Russian AP-29 rules by the end of 2012. The program sets an additional goal of obtaining an EASA certificate in order to promote foreign sales, but this issue is still being discussed, Shibitov says. The first prototype should be assembled at the Ulan-Ude aircraft plant, one of the two facilities that manufacture Mi-8/Mi-17 family aircraft, in 2011. Series production is to be launched in 2013. The designers hope to preserve the main advantage of the Hip family, which is a more attractive price than foreign competition, but also promise that the Mi-171M’s operating expenses will go down compared to the current modifications.

A E RO S PAC E I N D U S T RY

Unmanned Russian Helicopters Denis Fedutinov he Russian Defense Ministry plans to select a local supplier of unmanned surveillance and target designation aircraft. “The flight trials of possible candidates will be conducted this summer”, the first deputy defense minister Vladimir Popovkin told at the end of June at Engineering Technologies Forum, a defense show held in Zhukovsky, near Moscow. He added that about 10 Russian manufacturers will take part in the trials. This looks like another try of the Russian military to find an acceptable unmanned aerial vehicle (UAV) for its needs. Popovkin confessed that previous attempts to develop an indigenous UAV were unsuccessful what made the Defense Ministry to purchase a dozen of Israeli-made aircraft, including Bird Eye 400 mini-UAVs and 400 kg Searcher Mk II tactical reconnaissance drone in 2009. Earlier Popovkin explained that the Israeli aircraft have been purchased only to develop the methods of UAV operational use and train personnel. Now the Defense Ministry set a new requirement to the Russian UAV designers. “It’s important for us to see the quality of transmitted images, its immunity to countermeasures as well as the level of data-transmission channels protection”, explained the deputy defense minister. One of the possible suppliers is Russian Helicopters holding company that plans to participate in the tender with its new unmanned rotorcraft. The company is developing UAV systems in four classes: long-range (over 400 km), medium-range (up to 400 km), shortrange (up to 100 km), and very-shortrange systems (up to 25 km). One or several products will be offered in each category. Gennady Bebeshko, head of

Denis Fedutinov

The representatives of Russian Helicopters promise that if the 500-kg Korshun surveillance UAV is selected by the Russian military, the first prototype can take off in two years

unmanned programs at Russian Helicopters, says the model range will reflect the domestic and international market demand. The designer showed two of its projects as full-size mock-ups at the show in Zhukovsky. One was the Kamov Ka-135 pistonpowered coaxial-rotor UAV helicopter, with a take-off weight of 300 kg. The vehicle has a payload capacity of up to 100 kg, operational radius of 100 km and maximum endurance of 3.5 hours. Possible applications include environmental monitoring and patrol duties. The other UAV project, Korshun, is based on the Patrul 500-kg light helicopter by the Kumertau aircraft plant. Korshun is a medium-range vehicle with a 300-km operational radius, 6hour endurance, and capable of carrying a 100-kg mission payload. The system will be available in different mission-specific versions: for surveillance, freight transportation, and as a data relay system for isolated areas. Most unmanned systems out there are dual-use products. Judging form their characteristics, the Russian Helicopters UAVs can have both civilian and military applications. The plan is to achieve maximum operational flexibility: the systems’ modular design will reduce the

RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

assembly and deployment times, and there will be three to four different types of interchangeable payloads. According to Bebeshko, developing a UAV platform poses no difficulties to an experienced rotorcraft specialist. There are, however, certain problems with aircraft controls. Russian Helicopters has launched an effort to create an automatic UAV control system that could be used in all flight phases. In order to cut the costs and time of development, the prototype will be tested on a Patrul platform. Some of the Russian Helicopters enterprises have prior experience developing unmanned systems. The Kamov design bureau worked on the Ka-37 and Ka-137 UAV rotorcraft projects in its time, and the Mil helicopter plant once looked into building an unmanned version of its Mi-34 light helicopter. So it is no accident that the two enterprises now have the key role in the parent company’s UAV program, and select suppliers depending on the requirements of each individual project. So far the company is investing its own funds, but there is hope that financial support will be provided by the Defense Ministry if it selects some of the suggested unmanned aircraft.

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DEFENSE

Preparing for service

The Russian Air Force wants to speed up the testing of the fifth-generation fighter Maxim Pyadushkin he Russian Air Force plans to receive its first Sukhoi T-50 fifth-generation fighters in 2012-2016. It could be a preproduction batch of six to 10 aircraft, Vladimir Popovkin, deputy defense minister on armaments, said in June. The production of this batch will be launched in 2012 after the new fighter gets a preliminary approval from the military. Most of the trials should be completed by 2015, while serial production is to start in 2016. At the first stage the Air Force may order more than 50 aircraft, said Popovkin. The T-50 has been in development by the Sukhoi company under the PAK FA (Perspektivny Aviatsionny Kompleks Frontovoy Aviatsii, or Future Tactical Aviation Aircraft System) program since 2002. The new aircraft is intended to replace the Russian Air Force’s Su-27 fighters. T-50 is definitely shaped for stealth with its chined forward fuselage, planform edge alignment, internal weapons bays and small vertical tails. According to Sukhoi, the aircraft’s fuselage is 30% made of composites, while its shape and special coating will allow the T-50 to demonstrate an unprece-

dented small radar cross section in the radar, optical and infrared ranges. The first T-50 prototype made its maiden flight in January 2010. By midJune the aircraft had made 16 flights. The second prototype is expected to join the test program this year while two more test airframes will be ready in 2010. “The task for the first two aircraft is to test aerodynamics, stability and controllability while the 3rd and 4th aircraft will be fitted with onboard equipment required by the customer,” explains Sukhoi head Mikhail Pogosyan, adding that the aircraft subsystems like an AESA radar are being developed simultaneously. The X-band AESA radar for the T-50 is being developed by the Tikhomorov NIIP design bureau. Its antenna, first unveiled at the Moscow MAKS exhibition in August 2009, has 1,500 transmitreceive modules. Besides the X-band radar, NIIP is also working on an Lband active phased array that will be installed on the T-50’s leading-edge flaps. The first T-50 prototype is powered by a pair of NPO Saturn 117M engines, an improved modification of the 117S powerplant installed on Sukhoi Su-35 fighters. The 117M has a new FADEC system and a thrust reportedly increased

Alexey Mikheev

The Russian government has already spent about $1 billion on the PAK FA program and plans to allocate another $1 billion

RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

from 14.5 to 15 tons. This engine, initially planned as a temporary solution, will now power the first production aircraft as well. “We think that this engine will meet the requirements at the initial stage of the aircraft’s operation”, says Pogosyan, adding that development of a secondstage engine may be launched in 2011. The testing of the T-50’s onboard equipment and weapons trials will start after 2012, and will involve aircraft from the pre-production batch. “The size of the pre-production batch will depend on the progress with prototype testing while these aircraft should speed up the trials,” says Popovkin. The weapons trials will be conducted by the Air Force at the 929th flight-test center in Akhtubinsk. “We would like to complete the testing by 2015 in order to start deliveries of production aircraft from 2016,” the deputy defense minister adds. The Russian government in June disclosed the cost of the PAK FA program. When inspecting the T-50 prototype in Zhukovsky, Prime Minister Vladimir Putin said that 30 billion rubles (about $970 million) had already been spent on the aircraft’s development, and that another 30 billion was required to finish the program. But the PAK FA program is a top defense priority for the Russian authorities, and receives 100% funding annually. The T-50 is expected to stay in service for 30-35 years. Sukhoi currently focuses on the single-seat version, but long-term plans include the development of a two-seat PAK FA version, dubbed T-50UB, that will also serve as a basis for the Indian Air Force’s prospective FGFA fighter. Russia and India signed an intergovernmental agreement on 2007 to jointly develop this aircraft, but a relevant contract between India’s HAL corporation and Sukhoi is still being discussed.

DEFENSE

MiG-35 in radar testing final version’s 1,064. The source said that the radar demonstrated good ground-mapping capabilities and confirmed its target detection ranges. Earlier Phazotron-NIIR designers reported that during the initial testing at a MiG-35 demonstrator, the radar pro-

Maxim Pyadushkin his spring Russian jet maker MiG Corp. conducted the final stage of flight trials on its MiG-35 Gen 4++ fighter. The MiG-35 was developed from the MiG-29 Fulcrum model under the requirements of the Indian Air Force tender for 126 Medium Multi-Role Combat Aircraft (MMRCA), unofficially estimated at more than $10 billion. During the trials the aircraft for the first time demonstrated integration between the weapons and its Zhuk-AE AESA radar, and now stands a good chance to win the tender in which it competes with the Lockheed Martin F16, Boeing F/A-18, Dassault Rafale, Eurofighter Typhoon and Saab Gripen. The last trials in April involved two MiG-35 prototypes – a single-seat version with the side number 961, and a two-seat version, side number 967. The latter was modified to carry the ZhukAE multi-function X-band radar with an active electronically-scanned array (AESA) developed by Moscow-based Phazotron-NIIR Corporation. A Russian industry source told Russia & CIS Observer that at this stage the aircraft had confirmed their flight parameters with various loads and for the first time demonstrated operation of the AESA radar and its integration with the weapons. The two-seat number 967 made 18 sorties, piloted by both Russian and Indian pilots. The Zhuk-AE reportedly demonstrated its abilities to locate targets at maximum ranges, detect group targets and track evading targets, as well as its ground-mapping capabilities. The testing involved a radar prototype with a smaller antenna array than that planned for the series-production version. The prototype has a diameter of 500 mm, and incorporates only 680 transmit-receive modules instead of the

Russian proposal is the commitment to transfer MiG-35 production technology, including the AESA radar, to the Indian side. According to the tender requirements, the winner will deliver to the Indian Air Force 18 assembled fighters, while all other aircraft will be

Alexey Mikheev

In April the two-seat MiG-35 prototype for the first time demonstrated integration between the weapons and Zhuk-AE AESA radar

totype demonstrated a detection range of 130 km while the larger-antenna serial radar is expected to have a range of 160-170 km. But the major part of the current tests involved weapons trials. The MiG-35 for the first time engaged a Dan target drone with a Vympel R-77 (RVV-AE) medium-range air-to-air missile, the source revealed. He explained that the Zhuk-AE fed the missile with the target coordinates, calculated its launch zone and provided radio correction during the missile’s flight to the target. Another weapon tested was the KAB500 500-kg TV-guided bomb. The radar’s integration with other airlaunched munitions planned for MiG35 was demonstrated to the Indian side during the bench tests. The April trials brought up the rear of the tender evaluation process. India is expected to select the winner already this year. The major advantage of the

gradually manufactured at Hindustan Aeronautics Ltd. (HAL) facilities. But Russia has another chance to sell Zhuk-AE to India as it participates in parallel bidding for delivery of AESA radar for HAL’s Light Combat Aircraft (LCA) program. The radar modification for the LCA will have an antenna size between those of the current Zhuk-AE prototype and its serial version. The MiG-35’s success may also facilitate other applications of the Zhuk-AE, Russia’s first and so far only operational AESA radar, for the Russian Air Force. According to the industry source, the Zhuk AESA has been included in the government procurement plans as a modernization requirement for the Air Force MiG-29s and is also being considered by the Navy, which may install it on the MiG-29K ship-based fighters recently purchased for the Admiral Kuznetsov aircraft carrier.

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DEFENSE

Airlift renewal

The Russian Air Force is planning for new transport aircraft Maxim Pyadushkin ussian Military Transport Aviation (MTA), a part of the country’s air force, completed reorganization in 2009 and is now preparing to renew its fleet. MTA Commander Lt-Gen Viktor Kachalkin announced in May that his service expected to get new transport aircraft from 2012 to 2020. However, the military’s plans strongly depend of the capabilities of the Russian aircraft industry and its possible cooperation with the Ukrainian aircraft makers. Following the general reorganization of the Russian Armed Forces, MTA shifted to a more simple organizational structure. The earlier structure, inherited from the Soviet era, included air divisions, air regiments and air squadrons. Now there are air bases, which directly command air squadrons. Overall, there are four air bases: two 1st class bases in Tver and Orenburg, and two 2nd class bases in Pskov and Taganrog. There is also the 610th training center in Ivanovo. As part of the reorganization effort,

military transport aviation now includes A-50 AWACS units, as well as An-2 light turboprops formerly operated by aviation of the Airborne Troops. According to Lt-Gen Kachalkin, whereas in the previous years the total annual flying time of his aircraft amounted to 12,000 hours, this year his service managed to reach that result in the first six month alone. He expects that an average MTA pilot’s flight experience will reach 96-100 hours in 2010. Now the service relies on a fleet of Antonov An-124 strategic transports, Ilyushin Il-76MD heavy transport aircraft and Antonov An-26, An-22 and An-12 turboprops. None of these models is produced in Russia at the moment, but the military plans to include orders for new such aircraft in the state defense procurement program for 2011-2020, which is expected to be approved by the Russian government at the end of 2010.

