Russia&CIS Observer June 2015

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Russia & CIS Observer â„– 1 (41) june 2015

special focus on paris air show 2015

Russia & CIS Observer № 1 ( 41) ju ne 2015

from the publisher of

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Russia/CIS Observer is produced by:

• AEROSPACE INDUSTRY

• DEFENSE

Superjet 100 sales set to grow................2 Publisher Evgeny Semenov EditiorinChief Maxim Pyadushkin Art Director Andrey Khorkov Sales & Marketing Director Oleg Abdulov Commercial Director Sergey Belyaev Cover Photos Leonid Faerberg, Fyodor Borisov, Russian Helicopters All rights reserved.

No part of this publication may be reproduced in whole or in part without the written permission of A.B.E. Media.

A.B.E. Media cannot be held responsible for any claim, error, omission or inaccuracy in advertising material supplied by advertisers.

The MMRCA saga: lessons for Russia ..............................14

Russian Helicopters working Navalized version for Kamov Ka-52 ..17 on new products ..................................6 Powerplants for Russia’s new aircraft ....8

• AIR TRANSPORT Hitting rock bottom ..........................18

Russia and China to develop

Excessive seats....................................23 a heavy helicopter ..............................9 • BUSINESS AVIATION

Russian lessor re-negotiates CSeries contract ................................10 Antonov working on new airlifters ......11

It could be worse ................................24 • SPACE BUSINESS

Technodinamika is ready for new

Russia saving on space research ..........26

international partners ........................12

Russian private rocket solutions..........28

© № 1 (41), June 2015 Tel./Fax: +7 (495) 933 0297 Correspondence: P.O. Box 127, Moscow, 119048, Russia

Visit our website at www.ato.ru/rco RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

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AEROSPACE INDUSTRY

Superjet 100 sales set to grow Maxim Pyadushkin ussia’s Sukhoi Superjet 100 (SSJ 100) has already logged more than 100,000 flight hours since it entered commercial operation in April 2011. This type flies to over 130 destinations in the fleets of both Russian and foreign carriers. However, the commercial success of the program remains fairly modest while the aircraft’s manufacturer, Sukhoi Civil Aircraft Company (SCAC), is now seeking new ways to boost sales.

The latest serious effort in this area was made this past May, when the SSJ 100 got a chance to break into the promising Chinese market with a new lease scheme agreed between SCAC’ parent company United Aircraft Corporation (UAC), the Russia-China Investment Fund, the Xixian New Area Administrative Committee, and the Chinese company New Century International Leasing. The parties signed a framework agreement in Moscow to set up a joint venture based in the Sino-Russian Silk Road Hi-Tech Industrial Park in Xi’an, Shaanxi

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Province. The JV would offer Superjets to Chinese and Southeast Asian carriers under operational lease agreements. The partners expect the enterprise to buy up to 100 SSJ 100s within the first three years of operation, to a total value of about $3.5 billion in list prices.

The share of each party in the new joint venture will be determined at a later stage, UAC President Yuri Slyusar said, explaining that the deal had been agreed within a very short period of time, in the course of negotiations which were launched only three months prior to the signing of the memorandum.

Slyusar told Russia & CIS Observer that, under the original agreement, the first five aircraft are scheduled to be delivered to China in 2016, but that the Russian side hopes to increase this number to 10.

In parallel, SCAC has launched the SSJ 100 type certificate validation process in China. It is to be completed by the end of 2015.

The partners are also planning to support SSJ 100 operations in the region by opening a maintenance center with a spares stock and a training facility in Xi’an. The next step could involve

the opening of a regional customization center for cabin interior installations and paint jobs. Slyusar hopes the new sales scheme will help the Superjet 100 capture at least 10% of the Southeast Asian market for regional aircraft, which the UAC estimates will amount to 1,400 airframes in the next 20 years.

So far, Sukhoi’s sales efforts in Asia have not looked very impressive: the manufacturer delivered three airframes to Indonesia’s Sky Aviation, and another one to Laos’ Lao Central. Both carriers have failed to serve as SSJ 100 promoters in the region: neither flies anymore.

The Mexican carrier Interjet is currently the only non-Russian operator of the type. The airline received its 15th aircraft this May, with 15 more to come.

The deal is being managed by SuperJet International (SJI), a joint venture between Sukhoi and the program’s strategic partner Alenia Aermacchi. SJI CEO Nazario Cauceglia has announced plans to deliver six more aircraft to Mexico by the end of 2015, and to complete deliveries in the course of 2016. One SSJ 100 in the Interjet livery is expected to be at display at Paris Air Show this year.

SJI

Interjet received its 15th SSJ 100s in May

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RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

AEROSPACE INDUSTRY

Despite the SSJ 100’s quite impressive operational history in Mexico, where it is demonstrating 99% dispatch reliability on average, this does not guarantee an easy life for the program. According to SCAC, the Superjet 100 has generated only 192

craft program. In March this year, it arranged for 100 billion rubles to be injected in the UAC charter capital. This money, it was said at the time, would be spent mostly on the SSJ 100 program.

Earlier, in October 2014, SCAC was supported through direct or indirect

Leonid Faerberg / Transport-Photo.com

Superjet 100s has already logged more than 100,000 flight hours in commercial operations both in Russia and abroad

firm orders so far, with 51 airframes already in commercial operations. All the current operators except Interjet are Russian: Aeroflot (20 aircraft), Gazpromavia (eight), Red Wings (three), Center-South (three), and Yakutia (two). Red Wings has already confirmed its plans to expand the SSJ 100 fleet by seven more airframes by the end of next year.

The Russian manufacturer reached a production peak in 2014, rolling out 37 aircraft that year. Production capacity of the SCAC assembly facility in Komsomolsk-on-Amur has been boosted to 50 airframes per year.

However, according to Slyusar, production plans for this year stand at a modest 36 airframes.

SCAC admits that its failure to meet the sales target and a number of knowingly loss-making contracts resulted in a net loss of 8.592 billion rubles (about $161 million at the current exchange rate) in 2014 under the international financial reporting standards, or about 10% up year-on-year.

The Russian government has made several attempts to back its major air4

loan guarantees and a capital increase for a total sum of about $2 billion.

The program’s inefficiency prompted Alenia to propose changes to the management scheme. The Italian company formally reduced its share in SCAC from the initial 25% to 5.9% after the Russian government injected 36 billion rubles in the company’s charter capital in 2014. Despite this, Alenia will keep its blocking vote until the end of 2017, when it is expected to invest another $390 million in SCAC so as to restore the partnership balance.

According to sources in the Russian industry, the partners are now negotiating improvements to the SSJ 100 sales system. The current division between SCAC (sales to Russia, the CIS, and Asia) and Superjet International (the Western world) is to be canceled, and the program management to be placed under the uniform control of a newly established joint company. The new entity will likely be registered in Russia in order to enjoy government support.

Another possible change to the SSJ 100 program expected to be announced this summer concerns further expan-

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

sion of the airliner family. Slyusar promised earlier this year that the UAC product range would be reviewed. The current SSJ 100 baseline and longrange variants could be supplemented by a stretch with up to 130-seat capacity. The maximum capacity for the current airframe stands at 103 passengers in the all-economy layout. This variant was certified in the interest of the Russian carrier UTair Aviation, whose order has since been suspended.

Alexander Dolotovsky, SCAC deputy chief designer for aerodynamics, told Russia & CIS Observer earlier that the new version would require a new wing, but that it would still be based on the same technology.

The projected stretch could partially bridge a gap in the UAC product range, that between the SSJ 100 and the future MC-21 narrowbody family with 150to 210-seat capacity. The MC-21 program is expected to bring Russia back to the lucrative narrowbody market.

The rolling out of the first prototype is planned for the end of this year; the first flight could take place in the first half of 2016. The aircraft will begin flight trials with Pratt & Whitney PW1400G engines. Russia’s United Engine Corporation is working on an alternative powerplant, the Perm Motor Company PD-14. The first flight with the Russian engines is now slated for 2017. The UAC is planning to obtain the Russian type certificate and put the MC-21 into service by the end of 2018.

EASA validation could follow in 2019.

“We are planning to build up to 72 airframes per year. We currently have orders and commitments for 175 aircraft,” Slyusar says.

The widebody segment will be filled by a joint Russo-Chinese project officially launched by the UAC and China’s COMAC in 2014. The new airliner will seat 250-300 passengers and will have a range of up to 12,000 km. Its first flight is scheduled for 2021-22, followed by entry into service in 2025. The UAC estimated that the global demand for widebody airliners will amount to 8,000 through to the year 2033, including 1,000 aircraft in China.

MARKET SUPPLEMENT

Advanced simulators: integration and innovative technology CKT Company has been designing and manufacturing training equipment for aviation specialists since 1992. Over the years we have created a wide range of assets, including full-flight simulators, cockpit procedures trainers, visualisation and motion systems, cabin emergency and evacuation trainers, test rigs for aircraft engineers, and aircraft system simulators. All our products are used successfully by Russian airlines and aerospace manufacturers.

