Russian Commercial Aviation Faces Uncertain Future

One of the world’s most important players in commercial and military aviation is probably very unfamiliar to the average American but will play a defining role in future conflicts, and potentially the general aviation industry. The United Aircraft Corporation was founded in 2006 by decree of President Vladimir Putin. It was a bold move that agglomerated all of the former Soviet OKBs (Design Bureaus) into one stable, with iconic brands such as Sukhoi, Mikoyan (MiG), Tupolev, Illyushin and others. While the country has a reputation in this field, the Putin administration has aggressively funded the group, with an 80% equity position held by the Russian government. Billions of dollars have been invested with the parallel aims of entering the single-aisle market with the Sukhoi Superjet, and penetrating the higher capacity regional market with the Irkut MC-21. The Superjet program has had mixed results in its first two years with a large order-book dominated by Russian carriers such as Aeroflot, which is likely adding UAC planes, partly due to the fact it is also majority owned by the Russian government. Despite the order-book, manufacturing capacity falls woefully short, producing at a planned rate of 36 planes/year with 192 units unfulfilled. The Superjet has certainly failed (until recently) in generating significant foreign orders and attention with only three major non-CIS airlines, Interjet (Mexico), VLM (Belgium) and Cityjet (Ireland), operating or actively ordering the craft.

The recent halving of the ruble relative to the dollar has certainly not simplified a program with other concerns. This alone has doubled the cost of already expensive important components such as the avionics suite, hydraulic systems and other electronics. This has led some to suggest Russian suppliers can stop the gap and help keep unit aircraft costs down through import substitution. The ultimate feasibility of this is to be seen, as these systems haven’t undergone foreign commercial certifications.

Ukranian manufacturer Antonov has also exited its joint venture with the UAC as a result of the ongoing tensions regarding Ukraine. This could be seen as a loss of standing, due to a loss of engineering talent, and bragging rights associated with having the world’s largest heavy lift aircraft ever in their product portfolio, the 225-Mriya.

Political shifts within corporate management are another concern, which potentially taints Western perception of UAC. Former head Mikhail Pogosyan was relegated to ‘General Designer’ this year in favor of former Trade Minister Yury Slyusar. Slyusar is perceived to be an ally of Viktor Chemezov, the head of Rostec, a massive defense conglomerate. Chemezov has extensive ties to Putin as his mentor during their days as operatives in East Germany with the KGB.  

While there are certainly many concerns about the trajectory of the commercial sector of the group, there have also been a few recent successes. Even with two years to the scheduled launch the MC-21 has garnered 175 orders from domestic airlines and Lufthansa has even come to the fore by expressing serious interest. A new purchase agreement with China was created, adding another 100 Superjets tallied to be supplied over the next 3 years. Further collaboration was announced this Spring with a combined development to tackle the competitive duopoly held by Airbus and Boeing in the wide-body market; with COMAC and UAC launching a joint venture with a targeted release around 2025.

In light of the group’s successes and setbacks over the last few years, the future success of the commercial arm of the UAC will very likely depend on the adoption of its product both within, and outside of Russia.