Challenge for the industry

Lt-Gen Kachalkin explained that the fleet renewal will start in 2012-13 with the introduction of new Ilyushin Il-112

light transports. These turboprops, with a payload of up to 6 tons and a range of up to 5,000 km, should replace MTA’s ageing An-26s and An-24s. Later on the military expects to modernize the Il-76MD aircraft through the installation of new avionics and more powerful PS-90A-76 turbofan engines. Plans also call for the procurement of new Il476 aircraft, an improved modification of the Il-76 which will be assembled in Russia. In 2009, the Russian government took a decision to resume production of the An-124 transport, with deliveries to MTA to start in 2014. The MTA commander also mentioned the Antonov An-70 transport aircraft developed jointly by Russia and Ukraine. He said that this model, with a payload of 47 tons, could find its niche in the MTA inventory between the Il-76MD and the An-12. Lt-Gen Kachalkin expects his service to get the first one or two such aircraft in 201415, to be deployed at the Tver air base. He declined to give the exact overall number of new transport aircraft to be procured, saying only that the fleet ren-

Leonid Faerberg/Transport-Photo.com

The Russian Air Force plans to modernize the current fleet of Ilyushin Il-76 heavy transport as well as to purchase new Il-476 version

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DEFENSE

Cooperation with Ukraine

Cooperation with Antonov should also give an additional boost to the An-70 program. The development of this aircraft was launched in the 1980s. The model will feature short-runway performance due to its four D-27 engines with SV-27 counter-rotating propfans. These propellers produce additional air flow that increases the wing lift, provides higher cruising speeds and reduces fuel consumption compared to similarly sized turboprops. The An-70 will be able to operate from unpaved runways of up to 700 m length with 20-ton payloads. The maiden flight of the first prototype took place in 1994. The program has been developed in cooperation between Russia and Ukraine, but in 2006 the Russian Air Force that was expected

Procurement of Antonov An-70 depends on level of cooperation between the aircraft industries of Russia and Ukraine

ATO.ru

ovation program would be completed by 2020. However, the military’s plans strongly depends on the ability of the Russian aviation industry, now merged under the umbrella of United Aircraft Corporation (UAC), to successfully run so many new programs within such limited timeframes. UAC representatives comment that the Air Force hasn’t yet placed any firm orders. The Defense Ministry is still in the process of defining its vision of the defense procurement program for 2011-20, which is to be funded from the state budget. The Il-112 will be produced at the Voronezh VASO plant and, according to a UAC source, the first prototype should roll out in 2011. Next year will also see the start of Il-476 assembly at the Ulyanovsk-based Aviastar facility. Compared to the Il-76, which used to be produced at the TAPO plant in Uzbekistan, the new aircraft will have PS-90A-76 engines, a two-member crew and a new, more swept wing. Aviastar also plans to restart its only remaining assembly line for the An-124 strategic transport, but to do so it has to land a military order for at least 20 aircraft, the UAC source says. This program would also require closer cooperation with Ukraine’s Antonov concern, the An-124 designer.

to be the major customer for the new aircraft suddenly announced its withdrawal from the program. Bilateral cooperation on the An-70 officially resumed only in 2009. Dmytro Kiva, President and General Designer of Antonov,

Khrunichev Space Center, it has now shifted to manufacturing launch vehicles and space satellites. Integration prospects for the two countries’ aircraft industries were discussed during Russian President Dmit-

Russia and Ukraine discuss the creation of a joint venture that will run joint programs, including those of An-124 and An-70. explained to Russia & CIS Observer that the Russian side has resumed financial support for the program, but that another $150 million is needed to complete the An-70 development. An-70 prototype is currently in the final phase of government evaluation trials in Ukraine, to be completed in 2012. The aircraft has made 624 test flights, logging 707 flight hours. The remaining tests will include hot-and-high trials and formation flights, for which the An70 prototype will team up with the first two production aircraft currently under construction in Kiev under the order of the Ukrainian Defense Ministry, Kiva said. He also confirmed that the first production aircraft would feature improved avionics, including new hardware components and processors, cathode ray tubes replaced with LCD displays, and FADEC engine controls. Earlier, the assembly of An-70 aircraft for the Russian Air Force was expected to start at the Omsk-based Polet facility. But now this facility is out of the UAC scope. After merging with the

ry Medvedev’s visit to Kiev in April. According to preliminary plans, UAC was expected to get 50% plus 1 share of Antonov concern, which includes the Antonov Сompany, production plant in Kharkiv and the Kiev-based 410th aircraft repair plant. In exchange, Antonov was to receive a stake in UAC whose size could be defined after the Ukrainian company completes due diligence. Now it looks like the possible merger is put off for more distant future as it will require reincorporation of the state-owned Antonov into a joint-stock company. Both sides discuss now the creation of a joint venture that will run joint programs like, for example, those of An-124 and An-70. In June UAC’s Board of Directors approved the creation of such Russian-Ukrainian JV. According to Vasily Prutkosvky, UAC Vice-President for Corporate Governance and Development, it will be responsible for procurement of materials and assembly parts for jointly produced aircraft as well as for their sales and post-sale support.

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A I R T R A N S P O RT

Glimmer of hope or same game, next season? Air transport relations between Russia and European Union Boris Rybak ast year and the first half of the year 2010 have been the period of general frustration for airline business on nearly all fronts. The globalized economy, promoted by bankers and stock brokers as a new era for business, has so far failed to deliver on its promises. The deep recession that followed has resulted in unprecedented losses for the airline business all over the world. The natural disaster in Iceland, aggravated by the narrow minded actions of officials, has completed the picture of a depressed industry. Airlines have been and still are struggling to survive in both the EU and Russia. Not all of them were lucky enough to survive. Some are asking, “who will be next to fail under such conditions?” Contact between Russian aviation authorities and the European Commission on aviation issues have stopped completely – marking almost three years of deadlock. Russian authorities have initiated a number of investigations pertaining to airline ownership and beneficiaries of several European nations, indirectly threatening them with potential problems in obtaining permission to fly to and over Russia within the framework of existing bi-lateral Air Service Agreements (ASA). The mostly useless bi-lateral talks held in 2009 and early 2010 between the Russian Ministry of Transport and respective authorities of many EU nations did not add anything positive to this gloomy picture. However, in May long awaited but nevertheless unexpected changes in Russian policy towards the West and 18

Leonid Faerberg / Transport-Photo.com

Today misunderstanding is a major problem in air transport relations between Russia and European Union

the EU in particular, began to take shape. Successful and very productive summits between the Russian President and leaders of Northern Europe have taken place in rapid succession. New prospects for Russia joining the World Trade Organization in the near future have started to fuel almost forgotten expectations. And finally rumors regarding the possibility of a “New Basic Agreement” between Russia and the European Union to be signed in the near future have made these expectations even more realistic. This principal turn in relations between Russia and the European Union give us an excellent opportunity to re-visit all major issues of Russia-EU civil aviation relations and try to forecast future developments.