In the past several years we have partnered with a number of aircraft manufacturers and design houses (Irkut Corporation, Tupolev, Ilyushin, GosNIIAS, NIIAO Institute of Aircraft Equipment, Moscow Institute of Electromechanics and Automatics, VASO, Novosibirsk Aircraft Production Association, Antonov, etc.) to develop full-flight simulators for a range of aircraft, including the Sukhoi Su-24, Ilyushin Il-86, and Tupolev Tu-154M (Level C), for the Il-96-300 (Level C), for the Antonov An-124-100 (Level D).

We also developed cockpit procedures simulators for the Il-86, Tu-154M, Il-96300, An-124-100, Tu-204SM and Irkut MC-21, as well as system simulators for the An-148.

CKT Company has been contracted by Irkut Corporation to develop a line of flight training devices for MC21 pilots, cabin crew and engineering personnel. There will be a full-flight

simulator, a cockpit procedures simulator, cabin emergency and evacuation trainers, and modern training classes.

Our products comply with the international standards. In their pursuit of developing perfect software, CKT Company engineers use advanced components supplied by leading international manufacturers. Our Il-96-300 and An-124-100 simulators have a Bosch-Rexroth motion system with six degrees of freedom. Our MC-21 and Tu-204SM full-flight simulators incorporate an electric motion system by Moog Inc. and the Rockwell Collins EP-8000 image generator.

Our specialists actively introduce innovative technology in order to further improve the quality of our products and make high-quality training solutions available to aviation personnel. Our new-generation programmable interfaces are intended for hardware and software systems (HSS) that work with flight models. These interfaces, which bring the computing system and simulation equipment together, were first used in our NPS-204SM piloting stand, Il-114 FFS and Tu-204SM CPT. We have also created a unified programming environment for flight and systems models (first used with our Il-114 FFS and Tu-204SM CPT). The high quality of our products is ensured by the use of perfect software and cutting-edge components supplied by leading global manufacturers.

CKT Company this year completed development of a Tu-204SM simulator, which was located at OEM Tupolev’s facilities in the town of Zhukovsky, Moscow Region.

Work continues on a full-flight simulator for the MC-21 airliner, which will be located at the Aeroflot training centre.

CKT Company takes pride in its fullflight simulators, whose high degree of realism, effectiveness and reliability

Full Flight Simulator Research and Production Company (CKT Company, Ltd) manufactures full-flight simulators and flight training devices for airline training centres and aviation enterprises.

We develop and build our simulators with the use of advanced customer-tailored global technologies. have gained them massive popularity with airlines. We have cooperation agreements with several world-leading simulation specialists, including SIM-Industries (a Lockheed Martin Company) and Rockwell Collins Simulation & Training Solutions.

The technologies we use comply with the ICAO doc. 9625 requirements and ensure the highest quality of simulator training.

What makes our company stand out is our profound understanding of what airlines, training centres and manufacturers look for when it comes to simulation-based training. We do our best to accommodate all requirements of our customers, invariably providing them with quality pilot training.

Chief designer Oleg Yefimov CKT Company 5, Lodochnaya Street, Building 1 Moscow, 125363, Russian Federation E-mail: info@ckt.aero www.ckt.aero

AEROSPACE INDUSTRY

Alexey Sinitsky and Tatyana Volodina

Ka-62

he Russian Helicopters holding company is planning to build 244 helicopters this year. Chief Executive Officer Alexander Mikheev says the company’s backlog stands at 585 units, worth 490 billion rubles ($9.2 billion at the current exchange rate); 67% of the orders in monetary value are for military rotorcraft.

But Russian Helicopters looks to boost sales of its civilian products. “We

The Russian government intends to increase the 2015 budget of the Ka62 medium twin helicopter program from the original 1.1 billion rubles to 1.7 billion (up 62.1%). This year’s plans include component endurance tests, the development of working design documentation, extension of the operating envelope, and sales of 29 aircraft.

The Ka-62 has a MTOW of 6,500 kg and can transport 12–15 passengers.

Three prototypes have been built to

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Turbomecca-powered Ka-226T light twin received the Russian certificate

are bringing five civilian types [of helicopters] to the market,” Mikheev says.

“These are the Kamov Ka-62, the Kazan Helicopters Ansat, the Ka-226T, as well as the Mil Mi-171A2 and Mi26T2.” The passenger versions of the Ansat and the Ka-226T have recently been certified in Russia. Work continues to develop the other civil products.

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date. The maiden flight is expected to take place in 2015, Deputy Minister of Industry and Trade Andrey Boginsky said in May, adding that certification is to be completed in 2017.

Static tests should begin in June, says Russian Helicopters’ deputy head for production, Andrey Shibitov. He explains the delays in certification by

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

Fyodor Borisov / Transport-Photo.com

Russian Helicopters working on new products problems with the program quality management system and the highly innovative nature of the new product.

The greatest difficulties are related to the development of the world’s first general helicopter equipment management system dubbed SUOVO. Nevertheless, despite the complex geopolitical situation, Russian Helicopters has agreed on component deliveries with the program’s foreign suppliers. Three major Ka-62 components are currently produced abroad: the Turbomeca Ardiden 3G powerplant, the Zodiac Aerospace fuel system, and the Zoerkler transmission.

Shibitov says Russian Helicopters is looking to replace these with Russianmade equivalents.

“Given the political nuances, we are actively looking to customize and localize as many of the current foreign components in this helicopters as possible,” Shibitov notes. This is particularly important because the Ka-62 will be offered to Russian government agencies.

Russian Helicopters currently has “a suspended firm launch order” for seven of the type, with an option for another seven, from the Brazilian operator Atlas Taxi Aereo, Shibitov says. The contract was signed in 2012.

Mi-38 The program to develop the Mil Mi-38 heavy twin helicopter is drawing to a close. The helicopter will be able to transport 6 tons of freight in cabin or 7 tons underslung, and is aimed at the niche between the best-selling Mi-8/17 family and the Mi-26, the world’s largest production rotorcraft.

Kazan Helicopters, a subsidiary of Russian Helicopters, assembled the fourth Mi-83 prototype (OP-4) last year. The helicopter has joined the sec-

ond and third aircraft in the testing program. The second prototype will be used for ground-testing the rotors and several other mechanical systems. The third and fourth airframes are used in the factory certification tests. The first prototype will be used as a VIP-configured demonstrator. Kazan Helicopters has started assembling the first pre-production airframe.

Earlier, the Russian government planned to allocate 826.8 million rubles for the Mi-38 program in 2015, including 239.7 million from the federal budget and 587.1 million from extrabudgetary funds. Russian Helicopters was planning to obtain the Russian type certificate and sell six aircraft this year.

However, it soon became clear that it would not be possible to achieve these goals with the available budget. The government is now looking into the possibility of allocating additional funds this year, mainly from the federal budget, bringing the total 2015 program funding up to 1.9 billion rubles (3.3 times more than originally planned).

Most of the extra money (1.5 billion rubles) should come from the federal budget.

The additional costs are caused by the need to build an additional two prototypes of the TV7-117 turboshaft engine for certification tests, and to hold a series of additional ground and flight tests to meet the current Russian and EASA certification requirements.

Advanced high-speed helicopter The Russian Advanced Commercial Helicopter (RACHEL) program, which has been on for three years, will be split into two separate efforts next year, Boginsky says.

According to Russian Helicopters’ Shibitov, the program has reached the testbed stage; the testbed is expected to be built by year-end and first fly in the first quarter of 2016. Shibitov explains that now, three years into the development, it has become clear that the program should be split in two.

Unlike the US high-speed helicopter program, which is military in nature,

Russian Helicopters

AEROSPACE INDUSTRY

Mi-28 OP-4 prototype has joined the testing program

and similar purely experimental European efforts, RACHEL has been targeting the commercial market from the start. Polls of prospective operators revealed that the future helicopter’s life cycle cost is of greater priority to customers than its speed. “According to our analysis, even the first stage of the development work, which involves reaching a cruise speed of 360 kmph, would make the helicopter’s life cycle cost too expensive for our potential customers,” Shibitov notes.

It has therefore been decided to continue with the commercial program for a medium helicopter with over 10 tons MTOW, which would incorporate all the achievements of the RACHEL program to date while meeting market expectations. In the meantime, research into high-speed helicopters will continue as a separate effort. The first phase will involve reaching a speed of 360-400 kmph; during the second phase, the airspeed is expected to be pushed to 400-450 kmph and beyond.

Boginsky says that after Russian Helicopters has submitted an updated business plan, corresponding changes will be made to the relevant federal program.

RACHEL funding was stopped in September last year (the program was to be funded to 2.692 billion rubles last year, or $56.4 million at the current ex-

change rate). This year, as part of the funding program “Aviation mobility and aviation technologies” to develop advanced helicopters, research and experiments will be conducted to improve the performance of helicopters that would allow them to fly at up to 400 kmph. A total of 630 million rubles will be allocated for this purpose from the federal budget; there will be no other sources of funding.

The engine development effort under the RACHEL program also continues.

In the first phase, the Klimov VK2500M engine will be upgraded with a new compressor, new compressor and free turbines, new control systems, and other improvements. The second phase will comprise the development of a clean-sheet engine design, whose primary components (including the centrifugal compressor and combustion chamber) are currently being designed.

