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June 07, 2005
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Aircraft for the Provinces
// Aircraft manufacturers hurry to replace the Tu-134
The Aircraft Industry
At the end of April, the An-148, one of three post-Soviet regional 100-seat aircraft projects, won its first real customer. The leasing company Ilyushin Finance Co. (IFC) and the airline company Krasair signed a leasing agreement for ten aircraft with an option on another five units for a total value of more than $270 million. Meanwhile, the state has refused to support full-scale production of the An-148 and Tu-334, and another replacement, the Tu-134, preferring to gamble on the Russian Regional Jet (RRJ), a civil design of the Sukhoi holding company, which will only appear two years from now.
Replacing the Tu

According to the Federal Air Transport Agency (Rosaviatsia) Russia's civil aircraft fleet consists of 5780 units, including light and business, regional and long-distance cargo planes, as well as light, medium, and heavy helicopters. There are now 1438 planes making commercial flights (33.8 million people based on the results of 2004) in the country; of these, 663 are long-distance (Il-96-300, Il-86, Tu-154, and foreign models) and 775 are regional (Tu-134, An-24, Yak-40). These were all mainly inherited from the USSR and were left to present-day airlines as a result of breaking up the Soviet Aeroflot. Most of the flights are made with short-haul Tu-134's (seating capacity of 76 and a range of 2000-3000 km) and medium-haul Tu-154's (B and more modern M modifications with a seating capacity of 176 in economy class and a range of 3500 km), which are often used unloaded on short-haul routes. The fleet consists of 242 Tu-134 liners and 352 Tu-154 liners.

Forecasts of how long this fleet will be in service and the demand for short-haul airliners differ significantly. According to Rosaviatsia's pessimistic estimates, a carrying capacity crisis (a shortage of aircraft compared with increasing passenger turnover) will begin in 2006 if framework solutions for individual extension of resources are employed. Since the aircraft in operation are obviously not new, airlines sometimes turn to the designers to extend the resources by performing engineering work to maintain the aircraft in flight readiness. УAir carriers must be given the opportunity to lease new regional airplanes in the shortest possible time; otherwise, they will be forced to buy maintained foreign aircraft as early as 2006-2007, У according to the minutes of the working council at Rosaviatsia, quoting Nikolai Shipil, the head of the council.

The State Civil Aviation Research Institute has concluded that replacing the Tu-134's, which have been used in the fleet for nearly 40 years, will require nearly 100 76-seat turbojet airplanes and mixed class with 90 seats. According to a long-range forecast by Airbus S.A.S., in the next 20 years, Russia will need 620 airplanes of various kinds, mainly short- and medium-haul with a seating capacity of 100 or more. The Ministry of Industry and Energy believes that a massive write-off of the regional aircraft fleet, including Tu-134's, will begin in 2010-2012, while the similar Tu-154M will keep going until 2018-2019; but Russian domestic demand will be for 320-350 units up to 2022, based on the effective use of one plane of 3500Ц4000 hours per year instead of 700-800 hours per year, as is currently the case for individual Tu-134's.

However, even if you accept the forecasts of aircraft manufacturers rather than carriers, it is clear that the greatest influence on carriers' plans to update their fleets is the toughening of international requirements for the technical condition of aircraft, for example, with respect to emissions and noise, as well as fuel efficiency of the aircraft in use, which is only half of that of modern Western counterparts. Taking into account significant aviation fuel price increases, the traditionally low profitability of the air transport business is decreasing.

The Three Aircraft Industry Giants

The Russian aircraft industry began to prepare for the replacement of the Tu several years ago. Based on estimates of the Ministry of Industry and Trade for the need for airplanes, with an averaged cost of $20 million per unit, this part of the market is worth $6 billion. There are now three main projects for new regional airplanes, which, with certain reservations, are comparable to one another. These are the Tu-334 (OAO Tupolev), the Ukrainian Ц Russian An-148 (Antonov Aviation Scientific and Technological Complex of Kiev), and the Russian Regional jet (RRJ, ZAO Sukhoi Civil Aircraft, a subsidiary of the Sukhoi aviation holding company).

Officially, the Tu-334 is the best prepared project. In December 2003, the airplane received an AP-25 certificate of domestic standards (the ceremonial award of the document took place in the summer of 2004); and in April, Prime Minister Mikhail Fradkov signed an order for full-scale production of the Tu-334 at the state-owned Kazan Aircraft Manufacturers' Association (KAPO). The government of Tatarstan is prepared to invest nearly $30 million in the project. However, as they say at KAPO, the first airplane might not be produced in Kazan before 2007. The first Tu-334's from the Ukrainian state-owned Aviant aircraft plant are supposed to appear in November 2005. However, neither Tupolev nor its joint venture with ZAO Yuniinter-M of Cheboksary to sell flying hours has a single firm order, and in private conversations, the head of airlines are not the least bit optimistic about aircraft designed in the 1980s. According to unofficial information, Aeroflot, which announced a tender last year for the choice of regional aircraft , refused to consider it even as a contender.