Russia-EU air transport dialogue at a glance

Contact between Russian transport authorities and European Commission

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DG TREN were resumed rather unexpectedly in May 2010, providing a glimpse of hope for those positively minded and new sources of frustration for pessimists. Little is publicly known as both sides have not released any information. It is known, however, that both sides have agreed to continue a dialogue and have planned another meeting for this autumn. While re-establishing official contacts is, by all means, a good thing, there are some fundamental deficiencies in the relations between the Russian and European air transport communities. A lot has been said about different positions on different issues. It is not a problem to have different views. Today misunderstanding is a major problem between Russia and European Union, covering virtually all aspects of the airline industry. What did the Russians actually mean by making an enquiry into the Austrian and Swiss ownership of these

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airlines? What was the actual purpose of attempts to direct Lufthansa Cargo to Krasnoyarsk airport, a base mostly unsuitable for modern cargo operations? Why are Russian officials not answering letters, e-mails and phone calls when asked for more explanations? What was the real purpose of the extensive SAFA activities regarding Russian airlines in EU airports between 2006 and 2008? Why are European authorities so reluctant to allow Russian capital or other forms of participation in European airlines? Why does the Association of European Airlines never talk to the Russians? In Russia, we do not hear the voice of European airlines. What are their strategies and goals in this market? What are their financial and operational results in Russia? Answers for these and many other questions have never materialized. To start improving understanding and mutual trust we need to widen the

dialogue beyond the box restricted by political and governmental circles. In these times when policy is being formed from scratch, contributions from a broader spectrum of interest groups, like Parliament members, economists, financiers, and participants across the industry as a whole would be invaluable. We cannot afford to let outsiders – political dealmakers in Europe and Russia who know little or nothing of the airline industry to forge game rules for our industry for decades ahead.

Trans-Siberian route payments

This issue has become a stumbling block that has frozen Russia-EU civil aviation relations for three years. There is a common understanding in Russia that European airlines have asked the Commission to remove Trans-Siberian Route (TSR) overflight royalties. But why the Commission has made this issue not only a

number one priority, but de facto a mandatory precondition for all future contacts and negotiations remains a mystery. In this regard, the Commission has made itself a sort of hostage of a single issue. Historically it was European and Japanese airlines that asked the then Soviet government to provide them Siberian overflight permission for cash. Nobody is forcing European airlines today to make code-sharing agreements or to purchase additional frequencies from Aeroflot. There are a number of other trunk routes from the EU to Asia and the Pacific Rim outside of Russia airspace. What’s all the fuss about? Some say this system is against EU and international aviation laws, yet Russia has never signed any relevant treaties. Some say that that it is unfair to give money to Aeroflot, that it is a breach of the rules of competition. It is highly doubtful that Aeroflot represents any serious competition to European air-

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A I R T R A N S P O RT

Sergey Sergeev

New code-sharing agreements between Aeroflot and Air France-KLM now include intra-European sectors for the Russian carrier and Russian domestic sectors for its European partner

lines and I do not think that anybody in Europe will ever experience any competitive advantage if Aeroflot stops receiving overfly money at some point. Given that the Russian government wants to help this state-owned company, it could subsidize Aeroflot at any time it chooses – WTO membership or not. It would be very naive to think that a political, as opposed to an industry solution for the elimination of TSR payments will make any difference from a pure monetary standpoint for European airlines. Today it is absolutely clear that there will be no cost savings for those flying TSR. The TSR fee most probably will be replaced with either new environmental charges of some kind (thank you, European Union, for the hint) or a navaid fee increase or both. A political solution could have possibly been achieved in the late Soviet Union, but these times are long time gone. It is strange that policy makers in Europe can not see that simple fact. One possible “airline industry” solution would be in the sphere of making Russian air transport more and more de-regulated and more in line 20

with contemporary international standards, allowing for integration into the global airline business. Giving this as a starting point, the issue of TSR overflight payments would dissolve quickly by itself. The Commission should not insist on unilateral cancellation of what some view as unfair costs, but help Russia to modernize its air transport infrastructure and integrate it into the Common Aviation Area, bringing maximum pragmatic advantage for all parties. An approach like this would most certainly be appreciated by the Russian government. In my own opinion, a practical solution to the TSR payments issue does not rest in political trade-offs; it must be a result of modernization and deregulation of Russian air transport.

New realities of airline consolidation and cooperation

Large-scale changes are taking place in Russian and European civil aviation – consolidation among EU and Russian carriers has caused fundamentally new legal and regulatory problems as well as changes in civil aviation regulations in Russia. I have already mentioned inquiries made by Russian authorities re-

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garding airline ownership and national beneficiaries for several European airlines. The question is: who cares? Very soon there will be no “national“, “flagcarrying” airlines in many EU member states, e.g. in capital of Europe Belgium, and center of Central Europe, Austria, where two major airlines are foreign-owned. Not to mention a dozen of smaller countries. What will the Russians do if they cannot think beyond the narrow logic? Will they demand the termination of air service to these countries as they are no longer subject to bi-lateral Air Service Agreements? How will Europeans react to such pointless rhetoric? The expansion of Russian airlines’ includes cooperation with global alliances and the conclusion of previously unthinkable code-sharing agreements. Bi-lateral Air Service Agreements will obtain new meaning in this context. New forms of airline business cooperation are on the horizon both within the framework of global alliances as well as outside of these boundaries. Pursuing its own course, the Russian air transport industry is moving towards de-regulation and liberalization regarding in-

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ternational air service, despite the often harsh framework of bi-lateral agreements. A truly ground breaking code-sharing agreement was signed between Aeroflot and Air France-KLM in Paris this April in the presence of the Russian and French Ministers of Transport. New SU/AF code-sharing agreements now include intra-European sectors for the Russian carrier and Russian domestic sectors for its European partner. One might think that this is an exemption to the rule, representing a deeper commercial and marketing integration of Sky Team members favored by their respective governments. This is not, however, a unique case. Just a month later a new set of similar code-sharing agreements followed, this time with CSA, providing Aeroflot with more commercial rights within Europe. In fact this means that Russia’s largest airline has not only been accept-

ed into the EU Common Aviation Area, but is already taking serious advantage of the fact. Other Russian and European airlines, for example BMI and Transaero, Air Berlin and S7, are also making intensively use of opportunities offered by code-sharing with their partners. Even more impressive examples of new types of Russian-forged bi-lateral ASAs can be found in another part of the world. The recent agreement between Russia and Hong Kong (which is not an independent state by the way, but still subject to bi-lateral agreement) provides Russian airlines with possibility to have fifth freedom flights via Hong Kong to other Asian destinations. Singapore Airlines is already enjoying fifth freedom privileges for its Singapore-Moscow-Houston service. Given this context, it is not quite clear why Russian aviation authorities are not supporting the idea of Community Designation and / or a horizontal Open Sky agreement with the Euro-

pean Union. All of these remarkable events are a very tangible indication that mutually beneficial dialogue is both feasible and practical provided both sides want it.