New technologies could be employed in the program, such as 3D printing.

There will be two versions of the powerplant, with the forward- and aftmounted power offtake shaft, so that it could be used both on Mil and Kamov helicopters. If this work is completed successfully, and the engine demonstrates good technical performance and efficiency characteristics, it could be used to re-engine virtually the entire Russian helicopter fleet.

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

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AEROSPACE INDUSTRY

Powerplants for Russia’s new aircraft ThE UNITED ENgINE CORPORATION (UEC) IS RUNNINg SEVERAl PROgRAMS TO DERUSSIA’S NEw FIxED- AND ROTARY-wINg AIRCRAFT. UEC gENERAl DIRECTOR VlADISlAV MASAlOV TOlD RUSSIA & CIS OBSERVER ABOUT ThE CURRENT STATUS OF ThESE EFFORTS.

UEC

VElOP ENgINES FOR

— One of the UEC’s major projects is to develop the PD-14 engine for the Irkut MC-21 family of short- to medium-haul airliners. what is the current status of this program?

— Several prototype engines have been built and put through the first phase of testing. It is important to emphasize that now new engines for testing, including flight tests are being built on serial manufacturing plant and with serial technology. Flight tests on an Ilyushin Il-76LL testbed will begin shortly. The Aviation Register of the Interstate Aviation Committee and certification centers have convened a mock-up committee for the PD-14-powered MC-21-300 aircraft, which approved the certification basis for the engine.

— how many prototype engines will be built this year?

— The seventh engine for flight tests has been assembled; Perm Engine Company is assembling the eighth one, which will be used for high-altitude bench tests at Central Institute of Aviation Motors [TsIAM]. In all, 14 8

engines will be involved in the engineering and certification tests.

— what about the projected price tag for the PD-14?

— We believe that the engine will have a competitive price compared to the PW1000 GTF and CFM Leap equivalents. I would also like to say that what we are offering operators is not just a powerplant with an optimal price tag but the most profitable solution in terms of the life cycle costs. For this purpose we are devising a comprehensive operational support program, working with third-party MRO providers, and cutting production costs for the engine’s components both at UEC enterprises and at those of thirdparty suppliers.

— how is the program progressing to develop the TV7-117V engine for the Mil Mi-38 helicopter? when do you expect to obtain the type certificate and launch series production?

— The original plan was to have the engine with a 1,000-hour service life certified by the end of this year, but the customer – the Russian Helicopters holding company – asked us to speed up the process, so now we aim to obtain the certificate for the initial variant with a 100-hour service life by mid 2015. We will then complete the tests in order to extend the engine’s service life to 1,000 hours and obtain the corresponding supplemental type certificate by the end of the year.

We are currently in talks with Russian Helicopters over a possible contract for the delivery of 50 engines. The deadlines are key here, because the cus-

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

tomer would like deliveries for the Mi38 to begin in late 2015 or early 2016.

— The Russian government has revised the program to develop the RAChEl advanced high-speed helicopter. will the UEC continue to develop a new engine for this aircraft?

— As there were no technical specifications for the RACHEL helicopter, we have been working on an engine for it on our own initiative. There are two stages to this effort. The first stage involves the creation of the VK-2500M engine. Despite its designation, it differs a lot from the VK-2500 baseline. It has a new compressor, new compressor and free turbines, a new control system, and an extended service life. The powerplant’s maximum rated power is 3,000 hp, compared to the 2,700 hp for the VK-2500. If we complete this work successfully, and the engine demonstrates good technical performance and efficiency characteristics, we will be able to re-engine virtually the entire Russian helicopter fleet. We expect to have two versions of the powerpant, with the forward- and aft-mounted power offtake shaft, so that it could be used on existing Mil and Kamov helicopters with traditional location of engine in front of reduction gear, or on new types with modern approach to place the engine aft for more streamlined airframe shape.

The second stage is the creation of a new generation turboshaft engine. We are in the research phase at the moment. The Klimov plant is designing the main components.

This interview was taken by Valentin Makov

AEROSPACE INDUSTRY

Maxim Pyadushkin

ussia and China has officially launched the joint development of a new heavy helicopter with a framework agreement signed in early May between the Russian Helicopters holding and Aviation Industry Corporation of China (AVIC).

According to the Russian manufacturer, the future rotorcraft named Advanced Heavy Lifter will have a takeoff weight of 38 tons, and to be able to carry 10 tons of cargo inside the cabin or 15 tons on an external sling.

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This means it will be smaller than the world’s largest helicopter – Mil Mi-26T with 56 tons MTOW and 20 tons of load capacity. The future Russo-Chinese aircraft is expected to be capable to perform various missions including transportation, medevac, firefighting and much more.

The partners have already defined the preliminary technical specifications of the new helicopter and continue to finalize its concept. The general contract for the AHL development is to be signed later this year, says the Russian manufacturer. The partners expect

Russian Helicopters

Russia and China to develop a heavy helicopter

Although Mi-26T giants already work in China, it wants a different rotorcraft

that demand for the new heavy helicopter in China could exceed 200 airframes by 2040.

The new helicopter will be manufactured in China.

As Russia’s vice-premier Dmitry Rogozin mentioned earlier, the Chinese side will act as an investor in the program, which Russia views as a commercial project. He also suggested that Russia could propose a powerplant for the new helicopter. Vladislav

Masalov, the head of Russia’s United Engine Corporation, told Russia & CIS Observer that the aircraft’s new turboshaft engine could be based on the gas generator (core engine) of the new PD-14 turbofan developed by the corporation for Russia’s MC-21 narrowbody airliner. “We have evaluated [together with Russian Helicopters] the feasibility and deadlines of this work,” he added.

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

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AEROSPACE INDUSTRY

Russian lessor re-negotiates CSeries contract Ilyushin Finance Co. wants to reformat its order for 39 CS300 airliners Maxim Pyadushkin ussian leasing company Ilyushin Finance Co. (IFC) is in talks with the Canadian aircraft maker Bombardier on revising the terms of its CSeries aircraft order. The revised version might be announced at Paris Air Show 2015, where the new aircraft type is making its international debut.

“We are working with Bombardier’s management to reformat the contract.

We will possibly finalize our agreements at the Le Bourget air show,” an IFC spokesman told Russia & CIS Observer.

IFC is the first Russian customer for the CSeries. The Russian lessor placed an order for 32 CSeries 300 aircraft with an option for 10 more in February 2013.

In the summer of 2014, at Farnborough International Air Show, the company converted seven of its aircraft on option to firm orders. IFC explained its failure to publicly announce this deal by the deteriorating political situation in Russia due to the events in Ukraine.

As a results of the Ukraine-related sanctions, the Canadian authorities banned all financing of Russian companies in 2014, making the IFC deal more

pany’s CEO Alexander Rubtsov, despite a certain increase in the aircraft’s takeoff weight, the promised targets on flight range and fuel efficiency were fully met.

Despite the uncertainty over the contractual terms, the Russian company sees a market for the type and is already

IFC is the third largest customer for CSeries

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in talks on CSeries deliveries with potential customers. “We communicate on this issue with both Russian and foreign operators,” the IFC spokesman says.

CSeries will be IFC’s first experience with a Western type. The lessor has delivered a total of 56 different aircraft so far, including Antonov An-124 freighters, Ilyushin Il-96 widebodies, Tupolev Tu–204/214 narrowbodies, and An-148/158 regional airliners. Of these, 22 are currently on lease now with Russian and international carriers. IFC has placed firm orders for 69 more aircraft. Apart from the CSeries, there are eight Sukhoi Superjet 100 regional jets and 22 MC-21 narrowbody airliners.

IFC has placed firm orders for 69 more aircraft including the CSeries, Sukhoi Superjet 100 and 22 MC-21 types.

Bombardier

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expensive. This was one of the reasons for IFC to review the CSeries 300 contract. The company officially confirmed such a possibility in April this year.

“Indeed, we are looking into the possibility of reviewing our participation in this program because of constant delays to the delivery dates and to the launching of series production, and also due to the fact that [Canada’s export credit agency] Export Development Canada has suspended financing of Russian companies,” an IFC representative commented at the time.

Nevertheless, the Russian lessor said it was satisfied with the aircraft’s technical parameters. According to the com-

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

As per the original schedule, the 135seat CS300 version should have entered service in early 2014, six months later than the shorter SC100 variant. The first CS300 prototype performed its maiden flight in February this year. As things stand now, Bombardier expects to certify the CS100 variant by the end of 2015, with deliveries to follow in the first half of 2016. The launch customer is Swiss International Air Lines, which has ordered 30 CS100s through its parent company Deutsche Lufthansa AG. Bombardier’s CSeries backlog currently comprises 603 orders and commitments, including 243 firm orders.

IFC’s is the third largest contract for the type, after the US carrier Republic Airways and the Australian leasing company Macquarie AirFinance, which ordered 40 airframes each.