The An-148 project is progressing much more quickly. The first models of the airplane are undergoing certification tests, which should end in receiving a certificate in the second half of 2006; and six months later, there are plans to certify this airplane according to European JAR-25 standards. Ilyushin Finance Co. (IFC), which signed a firm contract for the first 15 machines with Krasair (delivery in 2006-2008), expects to get Pulkovo Airlines as a customer in the near future (12 machines). This will keep the Voronezh Joint Stock Aircraft Manufacturing Association (VASO), where full-scale production of the An has already begun, busy for two years. IFC's plans include reaching production of 36 airplanes per year starting in 2008. The cost of full-scale production is estimated at $100-130 million. This will probably be private investments and attraction of financial resources, since government officials are refusing to support the An-148 on the grounds that the project is not progressive enough and for the most part is not even Russian (the airplane will be assembled at both VASO and Aviant, and Ukrainian manufacturers will be involved in producing components).

The most ambitious government-supported project Ц RRJ Ц is the still the least prepared one. According to various estimates, it will cost from $750 million to $810 million, not counting the SaM 146 fanjet engine, which is being specially designed for it by the Russian Saturn Research Institute and the French Snecma Moteurs and which will cost another И600 million. The project is being implemented with the consultative support of Boeing; it assumes major international cooperation (suppliers include Thales, Liebherr Aerospace, B/E Aerospace, and Honeywell), and is oriented towards the international market.

The sales plan envisages 750-800 airplanes, of which only a little more than a third will go to Russia and the CIS. Certification according to Russian standards must occur in 2007, after which the first full-scale models will appear. So far, Sukhoi has only announced the signing of a precontract agreement with Sibir Airlines for 50 RRJ 95's, the largest version of the family, which also includes the RRJ 60 (experts believe the company will abandon it) and the RRJ 75. However, like IFC, the company is participating in the Aeroflot tender. Given the position of general manager Valery Okulov, who assigned the right to choose to government officials on the board of directors and bureaucrats' declared support for the RRJ, he could bring victory to Sukhoi. However, Aeroflot is especially counting on a serious shortage of regional aircraft, and is not ruling out intermediate options, such as buying used foreign-made airplanes like the Fokker-100.

No Choice Has Been Made Yet

The prospects of replacing the regional airplane fleet, and hence the two most viable projects Ц An-148 and RRJ Ц depend on a number of factors. A choice in favor of new foreign models (CRJ 770/900, the Canadian Bombardier, and the E 170/175/190 produced by Brazil's Embraer) is limited by their cost. The catalog price of a CRJ-700 is $17.5 million, and similar Embraer planes are $1.5 million cheaper, but customs payments raise the price of the purchase by nearly half through duties and VAT. The Tu-334 is the cheapest of all (the stated price for standard equipment is $15 million), but is not attractive to carriers in its technical and economic indicators.

As far as price goes, IFC is guided by an upper bar of $20 million, based on the fact that the regional airplane market by definition is not noted for excess revenues, unlike the medium- and long-haul segments. The catalog prices for the RRJ 75 and RRJ 95 range from $23.8 millon to $27.5 million, although as they emphasize at Sukhoi, these figures are extremely relative, since airlines pay less for the airplane itself than for a package of services, which can be very attractive. However, when speaking of conditions, it should not be forgotten that both companies are striving to develop a state-of-the-art technical support system, and the success of the projects will on its successful operation.

From the standpoint of the carriers, the An-148 and RRJ are very competitive with one another and with foreign analogs, which is confirmed by a technical and economic analysis of airplane offers in the 70- to 90-passenger-seat classes prepared this year by the State Civil Aviation Research Institute.

The difference between the An-148-100A and the RRJ 75 (both seating 75 passengers in key indicators is negligible. The takeoff mass (governs the size of the airport fees) of the An-148-100A is 37.13 metric tons, while the takeoff man of the RRJ 75 is 38.77 metric tons. Fuel consumption per passenger km is 24 and 23.8 gal., respectively. However, the RRJ 75 easily wins out over the An-148 in noise levels (this is very important, considering the tough European requirements for this measure Ц 28.8 dB vs. 14.6 dB. Although modernized, the latest version of D-436-148 engine for the An-148 produced by the Ukrainian OAO Motor Sich does not arouse enthusiasm among industry experts, unlike the French Ц Russian SaM-16.

The success of both projects, their payback, and profitability depends on production scales and sales. As a precautionary As security, IFC intends to implement a project for manufacturing the military transport version of the an-148 for Ministry of Defense needs, while Sukhoi is pinning its hopes for success on the RRJ onto the external market and state support. Sukhoi has already managed the latter. This year, even small, direct budgetary financing was the project. However, the project has its opponents. State Duma Deputy Aleksandr Beloussov, who is chairman of the export council for the aerospace complex, and an academician of the Tsiolkovsky Academy of Space Exploration, believes that by limiting itself to supporting only RRJ, the government is unwittingly promoting an inflow of foreign second hand planes into Russia. У I'm by no means an opponent of RRJ. But I don't understand why, until this plane is ready , we can't support the development of mass production of the Tu-334 and An-148 in Russia,Ф he says.

Sergey Ryzhkin

All the Article in Russian as of June 07, 2005

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