Tourist and Leisure Travel

Tourism between Russia and European countries has been a major driving force behind the constant growth of Russia-EU air traffic over the last twenty years. Air traffic between Russia and EU member states tripled in the 90’s and had been growing at average rate of 15-17% annually thereafter until 2008. Two out of the four largest Russian international airlines are dedicated leisure travel charter operators - Orenair and VIM Avia. The two largest Russian international airlines, Aeroflot and Transaero, have a significant part of their European business from the tourist industry. The most liberalized (from regulatory point of view) travel market for air transport, the Russia-Germany mar-

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A I R T R A N S P O RT

Sergey Sergeev

ket, has clearly demonstrated all the advantages of easy access to the market. For many years Germany has been the No.1 international market for Russian airlines. Other EU countries are far behind, including major tourist destinations like France, UK, Italy and Spain. In 2008 Lufthansa has carried 430,000 passengers between St Petersburg and Germany. For comparison: France has 75 million visitors per year and only half a million of those tourists

mediately resulted in a boom in the number of travelers to this major Russian tourist attraction. Potentially cardinal changes in the tourist market loom as a consequence of moving forward with negotiations on relaxing visa procedures.

What to do?

Fundamental changes in relations between Europe and Russia demand an immediate response from market par-

In 2008 Lufthansa has carried 430,000 passengers between St Petersburg and Germany

are carried by Russian airlines, which means that Air France has another half million passengers. We can see a very similar artificially depressed situation with traffic to Spain and Italy with 50+ million and 40 million international visitors per year. It is hardly surprising that Sky Team members and their Russian partner, Aeroflot, dominate all these markets. It is quite obvious that easier access for other Russian carriers to these markets will result in a significant growth of tourist traffic to these countries and to Russia. Russia’s Tourist Industry Union is currently leading a lobbying campaign targeted at relaxing the visa regime for travelers from developed countries, first and foremost for residents of the European Union. The simplification procedures for obtaining short term visas for those traveling to Saint Petersburg implemented during a trial last year im22

ticipants. There are two basic scenarios. The first is to simply do nothing. “Let politicians do their job. We will wait and jump on this bandwagon when all the ground work is done.” How often we hear this, or if not actually hear, meet this very common, hassle-free, “energy saving” approach. Another possibility is to provide solid, valuable industry input in this conversation before the political process becomes hardened and poorly informed laws and agreements cripple the progress that has been made so far. The bottom line is that today politicians and governmental officials from both sides do not have any clear strategy for the future development of air transport. European policy on the Russian air transport market looks very sketchy and, from Russian standpoint, one sided. Russian policy for the European air transport market is so vaguely formulated that its provi-

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sions are considered by many to be completely unacceptable from the perspective of EU legislation. In these circumstances, given the airline industry intends to take a pro-active approach and contributes to the political and legislative conversations at the initial stages of what is essentially a new era of relations between Russia and EU, many very useful and positive things could be done. Here is just one example. In the political arena, Russia and the EU are moving forward to developing the Partnership for Modernization Program, originally proposed by the European Commission earlier this year and well received by the Russian government. The airline industry can and should include itself in this potentially important program with feasible, understandable and pragmatic programs with clear goals and results. The success of industry inspired programs within this framework will build-up mutual credibility and trust for further cooperation in the political and commercial spheres. Other similar opportunities should be researched and explored to the full advantage of our industry. Endless talk about crazy Russians who are always against all nice EU initiatives (simply because of their bad temper and the twisted workings of their mysterious souls) and the constant Russian accusations about European with their hidden intentions to squeeze unilateral benefits our of Russia and discriminate against friendly Russian businesses will lead to nowhere. It’s for the industry to begin to have a more significant voice in the conversation about the state of affairs in the international airline industry and dispel the myth of gloom with a clear thinking and straight talk about the potential for growth and cooperation in this new era for the benefit of the airline business and better relations between neighbor nations.

A I R T R A N S P O RT

Choosing a business model Russia has specialized airlines now

737s to its fleet and actively moving into the charter segment. Orenair increased its number of passengers flown by 40% in 2009, to 1.6 million. Most of this growth came from international charter flights; the carrier flew nearly 1.4 million passengers on these routes,

Polina Zvereva ver since Russia’s air transportation market got started, most of its airlines have tried to do everything at once: offering scheduled flights, international and domestic charters, and so on. This lack of specialization among Russian carriers was due to the extremely complicated market conditions they faced, their aim to make money across all segments, and (in some cases) management miscalculations. It’s only now that major players learn to position their business to some extent. At the same time, the Russian market has gained the kind of airlines that operate in the European and American markets.

While Orenair still has its domestic routes, along with international charters, other Russian airlines – such as Nordwind Airlines and IFly – operate charter flights to holiday destinations only. Nordwind is associated with the aforementioned tour operator, Pegas

Orenair is expected to remain a charter specialist even after being transferred to Aeroflot’s management.

The tourist charter market has been attractive to most carriers ever since the 1990s; the features of this business model enable an airline to make profits even if a significant proportion of seats remain empty. In structuring their operations, however, the major airlines still placed greater emphasis on scheduled network flights, since charter flights alone are not enough to gain significant market share. Charter-only airlines have existed in Europe for years; most of them are owned by or affiliated with tour operators. This trend is only just starting to develop in the Russian market. The most notable project to date has been Orenair airlines; although this can’t be described as a 100% charter airline, since it still operates some scheduled domestic flights (primarily between Orenburg and Moscow). In 2009, when most airlines saw passenger numbers fall, this state-controlled carrier managed to boost its traffic radically by adding various versions of Boeing 24

Sergey Sergeev

Charters only

making it Russia’s fourth-largest international airline – after Aeroflot, Transaero, and Rossiya. The rapid growth of Orenair is attributed to its cooperation with a tour operator, Pegas Touristik. It reportedly financed the lease deal for aircraft now registered as in use by Orenair. There are now plans to transfer Orenair to Aeroflot’s management; the airline’s new development strategy is to be announced this autumn. But Aeroflot chief Vitaly Savelyev has already stated that some of the carriers to be transferred to his company’s management, as per its agreement with the Russian Technologies state corporation, will be specialized – including one charter airline. Naturally, the industry has assumed that Orenair is the only candidate for that role.