AEROSPACE INDUSTRY

Sergey Popsuevich / Transport-Photo.com

An-178 will carry up to 18,000 kg of freight and to operate from unpaved runways

Antonov working on new airlifters Maxim Pyadushkin

krainian aircraft manufacturer Antonov has commenced flight trials of the transport version of its An-148 regional jet. The first prototype of the new airlifter dubbed An-178 was rolled out in Kiev this April and made its maiden flight in early May. Antonov says it is assembling the second airframe, which will be used for static tests. The first international presentation is planned to take place at Paris Air Show 2015.

The new airlifter differs from the An-148 regional jet in an aft ramp door and reinforced landing gear. It will be powered by a pair of Ivchenko D-436-148FM turbofans, each rated at 7,010 kgf take-off thrust compared to the baseline An-148 baseline powerplant’s 6,570 kgf.

Antonov says the An-178 airlifter will serve as a replacement for the aging An-12 and Transall C-160 transport fleets. It will be able to carry up to 18,000 kg of freight in standard containers, and to operate from unpaved runways. According to Antonov President and General

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Designer Dmytro Kiva, the company will be able to assemble up to 24 aircraft after it has upgraded its production facilities. The airlifter’s list price will be around $40 million, Kiva says.

Antonov has already signed a memorandum for 10 aircraft with Azerbaijan’s Silk Way Group, which owns the cargo carriers Silk Way West and Silk Way Airlines. The Azeri customer says the An178s will replace its ageing fleet of An-12 transports. The Ukrainian manufacturer has also signed an agreement with Beijing A-Star Aerospace & Technology Company, which wants to purchase two An178s and subsequently organize an assembly line for the type in China.

Antonov has also found a new use for its other light transport, the An-32 turboprop. In May this year the manufacturer signed an agreement with Taqnia Aeronautics, a subsidiary of the Saudi investment fund Taqnia, on joint development and manufacture of the aircraft’s modernized variant, to be known as An-132. The design stage will be a joint effort between Antonov, Taqnia Aeronautics, and King

Abdulaziz City for Science and Technology (KACST).

This aircraft is expected to receive new engines instead of the current 4,200 hp AI20D-5E turboprops, new propellers and avionics.

Prince Dr. Turki bin Saud bin Mohammad Al Saud, the KACST president, says

the aircraft’s payload is expected to be increased to 10,000 kg against the baseline’s 7,500 kg.

The agreement involves technology transfer to the Saudi partners, who will retain the intellectual property rights and all documentation related to the modernized aircraft. Antonov will also help set up an An-132 assembly line in Saudi Arabia.

The An-32 twin first flew in 1976 and entered into service in 1984. According to Antonov, about 370 of the type have been assembled to date. In 2009, the manufacturer won a contract for the modernization of 105 Indian Air Force An-32s.

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

11

AEROSPACE INDUSTRY

Technodinamika is ready for new international partners

Technodinamika

One One of of Technodinamica’s Technodinamica’s most most promising promising developments developments is is the the landing landing gear gear for for the the new new Ka-62 Ka-62 helicopter helicopter

Maxim Pyadushkin he Russian holding company Technodinamika, a subsidiary of Rostec Corporation, has set itself the ambitious goal of becoming a top-five international aviation equipment supplier by 2020. The company’s consolidated revenue is expected to have grown three times by then, from the current 21 billion rubles to 70 billion ($400 million and $1.3 billion respectively at the current exchange rate), and its combined net income is to increase fourfold to 6.4 billion rubles.

Technodinamika already is Russia’s largest aviation equipment specialist with 46% of the domestic market. The company produces components for 18 different aircraft systems, and partners with international aviation suppliers such as Safran, Curtis-Wright Controls, Boeing, United Aircraft Corporation, Russian Helicopters, and United Engine Corporation.

In line with its development strategy, Technodinamika is gaining developer and integrator competencies in 12 different aviation system segments, including landing gear, aircraft power supply, safety, and life sustaining systems, powerplants, hydraulic and fuel systems. The company will be showcas-

T

12

ing all its products with the help of an interactive stand at Paris Air Show 2015.

Technodinamika heavily invests in the development of new products within its network of design centers. Thanks to the retooling of the existing production facilities and their certification to the AS/EN 9100 standard for quality management systems, the company is capable of offering world-standard manufacturing quality. Technodinamika’s latest developments include a variable-frequency A/C generator for Russia’s future Irkut MC-21 narrowbody. The generator can also be used on existing and future heavy helicopters.

The absence of a hydraulic constant speed drive helps to boost the generator’s energy efficiency by 15-20% on average, as well as eliminating a number of drawbacks inherent to hydraulic drives, such as low reliability, high cost, and the need for periodic maintenance and fluid replacement.

At this year’s Paris Air Show, Technodinamika will also present its new VSU-90/120 auxiliary power unit for short- and medium-range aircraft. The APU’s main advantages are high reliability, simple design, lower operating cost, extended service life, low weight, and compactness. The VSU-90/120 is based on a two-stage centrifugal compressor.

Also presented at Le Bourget will be a virtual mock-up of Technodinamika’s

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

innovative electric wheel drive for aircraft. Integrated into the landing gear system, the wheel drive enables taxiing and pushback without the use of the aircraft’s main powerplant, thus eliminating the need for a towing tractor, saving fuel and prolonging the life of the main engines. Technodinamika’s other development is a new fire-fighting system, a joint project with Curtiss-Wright Controls. The system weighs 15% less than available equivalents and is more compact thanks to the use of a smallsized control module and lightweight fire extinguishers. Quick reaction times enhance the safety of the aircraft and its passengers. Anti-falsing filters increase the system’s reliability. The fire-fighting system can be customized for use on different aircraft types. Its modular design helps lower the operating cost, and its service life may be extended to match the service life of the aircraft.

One of the company’s most promising developments is the landing gear for the new Russian Kamov Ka-62 medium helicopter. Technodinamika has developed both the main and tail landing gear for this aircraft. The shock absorption and gear retraction functions are performed by a small-sized cylinder, which is also responsible for locking the gear in either position. The landing gear is designed to withstand high vertical speeds, thus enabling offshore operations of the helicopter.

“Our company offers optimal solutions to the market and is ready to compete against international manufacturers for a significant portion of the global market,” says Technodinamika General Director Maxim Kuzyuk. “We consistently implement our development strategy as a systems integrator, bringing our subsidiary enterprises to a qualitatively new level of efficiency.”

2015 PUBLISHING DATES: August 25, 26 & 27, 2015

OFFICIAL DAILY NEWS PUBLICATION FOR KEY RUSSIAN AIR SHOW MAKS-2015 The Show Observer is brought to you by the publisher of the renowned Air Transport Observer magazine, its sister publications and aviation b2b portal ATO.ru — Russia’s only true aerospace industry trade media, which are recognized worldwide for the quality of reporting and indepth news coverage. Show Observer is published at MAKS since 2003 and building on the multiyear experience of our partner — AVIATION WEEK.

Show Observer – the only professional show news publication at MAKS-2015 » Reach top executives of the Russian/CIS aerospace industry, air transport, military and government » Deliver your message to all MAKS-2015 entrances/exits, chalets, static displays and hand distribution at the show through more than 10,000 copies per day » Learn about the latest developments in the Russian/CIS aerospace industry with the news reported on-site » Complement your exhibit presence at MAKS-2015 with an ad in the Show Observer » Create awareness of your company with a showcase advertisement, even if it is not exhibiting at MAKS-2015 » Ensure your message reaches the right people at the right time by using our free-of-charge Russian advertisement translation service, which is included in the ad package » The entire content of the Show Observer issues will be accessible in graphical and text-only formats at the www.ATO.ru portal, and will also be available for downloading via our ATO.ru application for smartphones and tablets.

For advertising information about the Show Observer MAKS 2015, contact: Oleg Abdulov, Sales and Marketing Director, Tel.: +7 495 626 5356 ext.16, Мob.: +7 903 225 6779, e-mail: o.abdulov@ato.ru

DEFENSE

The MMRCA saga: lessons for Russia Konstantin Makienko n April 2015, the 15-year-long saga of the Indian tender to procure 126 Medium Multi-Role Combat Aircraft (MMRCA) for the national air force arrived at an interim arrangement. Paradoxical as it may sound, this arrangement actually improves Russia’s chances on the Indian arms market. Having failed to reach a mutually acceptable compromise with France on the particularities of license-building 108 Dassault Rafale fighters (this type officially won the contest in 2012), the Indian Air Force (IAF) decided to buy 36 such warplanes directly from the manufacturer.

Although not optimal, under the circumstances this decision appears the least bad way out of the tight corner in which India has found itself because of

I

national manufacturer Hindustan Aeronautics Ltd. (HAL) with work following the completion of the program to license-build Russian Sukhoi Su30MKI fighters. Inevitably, this complex and far-reaching project also had a political dimension.

The French victory in the tender did not imply the immediate signing of the contract. After three years of commercial negotiations, it became clear that India was not happy with both the unit price and the license production schedule. Furthermore, in 2015, with fifthgeneration fighter offers already available on the market, the idea of buying a fourth-generation warplane no longer had any technological or military sense.

If India signed up for Rafale in 2015, the first 18 aircraft would be delivered to the IAF not earlier than 2018, and the program to license-build 108 more would only be completed by 2028 or 2030 (if the Su-30MKI program’s timeline if anything to go by). The IAF would end up with a fleet of 40-yearold aircraft, which it would have to operate for at least another 30 to 40 years.

China and, most likely, Pakistan will have probably formed their first units of Shenyang J-31 so-called fifth-generation fighters by then. In other words, purchasing fourth-generation fighters in 2015 is nothing more than a stopgap solution. In the long run, nothing short of a fifth-generation design will meet India’s strategic military, technological, and industrial needs.

its unwieldy procurement-related bureaucratic procedures.

The project currently known as the MMRCA tender was started in 2000 with the idea buying 126 Mirage 2000 fighters from the manufacturer without any contest procedure at all. The type had performed commendably on the Indian side in the 1999 Kargil War with Pakistan. New Delhi’s primary motive was to secure enough efficient warplanes for the IAF to keep its strength at 44 squadrons or more. However, the program eventually transformed into an international contest, in which the Russian MiG-35 also ran, and the motives also became more complex. Apart from purely military objectives, MMRCA now pursued the goal of obtaining new aviation technology (it appears that the idea was initially to go for nonRussian technology) and provide the

Fyodor Borisov / Transport-Photo.com

The Indian FGFA fighter will be based on the technology used in the Russian T-50 fifth-generation design

14

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

Opportunity for Russia In theory, the effective cancellation of the MMRCA tender improves Russia’s chances in India in two ways. First, there is an opportunity for selling another Su-30MKI batch. By early 2015, HAL had license-built 150 out of the

DEFENSE

MiG

222 fighters stipulated by the agreement which was signed in the early 2000s.

There are still 72 airframes to be manufactured. At the current production rate, it will take the Indian company between two years and 30 months to complete the program, after which it will find itself without any orders. It would be logical to assume that the Indian government will be willing to provide HAL with two or three years’ worth of interim work until the beginning of Rafale license production (if the relevant contract is signed) or, the more likely, the beginning of production of the Fifth Generation Fighter Aircraft (FGFA). The company could purchase the right to produce another 40+ Su30MKIs, which would allow the IAF to form two more Su-30MKI squadrons and make up for accident-related attrition. It would be expedient to build these new aircraft to the new, upgraded Su-30 standard, which is usually described as the Sukhoi Super 30.

Second, and more importantly, is that this development eliminates the

bat aviation market has been between the Rafale and the FGFA. For example, it is known for a fact that the campaign against the FGFA in the Indian press was initiated and financed by the French. Now that the Indians have found a compromise (which does not suit either France or Russia, meaning it is a good compromise), they could now both purchase the Rafale and keep the FGFA project.

Did Russia stand a chance?

The answer to this seemingly speculative question is actually very much of practical importance, because it will help find organizational and industrial solutions to increasing Russia’s competitiveness on the global military aviation market. It appears that the Russian MiG-29/35 was never a front-runner of the MMRCA contest. Technologically, the MiG-29 platform was half a generation behind all the other contenders (perhaps for the exception of the F-16).

In fact, the version the IAF would like to have does not even exist so far.

Unlike the other contenders in the MMRCA contest, the MiG-35 is not in series production

MMRCA’s direct and immediate threat to the Russian-Indian FGFA fifth-generation fighter project: the procurement and license production of the obsolescent and exorbitantly costly French design would rob India of the resources needed for implementing the fifth-generation fighter project. In effect, in the past two or three years the actual competition on the Indian com16

Unlike the other MMRCA contenders, the MiG-35 is not in series production.

Politically speaking, given the mass purchases and license production of the Su-30MKI, the launching of the FGFA project, and the Indian Navy’s selection of the MiG-29K deck-based fighter, India could hardly have been expected to go for another major program with the Russians, what with New

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

Delhi’s distinct policy of diversifying weapons sources.

Still, the Russian political leadership, arms dealing agencies and defense industry have failed to do their best in the MMRCA tender. After all, when the Su-30K was first offered to India in 1993, New Delhi’s initial reaction was bewilderingly negative. However, just three years later the contract was signed: the parties had managed to agree on the technical parameters of an as-yet-nonexistent warplane.

There appear to be two reasons for Russia’s relatively weak performance in the MMRCA tender, both purely domestic in nature. First and foremost, there is the relative weakness of RSK MiG’s scientific and industrial potential. At the start of the project, that potential virtually did not exist at all: there was not even a single economic entity that would unite the design bureau and the production capacities. Paradoxically, it was thanks to the efforts of former Sukhoi and Irkut employees that RSK MiG managed to improve its standing markedly in the 2000s. Yet the company’s innovative, financial and political potential lagged significantly behind that of Sukhoi.

The second reason, which is largely related to the first one, is that Russia has failed to come up with an attractive proposal in the G4+ medium fighter segment or, better yet, in the G5 segment. This is partially due to the aforementioned relative weakness of RSK MiG’s potential, but not only that: Sukhoi’s interesting single-engine projects were never implemented either.

These include the Su-37 strike aircraft (the first model with this name, powered by the R-79 engine) and the S54/55/56 family, which was expected to be powered by the AL-31F turbofan.

In hindsight, this appears to have been a marketing mistake.

Russia needs an advanced medium fighter in order to retain its position on the global warplane market, achieve a balanced composition of its own air force, and be more rational and flexible in procuring fighters. This is the main lesson to be learned from the MMRCA saga.

DEFENSE

Navalized version for Kamov Ka-52 Maxim Pyadushkin he Russian Navy remains interested in the naval version of the Kamov Ka-52 coaxial attack helicopter despite the uncertain fate of the two French-made Mistral-class landing docks, at which it was originally planned to base the aircraft. The first prototype of this modification, dubbed Ka-52K, entered factory trials at the Progress Arseniev Aviation Company in Russia’s Far East this March. “The Defense Ministry is committed to this program”, Deputy Defense Minister Yury Borisov said during a visit to the facility.

The development of the naval variant started in 2011, when Russia ordered two Mistrals worth 1.2 billion euros from the STX France shipyard. A baseline Ka-52 performed several test landings on the deck of the Russian Northern Fleet’s large anti-submarine ship Admiral Kulakov in Kola Bay, a Barents Sea fjord, in September 2011.

According to Progress’ parent company Russian Helicopters, the main differences of the naval version from the Ka52 Alligator baseline are the folding main rotor blades and folding stub wings, each of which is fitted with two hardpoints. The new version will also have enhanced corrosion protection and a modified air conditioning system. The Ka-52K will receive an improved avionics suite to enable instrument landing on a ship deck. The crew life support system will be upgraded to enable the pilots to operate in immersion suits.

The Ka-52K may get anti-ship weapons in the future, but it will initially carry the same weapons as the baseline variant. The standard weapons set includes one 30-mm 2A42 integrated automatic cannon, S-8 unguided rock-

The Ka-52K may get anti-ship weapons in the future

Russian Helicopters

T

ets, Vikhr (AT-12) laser-guided or Ataka-V radio-guided antitank missiles or underwing Strelets launchers with Igla surface-to-air missiles.

The naval version will have the GOES-451 gyro-stabilized electro-optical station and is likely to inherit the baseline’s Arbalet millimeter-wave radar with a 25-km detection range.

The radar designer, Moscow-based Phazotron-NIIR, has previously offered a new dual-band radar specially for the Ka-52K. “Its centimeter-wave channel with a range of 200 km will enable the helicopter to use weapons against surface ships, while the millimeter-wave channel could be employed against ground targets,” Phazotron-NIIR’s general designer, Yuri Guskov, said at the end of 2014.

The new radar would enable the Ka52K to use Kh-31 (AS-17 Krypton) and Kh-35 (AS-20 Kayak) anti-ship missiles. The Russian Defense Ministry has not confirmed its plans to finance the development of the new radar.

In June 2014, the Defense Ministry’s Borisov mentioned the plan to order 32 Ka-52K helicopters with deliveries in 2015-16. He has since confirmed the ministry’s commitment to the pro-

gram, despite the uncertain prospects of the Mistral deliveries. “We are building our own landing ships, and will need a helicopter like the Ka-52K for our surface fleet. So it would be wrong to make the completion of the helicopter’s development dependent on whether the Mistrals are delivered,” Borisov noted.

The Mistrals were originally expected to be deployed by Russia’s Black Sea and Pacific fleets. The first of the two, Vladivostok, was to be handed over to Russia in November 2014, but the French government decided to suspend the deal over the Ukrainian crisis. The construction of the second ship, Sevastopol, was reportedly completed in May. Both ships are now at the French shipyard in Saint-Nazaire pending an agreement between the two countries.

The twin-seat Ka-52 baseline entered service with the Russian Air Force as a reconnaissance and combat helicopter in 2011. Russian Helicopters currently has a contract with the Air Force for the delivery of 146 of the type through 2020. The first airframes under this order were delivered in 2011. The Defense Ministry expects to take delivery of another 16 this year.

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

17

AIR TRANSPORT

Hitting rock bottom Russian carriers should get used to weak demand Andrey Kramarenko t appears that the demand for air services in Russia hit rock bottom in February this year. Every time spring comes and the travel segment revitalizes, the two-digit plummeting of passenger traffic tends to stop. Not this time, however: Russian carriers will have to get used to low demand, and to seek new markets, if they want to reduce their dependence on macroeconomic fluctuations in Russia.