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Touristik; IFly is linked to TEZ Tour. According to the Russian Federal Air Transportation Agency, Nordwind flew 860,000 passengers in 2009, mostly on international routes. IFly, launched relatively recently, hasn’t released any performance figures as yet. As well as these two companies, analysts also associate the NordStar carrier (the brand used by Taimyr Airlines) with the tourist market. This airline started leasing Boeing 737NGs last year, announcing that it would use these aircraft for scheduled domestic flights (from Norilsk to Krasnoyarsk, Moscow, and Sochi). But the airline has turned out to be operating charter flights as well. Taimyr is controlled by Norilsk Nickel, whose chief executive Vladimir Strzhalkovsky is a former head of the Federal Tourism Agency

A I R T R A N S P O RT

and a co-founder of the Neva tour operator. While tour operators are getting involved in launching charter carriers, airlines are actively moving into the tourism market. For example, S7 Airlines is promoting a company called S7 Tour, while Transaero has Transaero Tour. So the process of airlines and tour operators moving into contiguous markets is taking place in parallel.

Low-fare experiments

Sergey Sergeev

For years, low-cost airlines were only a tantalizing prospect for Russian passengers. Now Russia has two airlines that position themselves as discount carriers. The first to be launched was Sky Express, which started scheduled flights in January 2007. It flew just over 1 million passengers in 2009, making it one of Russia’s top twenty airlines; it ranked seventh on domestic passenger traffic, with domestic market share of over 3%. This airline’s revenues grew 27% in 2009 relative to 2008, reaching over 3.5 billion rubles (about $110 million). The carrier expects to fly 1.45 million passengers in 2010. As at March 2010, Sky Express was operating scheduled flights from Moscow to 10 other cities; its fleet consisted of nine Boeing 737-300 and 737-500 aircraft. All the same, Sky Express hasn’t managed to stay a low-cost carrier only. In an effort to improve its economic performance, the airline has started operating in the charter market. Russia’s second low-fare airline, Avianova, was launched in mid-2009.

This carrier has turned out to be more active than Sky Express. Avianova started out with Moscow-Sochi flights, but it now has 18 routes. It has flown around 120,000 passengers since its start-up, and its target for 2010 is to increase traffic more than tenfold: to 1.31.5 million passengers. The airline has only five 180-seat A320s; by the end of the year it plans to expand this fleet to at least seven aircraft, flying 20 routes. In less than a year of operation, Avianova has managed to add new routes not only from Moscow, but also from St Petersburg: it has been flying out of Pulkovo airport to Arkhangelsk, Krasnodar, and Sochi. In Moscow, Avianova has switched airports already: in March, it moved from Vnukovo to Sheremetyevo’s Terminal B (formerly known as Sheremetyevo-1). “Terminal 1 is exactly what meets the classic low-cost company’s needs,” says Vladimir Gorbunov, chief executive of Avianova. “We are the only airline using that terminal, and we have a whole ramp there. We plan to introduce a system that doesn’t require buses to deliver passengers to the aircraft for boarding – we will use gates they can reach by walking.” Positioning itself as a discount carrier, Avianova set Russia’s lowest air fare: 250 rubles ($8, excluding taxes and airport fees). The lowest fare until then had been announced by Sky Express, which offered tickets for 500 rubles. The subsequent competition in the low-cost segment forced Sky Express to

Avianova quickly expanded its route network to 18 domestic destinations.

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cut prices further: by early March, it was offering fares of 320 rubles. Even before Sky Express entered the market, some argued that discount airlines could never be viable in Russia for various reasons: the low population density of consumers who want to fly and can afford to do so, the large distances between cities, and the almost complete lack of competition between providers of services for airlines. Moscow-St Petersburg has been called the only profitable route for discount carriers. This route – a flight of about 80 minutes – links Russia’s two largest cities, with the most developed economic, political, and cultural life; the route is comparable to the conditions in which European low-cost airlines operate. But other destinations in Russia don’t fit this pattern. In Europe, Ryanair’s average flight distance is around 1,000 km and the average flight time is around 1.2 hours. In the United States, Southwest’s average distance is 1,300 km and its average time is around 1.5 hours. In Russia, low-cost airlines will inevitably have to work sectors of 2.0-2.5 hours; that’s the only way to reach cities with at least a million residents and attract potential passengers who presently spend days traveling by rail. But increased flight duration obviously reduces frequencies. Direct competition between many airports, located close to each other, is another factor that helps keep air travel costs down in Europe. But alternative secondary airports are practically nonexistent in Russia, and neither is there much scope for cost-cutting elsewhere. Taken together, all these factors make it clear that Russian airlines won’t be able to directly copy the European business model for low-cost flights. Avianova CEO Andrew Pyne counters these arguments by pointing out that he encountered similar problems when developing low-cost operations in Asia, before relocating to Russia. But despite the difficulties, the discount flights market in Asia is working — so Pyne is convinced that it can be launched in Russia as well.

Turn for the better

B U S I N E S S AV I AT I O N

Recovery of the Russian bizav market gives hope to local operators and service providers

Maxim Pyadushkin he Russian business aviation market is beginning to revive following a sharp decrease in 2009, caused by the economic crisis. Local operators and professional institutions are reporting growing demand for business flights in the first months of this year, while domestic business airports continue to improve and expand their services. According to Russia’s United Business Aviation Association, the frequency of business aviation operations in 2009 decreased by 35% compared to the previous year. Previously, the Russian bizav market demonstrated an unprecedented growth – in 2006-08 the number of business flights increased by 29%, according to the Aerotrans ground services and operational support provider. But last year’s slump brought the Russian bizav segment back to the levels of 2006. The lowest demand for business flights on the Russian market was reported in the first month of 2009, while the end of the year witnessed some stabilization and even modest recovery.

Uncertain improvements

The situation began to improve quickly in early 2010. Aerotrans estimates, based on the statistics of unscheduled flights, that demand for bizav services started to grow rapidly in January

through May. Monthly frequencies exceeded the 2007 level in February, while in May the indicator was better than in the most successful year of 2008. “It was the highest result since 2006,” comments an Aerotrans representative. The total number of unscheduled flights performed by Russian operators in the first five months of 2010 exceeded the results for the same period in

has passed the lowest point of the downturn, but it’s not yet clear whether the growth will be sustainable. Leonid Koshelev, head of the Russian charter operator Jet 2000, shares this view, saying that the volume of bizav services has returned to pre-crisis levels. In fact, the current growth is being fuelled by growing demand for large aircraft, which are traditionally preferred by the Russian customers. “We

The total number of unscheduled flights performed by Russian operators in the first five months of 2010 exceeded the results for the same period in 2008 by 5% 2008 by 5%, despite the European air traffic restrictions caused by the Icelandic volcanic eruption and a redistribution of charter operations initiated by the Russian authorities in early 2010. The number of flights preformed by foreign companies within the same period remained lower than in 2008. Russian business aviation operators agree with Aerotrans’ conclusions. “In the first three month [of 2010] the number of bookings for bizav flights was growing, and the prices were growing too,” says Igor Bublovsky, general director of the Moscow Sky VIP charter specialist. He hopes that the sector

don’t observe any other positive trends,” says Koshelev. Bublovsky concurs, saying that large aircraft are in high demand at the moment while those customers who preferred midsize jets before the crisis have now switched to lighter aircraft. Another trend reported by the operators is that demand for charter flights to leisure destinations is recovering faster than that for business trips. Leisure flights account for 70-75% of total charters, which is quite different from Western markets, says Bublovsky. “[Russian] customers don’t deny themselves tourist trips,” he notes.