Russian airlines’ passenger numbers dropped by 4% in February, and passenger kilometers flown by 12%; for international flights op-

I

erated to destinations outside the CIS area, the decline was 22% and 24%, respectively. Domestic passenger traffic grew by 7% (and passenger kilometers, by under 5%), but this fig-

flights from Moscow to Yerevan, and 39 to Chisinau, meaning much higher frequencies than one year ago. The crisis-related demand for flights to Central Asia is also an im-

February, compared to more than 10% in December and January.

Services to CIS countries demonstrated an impressive 11% growth, despite the Ukrainian crisis and the

Russian airlines’ passenger numbers for international flights operated to destinations outside the CIS area, dropped by 22% in February ure included services to and from Crimea, which had been classed as international flights until April last year. Without the Crimean statistics, the Russian domestic air services market saw nearly zero growth in

fact that Crimea was no longer regarded as part of the CIS. Liberalization of air services with Armenia and Moldova contributed significantly to this figure: Russian airlines currently perform 83 one-way weekly

Leonid Faerberg / Transport-Photo.com

Russian airlines should avail of the difference in the currency exchange rate and start looking for new markets

18

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

portant factor as temporary workers head home.

The January and February decline in passenger numbers on routes to destinations outside the CIS (by 19% and 22% respectively) turned out to be greater than expected. It appears that certain psychological factors were at work here, such as the crisis-related cutting of household expenses, which normally include travel. Despite the March recovery of the ruble exchange rate (by 5% to the dollar and by 10% to the euro), there will be no radical changes to the continuing decline of the market: the price elasticity of demand is taking the back seat to two microfinancial factors – households saving for a rainy day and households prioritizing their basic needs. We should not forget about the decline in business travel demand, which is related to the curtailing of foreign economic activity.

AIR TRANSPORT

Statistically, until August or September this year, the latter factor will continue to affect passenger numbers.

Therefore, unless something extraordinary happens, like the ruble’s rebound to the pre-crisis exchange rates and/or the lifting of Western sanctions, demand for flights to destinations outside the CIS may drop 10-15% by midfall. Traffic to CIS destinations is likely to keep growing, but this segment accounts for just 10% in Russian airlines’ statistics, so does not influence the bottom line all that much.

The feeble growth on domestic routes indicates that no expected reorientation of tourist flows from foreign to domestic destinations has materialized. On the other hand, February is historically the slowest month for domestic tourism in Russia (totally in contrast with tourism to foreign destinations), for the only exception of skiing resorts, and demand will certainly start growing from May. There are, however, two significant negative factors that will be impeding this growth: the aforementioned redistribution of household expenditures, with increasingly little money being allocated for travel and leisure, and the upcoming hike in air fares. Air ticket prices for domestic flights stayed indecently low in February, and carriers reported 25–30% losses. We expect air fares to grow considerably more expensive by the beginning of the high season. Since price elasticity cannot just be ignored, the latter factor will 20

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

be limiting consumer activity growth to 5–6%.

Russian domestic air services have remained loss-making for many years owing to high competition on the market — unlike flights abroad, which have helped carriers make at least some profit. Switching to the domestic market with its cut-throat rivalry and extremely low fares is unlikely to improve airlines’ financial standing, even despite the expected raising of air fares.

Raising fares is an art in its own right, a balancing act between politics and economics. As we already mentioned, the hike in air fares will be followed by a drop in demand for air services, which is why carriers prefer to ask the federal government and the most welloff regions for money in the form of guarantees, tax preferences, and subsidies.

Services to Crimean and North Caucasus resorts will probably remain the only source of solid profit this coming summer, but even then there is a possibility that the government will disagree with too high air fares on these “strategic” routes. The result may be the traditional populist demand that airlines lower their prices.

The shrinking demand in the corporate segment is giving carriers no less headache. It is well known that business-class passengers bring airlines more profits than self-paying customers, because they rarely buy tickets well in advance and generally pay high air fares unflinchingly. The balance between these two

AIR TRANSPORT

groups of customers has been changing in favor of economy passengers (which is obvious from the losses the industry is suffering); now, with the crisis full on, we should expect the cutting of business travel budgets and further decrease in businessclass passengers.

One unpleasant consequence of the market’s reorientation to domestic services is the increasingly seasonal nature of demand for air travel. Domestic tourism demonstrates the lowest figures in November through April, and whatever traffic there is mainly heads for skiing destinations in the Caucasus. In the mid-2000s, this problem would be solved by standing down aircraft and crews for the duration of the low season; nowadays, with most airframes operated on lease terms, this is no longer an option. Airlines will attempt to make up for the high winter losses in summer, which will bring about all the above mentioned problems and limitations.

Belly cargo has never been carriers’ main source of revenue, but it should not be discounted either.

In January and February, domestic demand for these kind of services dropped by 16%, and there are no reasons to believe the situation will improve radically any time soon.

In the mid-term, airlines’ inability to control their spending on fuel, airport and ATC services (due to the monopoly position of respective providers) will also remain a negative factor. As passenger numbers continue

to shrink, providers will start to hike prices in order to keep the overall revenue up, meaning that the situation will enter a self-sustaining downward spiral because of the constant growth of unit costs and the related decline in demand.

This current crisis is unlikely to end in one or two years. Airlines need to get used to the weak and unstable demand, and the government has to realize that oneoff measures will prove ineffective in mid-term. One such measure implies switching the focus from growth to efficiency in an attempt to return the industry to profitability, which has not been around since 2010.

The negative consequences of this will include the shrinking of the market and the folding of a number of airlines.

It is obvious that most Russian airlines are poor at tackling market risks. One aspect of this problem was demonstrated during the debt crisis of SeptemberOctober 2014: carriers paid too little attention to their debts and the associated refinancing risks.

The November slump in currency exchange rates hit foreign tourism hard, affecting those airlines which had staked their all on this market segment. In January and February, macroeconomic recession backed by high inflation resulted in the outrunning shrinkage of the domestic consumer market and the de-facto annihilation of the only market available to Russian airlines, many of whom had failed to break into any other markets in the previous “fat” years.

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

21

AIR TRANSPORT

Leonid Faerberg / Transport-Photo.com

Despite phasing out its Boeing 767s and An-148s, Rossiya airlines showed the largest increase in passenger numbers in Q1 2015 among Russia’s top 5 carriers

The demand for transfer services between Europe and Asia is virtually insatiable, as witnessed by the unbridled growth of Emirates Airlines

and Qatar Airways. On the other hand, even Finnair, small as it is, operates more flights to Southeast Asia than Aeroflot does – and does so

without resorting to state subsidies. Russian companies should avail of the difference in the currency exchange rate (which is help-

ing them keep their costs down) and start looking for new markets. The demand for international transfers is unaffected by the weak ruble; furthermore, it will allow airlines to use currency exchange rates as a competitive factor. However, price competitiveness alone is not enough; carriers need to develop the IT sector (including front-end applications), marketing strategies, and inflight services. The government, for its part, should help here by relaxing visa requirements (including through the introduction of visa-free entry and/or transit for foreigners), reinstating smoking rooms in airport transfer areas, and developing airport infrastructure.

20 largest Russian carriers for passenger numbers and passenger kilometers in Q1 2015 (international and domestic services) Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Airline Aeroflot Transaero S7 Airlines Rossiya UTair Aviation Ural Airlines Globus Orenair Pobeda Donavia VIM Airlines Nordwind Airlines Aurora Yamal Airlines Azur Air NordStar Metrojet

18 Ikar Airlines 19 UTair Express 20 Red Wings Total figure across Russian market Share of the top 20 airlines in total Russian market,%

Passengers carried Q1 2014 Q1 2015 4,981,576 2,341,517 1,660,285 898,258 1,621,029 920,152 388,030 455,012 0 335,806 226,874 766,991 219,381 224,660 34,553 218,293 237,055

5,470,961 109.8 2,200,553 94.0 1,561,200 94.0 1,095,247 121.9 1,035,477 63.9 890,718 96.8 481,251 124.0 454,731 99.9 367,143 325,642 97.0 311,245 137.2 311,016 40.6 227,752 103.8 209,502 93.3 191,713 5.5 times 147,973 67.8 140,236 59.2

Passenger kilometers Q1 2014 Q1 2015 14,391,528 10,337,208 3,350,661 1,685,179 3,895,086 2,470,373 1,052,427 1,450,836 0 476,931 489,996 2,969,320 345,864 398,285 43,558 615,976 774,082

%

15,960,799 110.9 8,429,856 81.5 3,055,655 91.2 2,116,083 125.6 2,119,455 54.4 2,149,450 87.0 1,222,000 116.1 800,815 55.2 549,320 445,836 93.5 623,292 127.2 1,267,759 42.7 363,426 105.1 367,447 92.3 880,173 20 times 338,032 54.9 497,291 64.2

Passenger load factor, % Q1 2014 Q1 2015

%

74.5 82.8 73.0 68.7 74.7 68.5 72.7 71.8 61.4 71.8 93.5 72.7 63.8 70.7 72.2 90.0

75.3 80.0 72.2 68.2 70.7 69.6 71.1 67.7 79.6 65.8 73.6 86.0 65.9 64.6 93.9 60.1 93.7

0.8 -2.8 -0.8 -0.5 -4.0 1.1 -1.6 -4.1 4.4 1.8 -7.5 -6.8 0.8 23.2 -12.1 3.7

228,400 132,473 91,035

130,964 124,555 122,955

57.3 94.0 135.1

1,299,398 91,902 139,395

697,903 86,781 163,210

53.7 94.4 117.1

89.8 59.6 60.4

80.8 54.8 68.0

-9.0 -4.8 7.6

17,395,048

16,996 891

97.7

48,810,533

44,079,914

90.3

76.1

74.8

-1.3

91.9

93.0

94.8

95.6

Source: Russia’s Federal Air Transport Agency

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%

RUSSIA/CIS OBSERVER № 1 (41) JUNE 2015

Excessive seats

Russian carriers are urgently cutting capacity due to the decline in passenger traffic

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of the airliners which have been stood down amounts to around 18 years. These include 10 Boeing 767200/300s whose average age is 18 years, five Boeing 747400s which are 17 years old on average, six Boeing 737200/500s over 23, 13 Boeing 737-700/800s aged over 14, and 12 Boeing 757-500s aged slightly under 18. The only exception was UTair, which shopped operating six new Boeing 737-800s and 10 new Airbus A321-200s.

The capacity cutting process is being stimulated on both sides: on the one

hand, Russian carriers are trying to get rid of the excessive seats, while on the other hand, foreign lessors are worried by the Russian lessees’ unstable financial situation and interested in moving their assets to more reliable markets. It is often the case that aircraft are returned to lessors as is, without any preparatory procedures. In some instances airlines manage to secure an adjournment of payments in hope to pay up during the summer high season – if they are still around by then.

CAPACITIES CUT BY AIRLINE (IN SEATS INSTALLED, AS OF LATE FEBRUARY 2015)

1,0

Orenair

0,7

Ak Bars Aero

UTair

7 3,

Yamal Airlines

Ural Airlines Aurora

2,4 2,7

Polet VIM-Avia I Fly Yakutia

2,7

4,0

,0 30

4,3

10,0

Transaero

,1 23

n December last year, Russian airlines began to actively reduce capacity due to the falling demand for air services. The total passenger fleet shrank by 36 aircraft (more than 6,000 seats) in December, by 34 (some 4.500 seats) in January, and by more than 20 (nearly 4,000 seat) in February. As of late February, around 13% of widebody passenger aircraft had been taken off regular services or handed back to lessors, along with 10% for narrowbodies and 34% for regional airliners. In all, around 12% of the Russian passenger fleet was thus stood down.

The size of capacity reduction differed from one carrier to another (see diagram). The leaders were UTair Aviation (30%), NordWind and Ikar (23.1% of their combined fleet), as well as Transaero (15.5%) and Orenair (10%).

The crisis did not come without a warning. Ever since 2012, passenger traffic had been growing much faster than GDP (17.4% to 3.4% in 2012, 15% to 1.3% in 2013, and 7.2% to 0.6% in 2014).

The growth rate of domestic

air freight services, an extremely sensitive economic indicator, continued to slow down steadily: 12.6% in 2011, 6% in 2012, 0.7% in 2013, and –5.1% in 2014. The segment demonstrated a noticeable decline in early 2014.

Passenger numbers doubled over the five years since 2009, whereas the revenue rate per passenger kilometer flown grew only by 5% in the current Russian prices (corrected for inflation with the 2009 prices taken as 100%, it actually reduced by over 38%). In other words, despite the growing traffic, the financial standing of Russian carriers did not improve, and the sector remained chronically unprofitable. The situation rapidly deteriorated last year due to the beginning of the domestic economic crisis and the drop in the ruble exchange rate. On the one hand, these factors affected the demand for air travel, especially on international routes, while on the other hand bringing about a significant increase in operating costs. The industry was forced to urgently reduce excessive capacities.

Despite the fact that the cheaper ruble and the frozen kerosene prices have made older aircraft types more attractive again, the average age

15 ,5

Andrey Kramarenko and Alexey Sinitsky

Nordwind Airlines + Ikar Airlines

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Leonid Faerberg / Transport-Photo.com

AIR TRANSPORT

BUSINESS AVIATION

It could be worse

In January-April, a number of international bizav flights performed from Russia dropped by 24.6% year-on-year

Alexey Sinitsky and Tatyana Volodina he difficult political and economic situation in Russia is inevitably affecting the country’s bizav market.

Like with regular passenger air services, this segment has seen the greatest slump in the demand for international flights.

According to the German consultancy Wingх Advance, the number of bizav flights between Russia and Europe dropped by 20.6% year-on-year in April 2015. However, the company’s analysts believe that the Russian bizav market has passed the lowest point already. Traffic declined by 22% in January, by 34% in February, and by 21.9% in March.

Moscow’s Vnukovo airport, the largest bizav center in Russia, ranked Europe’s sixth for bizav movements in April, handling 3,217 flights (16.4% down year-onyear). In January-April, a total of 5,391 international bizav flights were performed from Russia, or 24.6% down year-onyear. Russia ranked 11th among the European countries for this parameter.

The Russian domestic bizav market, on the contrary, has been growing by 5-7% year-on-year every month since the beginning of the year, according to the charter provider Air Charter Service. General Manager for Russia and the CIS Azat

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Mulgimov explains this trend by intensified business activity across the country.

The highest growth has been observed in the southern cities of Krasnodar, Sochi and Gelendzhik, as well as in annexed Crimea. Mulgimov does not rule out the possibility that the number of international bizav flights will start growing again in June-August: “According to our observations, international flights are more to do with leisure than business.

Therefore, there is hope that the market will revive in summer, demonstrating a modest growth of around 3–5%.”

The Russian bizav market started shrinking in late 2014. “In Q4 2014, private charter activity in Russia fell for the first time in several years,” says Gustav Andreasen, senior commercial manager at the Swedish online air charter marketplace Avinode. “The Russian business environment is being made more difficult by the imposed sanctions, falling asset prices, devaluation and the stock market performance.

This, in turn, is affecting the demand for private charters, but there is hope that the situation may recover this summer as domestic flights may increase.”

Based on Avinode’s statistics for August 2014, when demand for bizav flights in Russia and the CIS declined by 5% year-on-year, a significant slump

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Leonid Faerberg / Transport-Photo.com

The difficult political and economic situation in Russia affects the bizav market could have been expected for the whole of that year. This, however, was not the case. It should be noted that Avinode provides statistics for business flight requests across Russia and the CIS; the figures do not coincide with the number of flights actually performed. Still they may serve as a fairly good indicator of the market situation.

The annual number of requests for bizav flights to the 10 most popular airports across Russia and the CIS grew by 6.1% in 2014. Russia was growing faster than the CIS: the combined growth in requests for flights to Vnukovo, St. Petersburg’s Pulkovo, Sochi, Kazan and Moscow’s Sheremetyevo amounted to 12.1%. Vnukovo registered a 12.3% growth, with nearly six times more requests for flights into the airport than its closest rival Pulkovo, the demand for which dropped by 12.0% last year. The number of requested flights into Sheremetyevo declined by 10.6%.

Sochi, for its part, saw a massive increase in popularity (96.8% up yearon-year), undoubtedly because of the 2014 Winter Olympics.

The number of requests for departures from the same 10 most popular airports suggests a considerable slowdown in economic activity. The combined growth amounted to 0.8% in 2014. Russia’s three most popular airports — Vnukovo, Pulkovo, and Sheremetyevo – demonstrated a combined growth of 2.5%. Of the three, only Vnukovo saw an actual growth (4.2%). The number of requests for outgoing flights dropped by 3.4% at Pulkovo, and by a whopping 19.9% at Sheremetyevo.

“It is important to note that the impact of reduced Russian demand will be felt across Europe as aircraft based in Russia are often registered and operated on European Air Operator Certificates (AOC)”, Avinode’s Andreasen notes.

SPACE BUSINESS

Russia saving on space research Igor Afanasyev n April, the Russian Space Agency (Roscosmos) presented an updated draft of the federal space program for 2016-2025, known as FKP-2025. The revised document calls for the cancellation of a super-heavy launch vehicle and a number of scientific programs, but keeps the plan for a manned flight around the Moon. The space budget has been significantly reduced compared to the previous version of the program: instead of the original 2.85 trillion rubles ($54.3 billion at the current exchange rate) envisaged in the fall of 2014, Roscosmos will only be able to spend 2 trillion.

The program was revised in the light of Russia’s new economic environment. “The cost of the FKP-2015 projects has changed considerably over the past year, taking into account the current economic situation, the changing

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currency exchange rates and the growing inflation,” Roscosmos head Igor Komarov says. The crisis is to blame: the cost of the projects has grown by 30% on average, whereas the budget funding has decreased.

The good news is that 70% of the space budget will be spent on research and development. In addition, not a single project launched this year will get the ax. “We did not cancel anything planned for 2015,” Komarov stresses.

“There is no point in canceling projects which are 70–75% complete.”