RUSSIA/CIS OBSERVER № 2–3 (29–30) JULY 2010

B U S I N E S S AV I AT I O N

Competing for clients

The slowdown of the Russian business aviation sector in 2009 did not halt the development of ground infrastructure. The need for better landside and airside facilities becomes more evident now that the market has started to recover. Vnukovo traditionally remains the country’s largest business aviation airport, handling nearly 70% of all bizav traffic in Russia. St Petersburg’s Pulko-

ties, a bar with a view on the airside, pilot recreation and briefing areas, and a secure parking lot for 50 cars. Avia Group expects the terminal to promote business aviation at Sheremetyevo to a whole new level, increasing relevant handling capacity and providing the highest international standards of service. Avia Group is taking other steps to increase Sheremetyevo’s attractiveness

Vnukovo traditionally remains the country’s largest business aviation airport, handling nearly 70% of all bizav traffic in Russia

The new business terminal to be built by Avia Grup in Sheremetyevo will have an area of about 2,700 square meters and handling capacity of 75,000 passengers a year

for bizav operators and clients. Last year the company completed a new hangar facility exclusively for business aviation. Owned and operated by Avia Group, it can accommodate two Airbus A319s or Boeing BBJs, or several smaller business jets. The company has also installed an airframe de-icing service using equipment from Danish manufacturer Vestergaard. With the opening of the new terminal next year in addition to the two existing hangars, the Sheremetyevo Business Aviation Center will be fully equipped to provide one-stop-shop services to customers including passenger handling, flight planning and administration, ramp handling, intoplane fuelling, line maintenance, catering and security. The other Moscow airports also expand the range of their services to the

Avia Group

vo is second largest; other centers for business flights include Moscow’s Domodedovo and Sheremetyevo, as well as some airports in southern Russia, like Krasnodar, Rostov-on-Don and Sochi. Although Sheremetyevo is not as strong in the bizav segment as Vnukovo and Domodedovo, it is developing relevant infrastructure. Avia Group, a sister company of the Sheremetyevo management firm, is about to launch the construction of a new business aviation terminal at the airport. The facility, dubbed Terminal A, is expected to open to customers within the next 12 months. The new business terminal will have an area of about 2,700 square meters and handling capacity of 75,000 passengers a year. There will be duty-free shops, on-site customs and immigration clearance, and a variety of service and personnel facilities such as spacious arrival and departure halls, VIP departure lounges and meeting rooms, conference facili-

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business aviation segment. Vnukovo’s Jet Aviation facility has recently become an independent Russian legal entity and can now perform maintenance services under an EASA 145 approval. “EASA 145 gives us greater flexibility to tailor our portfolio of aircraft services to better match our customer fleet profile and requirements,” says managing director Ian Ludlow. This facility, which was set up in 2007 as a branch of Jet Aviation Dusseldorf, provides round-the-clock technical maintenance services, including line maintenance, defect rectification and aircraft-on-ground support to operators of Bombardier, Embraer, Gulfstream and Hawker business jets. Being a part of the Jet Aviation global network, the Vnukovobased company supports AOG requirements in Russia. It is also an authorized warranty line service for the Bombardier Challenger, Global Express and Gulfstream families. At Domodedovo, Avcom-D Business Aviation Center this spring has completed a 48-month inspection on a Challenger 300 in compliance with the FAA and Bombardier requirements. The company also conducted F and G checks on two HS 125-700 business jets operated by the Russian company Aerolimousine. Recently, Avcom-D has performed the first lading gear overhauls at its HS 125-700/800 maintenance facility. Avcom-D was established in 1995 to service business aviation operations at Domodedovo airport. Now the company can accommodate up to 55 business aircraft on its ramp and in hangars. Domodedovo’s two parallel runways allow for roundthe-clock bizav movements with no slot limit a t i o n s . Avc om - D ’ s maintenance center offers line service by FAA-licensed technicians on all types of business aircraft.

DAILY PUBLICATION

2010 PUBLISHING DATES: September 15&16, 2010

On-site daily news publication for the key Russian business aviation exhibition JET EXPO 2010 The Show Observer is brought to you by the publisher of the renowned Air Transport Observer (widely called ATO) magazine and its sister publications – Russia’s only true aerospace industry trade publications, which are recognized worldwide for the quality of reporting and in-depth news coverage.

» The Show Observer reaches JET EXPO 2010 exhibitors and attendees, including aircraft owners and operators, charter brokerage companies, ground handling service providers, MRO providers, airports and business aircraft terminals, etc. » Two issues of Show Observer, published on September 15 and 16 with a print-run of 5,000 copies each, will be delivered to all chalets and booths at the show as well as static displays, official transport, and major hotels as well as to all exhibition’s business visitors. » Successfully published at JET EXPO every year since the exhibition was launched, the Show Observer confirms its status of a perfect exhibitor’s marketing tool that can supplement the exhibition display with the advertisement in the daily issues and deliver necessary information to existing and potential partners and clients. » The Show Observer can create awareness of your company with a showcase advertisement, even if it is not exhibiting at JET EXPO 2010. » The entire Show Observer JET EXPO content will be instantly available in digital format at fast growing aviation b2b portal www.ato.ru.