The operation of the International Space Station (ISS) is expected to be prolonged beyond the year 2020.

Russia will continue to fly Soyuz and Progress ships to the station (including in support of its liabilities to the foreign partners), albeit at a slower rate, now that US automatic and manned vehicles (currently under development for NASA by private companies) will also be involved in servicing the ISS.

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NASA

Russia plans to further expand its segment of the ISS

The Russian segment of the station will expand further. The Nauka Multipurpose Laboratory Module will be added in 2017; the Nodal Module, in 2018; and a Science/Power Module, in 2019. The OKA-T freeflying lab has been excluded from the program. The lab was meant to dock with the ISS for regular servicing only, and was to spend most of the time in free flight in order to prevent any station-induced influences on its experiments, such as microvibrations.

The new-generation piloted transport ship (known as PTK NP), which is to replace the Soyuz, stays on. Its first unmanned launch into orbit is planned for 2021; an unmanned flight to the ISS should be performed in 2023; a manned flight to the ISS, in 2024; and a manned flight to orbit the Moon, in 2025.

Roscosmos is planning to gradually replace the Proton and Soyuz launch vehicles with the Angara modular family of rockets. Komarov says Russia will continue to launch the two existing rocket types until the first launch of an Angara-based piloted transport system from Vostochny cosmodrome. The Angara will not completely replace Protons until the beginning of its series production and the first commercial launches, something planned to happen between the years 2020 and 2025.

The redistribution of resources within FKP-2025 will enable more streamlined spending on the creation and operation of various launch vehicles, primarily thanks to the decision to scrap the super-heavy rocket program.

Instead, an augmented version of the Angara A5 will be created, with an oxygen-hydrogen third stage, which is expected to orbit all the requisite payloads until the year 2030.

The program also retains the development of a medium-class launch vehicle, which is aimed to replace the Soyuz family. The new rocket is to be

SPACE BUSINESS

where it could operate using a nuclear reactor’s power.

As for civilian and dual-use satellites, their development and launches will continue, albeit at a much slower pace than before. The streamlined orbital constellation is to ensure the necessary level of Earth remote sensing satellites, weather satellites, and navigation and communication satellites for the implementation of the current socioeconomic programs.

Over the period covered by the FKP2025, 181 Russian satellites are expected to be in operation on orbits around the Earth. The number of communications satellites is to increase two times; that of Earth remote sensing satellites, by 2.3 times; and the number of scientific satellites, by three times.

The plans for scientific probes, observatories, satellites and automatic interplanetary stations have been considerably revised. The new program mentions only three Lunar probes, to be launched in 2019, 2021, and 2022.

Only the second of the lander has any kind of backup, which could be launched also in 2022 if the main mission fails. The original Lunar soil sample recovery station is absent from FKP-2025.

Russia is planning to launch ExoMars Martian probes jointly with Europeans in 2016 and 2018 (with 2020 as the back-up date).

The Spektr-RG and Spektr-UF observatories will be launched in 2017 and 2021 respectively. Work on the SpektrM and Gamma-400 projects will be stopped.

Of the two Intergeliozond stations, only one has survived the revision and is scheduled to be launched in 2025.

There is also a new separate project to build the Arka observatory for investigating the Solar corona. The mysterious Expedition M (Mars-Grunt) mission is planned for 2024. It will apparently be a rerun of the failed FobosGround experiment. In addition, five Rezonans microsatellites will be launched between 2023 and 2025.

The development of the VozvratMKA automated lab, which will be

used for technological and biological experiments on a highly elliptical orbit for the duration of one year and for returning samples to Earth in special pods, has been postponed. These functions will now be performed by triedand-tested Bion satellites.

In addition, Roscosmos is planning to provide financial support to private companies which manufacture small spacecraft, and also to organizations involved in the processing and commercial distribution of data obtained from Earth remote sensing satellites.

Roscosmos believes that FKP-2025 will not just help it meet the minimum space use demands, but will also generate a profit of 1.8 trillion rubles through the provision of space communications and manned flight services.

Russia’s new Angara family will gradually replace the Proton and Soyuz launch vehicles

A. Morgunov

powered by highly efficient, reliable engines running on liquefied natural gas.

Paired launches of the proposed Angara A5V with orbital transfer vehicles on board will allow for a manned flight to orbit the Moon in 2025, three years earlier than originally planned.

Unfortunately, the funding for a piloted lunar lander has been slashed.

Therefore, according to FKP-2025, “a manned flight to the Moon in 2030 is impossible”. Nevertheless, the lunar mission complex should be ready for flight technologically tests by 2029.

The draft program calls for an indepth study of the Moon with the use of automatic probes, and for the beginning of work to create the critical components of the future automated Lunar base and a Lunar orbital station, to be secured by 2025.

The research and development program for a future nuclear-powered tug has also undergone some changes. The vehicle, fitted with an array of powerful electrical rocket engines which take power from a nuclear reactor (in essence, from a space-based nuclear power plant), is to snatch payloads to be inserted into a low Earth orbit by conventional launch vehicles, transfer them to geostationary orbit (and possibly to the Moon and beyond in the future), and return payloads back to low Earth orbits.

However, this project’s budget has now been halved, with only around 30 billion rubles remaining from the original 60 billion. FKP-2025 mentions not the tug as a whole but only its powerplant. There is the mentioning of a development effort described as “the creation of a set of baseline prototypes for energy sources with the requisite range of parameters”, but it is unclear whether this has anything to do with a nuclear power source. If it does, the overall tug budget will in fact amount to 55 billion rubles, against the 85-90 billion originally planned.

The prospective powerplant could be used as part of a future spacecraft. For example, a launch vehicle could insert a satellite into a low Earth orbit, to be further hefted to a geostationary orbit

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Russian private rocket solutions

Igor Afanasyev and Dmitry Vorontsov here is much talk these days about the potential benefits of commercializing space exploration and involving private companies in the Russian space industry. This viewpoint stems in no small measure from the lamentable fact that the sector has failed to secure any major long-term achievements in the past several decades. Society is baffled by the recent series of space failures, which is largely the result of the authorities’ narrow-mindedness, red tape, and the general unwillingness of statecontrolled enterprises to change their approaches.

Until recently, it was believed that private participation in the Russian space sector could not go anywhere beyond the manufacture of individual components. Then the Russian companies Dauria Aerospace and SPUTNIX, both founded several years ago, orbited their satellites in 2014 in Russian clustered and piggyback launches. These and other similar firms are interested in the development of an affordable launch vehicle.

Answering this demand, the Russian company Lin Industrial was founded

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last year to specialize in ultra-light space rockets.

“During meetings with representatives of the Russian satellite specialists Dauria Aerospace and SPUTNIX, I was shown impressive statistics for the smallsatellite launch market; it suddenly dawned on me what to do, and soon thereafter we were launching our project,” says Lin Industrial founder and chief designer Alexander Ilyin.

The company became a resident of the Skolkovo innovation center in 2014. By that time, it already had several launch vehicle projects: the Taymyr ultra-light vehicle is planned to be developed first, whereas the Adler and Aldan rockets belong to the more distant future. In conceptualizing Taymyr the Lin Industrial team was proceeding from the specific launch cost target of around $20,000 to $45,000 per kilogram.

In order to stay within the tight launch cost bracket, the company intends to design Taymyr with the use of simple, tried-and-tested, commercially available solutions. Thus, the propellant will comprise non-toxic, storable and relatively inexpensive components: high-strength hydrogen peroxide for oxidizer and kerosene for fuel. These components’ hypergolicity in the presence of a catalyst helps keep the engine design simple. The engine, currently under development at Moscow Aviation Institute, incorporates a simple pressure-feed fuel system, with the propellant forced out of the tanks by the pressure of compressed helium. The fuel tanks are also of simplified design: their all-composite barrels will be man-

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Igor Afanasyev

SPACE BUSINESS

The specific payload launch cost for Taymyr vehicles is expected to be under $45,000 per kg

ufactured at an ordinary industrial enterprise.

The instrumentation portion of the control system will be comprised of commercial off-the-shelf components, its “brain” comparable in size and weight to a large smartphone.

The launch vehicle’s modular design will help cut the development costs.

Using this approach, Lin Industrial will be able to begin experimental development with a relatively small universal rocket module. There will be two such modules, URM-1 for the lower stages and URM-2 for the upper stages.

The initial engine prototype, with a thrust of only about 100 kgf, will serve as the baseline for Taymyr-1’s thirdstage motor. This, in turn, will be modified to create clusters of nine 400-kgf engines for the first stage. The high-altitude version of the bigger engine will be used in the second stage of the smallest of the Taymyr family members.

Taymyr-1 is primarily viewed as the technology demonstrator. Based on the results of its development, production and testing, Lin Industrial and its partners are planning to develop a 3,500kgf “operational” engine for subsequent Taymyr versions.

The Taymyr family will be able to orbit satellites weighing between 10 and 140 kg. Besides the smallest Taymyr-1 variant, it will also have Taymyr-5 and Taymyr-7 launchers. The latter will be capable of inserting an Earth remote sensing satellite weighing around 100 kg into a Sun-synchronous orbit about 500 km above Earth.