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Tel. +7 495 626 5356 Fax +7 495 933 0297 e-mail: e_semenov@ato.ru

S PAC E B U S I N E S S

Murky future for Sea Launch Igor Afanasyev and Dmitry Vorontsov he fate of the Sea Launch LCC international consortium, once a world-leading commercial space launch provider, remains unclear. The company filed for bankruptcy protection a year ago, followed by reorganization and a change of hands. To add to the uncertainty, Sea Launch faces the task of returning to profitability through cost-cutting measures and an increase in the annual launch capacity. Sea Launch LLC was set up in 1995 as part of an international commercial project to create and operate a

DemoSat spacecraft, took place in March 1999. The latest one to date orbited the Sicral 1B satellite in April 2009. A total of 30 launches have been performed by Sea Launch. Of these, one was a partial success and two failed. In June 2009, Sea Launch LLC suddenly filed for bankruptcy under Chapter 11 of the US Bankruptcy Code. It turned out that the impressive launch statistics had been masking serious financial problems. By 2009 the company debt had reached, by different estimates, $1 billion to $1.4 billion, which considerably exceeded the value of its assets ($100-

Since 1999 Sea Launch has performed 30 launches from self-propelled platform near Christmas Island in the equatorial Pacific

floating launch platform for Zenit3SL rockets. Its founders were Boeing, Russia’s Energia Rocket and Space Corporation, Ukraine’s Yuzhnoye design office and Yuzhmash factory, as well as the Norwegian shipbuilder Kvaerner (now known as Aker Solutions). Three-stage Zenit-3SL launch vehicles would lift off from a self-propelled platform near Christmas Island in the equatorial Pacific. The first such launch, carrying the 30

500 million). There were several reasons for that. To begin with, the infrastructure required sizeable investments: after each launch the two Sea Launch vessels had to return to home port to take a new rocket on board. As a result, Sea Launch could not perform more than five launches a year. The operational costs were growing, and the launch plans proved overoptimistic about actual market demand. The situation worsened after the 31

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January 2007 disaster, when a Zenit3SL’s first-stage engine failed, causing the launch vehicle to crash back down onto the platform and explode. Repairs to the launch platform took months. This downtime moved some customers to walk out in search of alternative launch providers. Consequently, Sea Launch performed just one launch in 2009, against five the year before. The Sea Launch clientele of satellite operators was shaken by its withdrawal form the market. On the other hand, almost all the clients were convinced that Sea Launch would soon be back. The company had opted for a relatively painless bankruptcy procedure, one that did not call for liquidation of assets but demanded a clear reorganization plan. Under Chapter 11, the debtor is temporarily discharged from its debts. Creditor’s claims from customers amounted to slightly over $250 million. In an attempt to rescue at least part of its assets, Boeing in July 2009 settled with the Sea Launch creditors for the amount of $448 million, and began seeking compensations from the Russian and Ukrainian partners. In a separate development, an obscure business named Space Launch Services (SLS) extended a $25 million reorganization loan to Sea Launch in December 2009 – March 2010. However, by early summer 2010 the situation radically changed. Under a restructuring plan submitted to the Delaware court which oversees the Sea Launch bankruptcy case, on 12 May, 85% of the reorganized Sea Launch is to go to Energia’s subsidiary Energia Overseas Limited (EOL), in exchange for a $140 million investment in the consortium’s registered stock. The remaining 15% of the Sea Launch shares is to be distributed among outstanding creditors.

S PAC E B U S I N E S S

Sea Launch president and general manager Kjell Karlsen says that the approval of the restructuring plan will enable his company to emerge from Chapter 11 by September. Sea Launch plans to resume operations in 2011, performing up to five commercial launches a year. Energia president Vitaly Lopota says this is the minimum necessary figure for loss-free operations. In fact, such an annual launch rate does not look impressive compared with the leading international space launch providers – Arianespace with the Ariane-5 and International Launch Services (ILS), which operates Russian Proton launch vehicles. At present they each have a backlog of about 20 firm orders, against Sea Launch’s three, which include two SES Astra satellites and one INTELSAT spacecraft. In order to provide a competitive advantage, Sea Launch will probably have

In early May 2010, on an understanding with Sea Launch, EOL talked SLS into selling its right to finance the consortium’s restructuring effort. The move will cost EOL $30 million. Of this sum, $19 million will be spent on repaying the loan to SLS. The transaction was tentatively approved by the Delaware court. The agreement between Sea Launch and EOL will make it possible for Sea Launch to seek loans worth $200 million – the sum it needs to emerge from its debt. Some experts believe that the whole deal was financed by Russian state-controlled banks. As for the change of Sea Launch ownership, observers suggest it became possible after Boeing and Aker lost interest in the concern. Some experts offer the explanation that the entire bankruptcy procedure was orchestrated by Boeing, which used it as a pretext to get rid of an unprofitable business.

to cut prices. To do so it will have to reduce the cost of the single most expensive component of the Zenit booster – the RD-171M engine, developed and produced by Energomash. This, however, will be hard to do. According to Energomash sources, the engine’s factory price is about $13.5 million apiece, and even that is not profitable enough. Plans were recently made public for the creation of a Russian Space and Rocket Corporation. It is supposed to be built around Energia as the lead manufacturer, and will include the Samara-based TsSKB-Progress and Energomash. The Energomash management suspects that the main goal of the reform is to cut the price of the RD171M, even to the detriment of the company’s other projects. Whether or not Energia will manage to cut a deal with Energomash is a big question. Until it is answered, the future of Sea Launch will remain murky.

ISS-Reshetnev offers next-generation comsats

he Zheleznogorsk-based ISSReshetnev company, Russia’s leading satellite manufacturer, offers the common satellite platforms Express-1000H and Express-2000, which can be used for the creation of nextgeneration telecommunications satellites. Express-1000H is intended for medium-class satellites weighing up to 1,700 kg, and Express-2000 is designed for heavy-class spacecraft weighing over 3.5 tons. During its 50-year history ISSReshetnev has built more than 1,200 spacecraft, including 200 telecommunications satellites. Now the company builds modular telecommunications spacecraft. A modern satellite is made up of two modules — a service module (the satellite platform) and a payload module. The key advantages of modular design include reduced assembly times, lower production costs, higher quality and reliability of the spacecraft. In this program ISS-Reshetnev cooperates

with a number of leading foreign companies including Thales Alenia Space, Saft, Sodern, Aeroflex, and Actel. The Express-1000H platform has already been approved for the AMOS-5

ISS-Reshetnev

The advanced Express-1000 medium-class platform

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and Telkom-3 satellites under construction for Israel’s Space-Communication Ltd. and PT Telekomunikasi Indonesia. This platform is also intended for the Yamal-300K telecommunications spacecraft ordered by Russia’s Gazprom Space Systems company. The heavy-class Express-2000 platform will be used for the Express-AM5 and Express-AM6 satellites manufactured for the Russian national operator RSCC. Both spacecraft are to join the Russian comsat constellation in 2012. Each satellite will carry over 70 transponders in the C-, Ka-, Ku- и Lbands. With the payload power of no less than 14kW, Express-AM5 and Express-AM6 are expected to become the most powerful Russian telecommunications satellites. Express-2000 will also be used for another communications and TV broadcasting satellite — Yamal401, ordered by Gazprom Space Systems and expected to be orbited in 2012-13.