The United Aircraft Corporation must become one of the leaders of the world aircraft manufacturing

Mikhail Pogosyan

As usual, at the end of the year enterprises and organisations sum up the results of their activity during the preceding twelve months and chart their plans for the future. The United Aircraft Corporation (UAC) was no exception. On 19th December Mikhail Pogosyan, President of UAC, held a press-conference at the premises of ITAR-TASS; in the course of the press-conference he gave an account of the results of the Corporation’s work in 2012 and of the plans for 2013 and answered journalists’ questions.

“I would like to tell you about what we have achieved in 2012 and what we are planning for 2013. One of our most important tasks is the restructuring of the Corporation’s activities on the following lines: a growth of the volume of manufacture of civil aircraft; diversification of the backlog of orders for military aircraft in the direction of increasing the deliveries of aircraft to the Ministry of Defence of the Russian Federation; steps to organise and resume the manufacture of transport aircraft at production facilities within UAC.

In 2012 for the first time the balance of the products manufactured by UAC shifted towards a substantial increase of the volume of production of civil aviation hardware. Nowadays we can say that the manufacture of civil airliners at production facilities within the UAC makes up more than 20% of the total output. In 2012 we delivered nearly 20 aircraft and manufactured 23 civil aircraft, which is more than twice as many as in 2011.

In 2012 we increased nearly twofold the volume of deliveries of military aviation hardware to the Ministry of Defence of the Russian Federation. Prior to that year, during the last twenty years, the volume of deliveries to the Ministry of Defence had never exceeded the volume of export deliveries of our hardware. This year we shall for the first time deliver 35 aircraft to the Russian Ministry of Defence, and this will be a greater volume compared to the export deliveries from UAC enterprises in 2012. This tendency will persist in the time to come, so that in 2013 we shall reach a completely new level; nearly 70 aircraft will be manufactured for the Ministry of Defence.

I would like to say that the year 2012 became a milestone as regards the development of the transport segment of UAC. In September we started the flight testing of the Il-76MD-90A aircraft, and in early October in Ulyanovsk we signed a long-term contract with the Ministry of Defence of the Russian Federation for the delivery of 39 Il-76MD-90A aircraft to the Russian Ministry of Defence. Under the terms of the contract, the deliveries are to begin in 2014, and we shall accomplish this volume of deliveries in the period up to 2020. This will be a substantial workload for UAC in this segment of aviation hardware. As I see it, this creates a new situation in which the segment of transport aviation will actually receive a powerful boost within the range of products manufactured by UAC member enterprises.

An important event in the development of the transport aircraft segment is the signing of a contract for the development of a preliminary design of a multi-purpose transport aircraft which took place in November 2012. A group of Indian specialists arrived in Russia; now they are engaged in the preparation of a preliminary design of the MTA aircraft together with Ilyushin specialists.

I think that here we have laid a good foundation for an active progress in the implementation of this programme, alongside with the programmes for upgrading and repairing the An-124 aircraft and for the subsequent resumption of their manufacture which is envisaged by our armaments programme. Soon the development of this segment will receive an extra impetus after the adoption of decisions concerning the choice of a platform for the manufacture of tactical class aircraft for the military transport aviation.

The second task of utmost importance which we were faced with was the reshaping of the Corporation itself. In 2012 we finished the consolidation of UAC assets. The United Aircraft Corporation was allotted the state-owned 100% stake in connection with converting the Gromov LII (Flight Research Institute) into a joint stock society. No doubt, the reshaping of the Corporation’s structure constitutes a necessary element for enhancing the efficiency of management within the framework of the unified entity. The optimisation which we are putting into effect now envisages a reduction of the number of enterprises and management entities within each of the business segments.

The most important task, connected with reshaping the structure of the UAC, which was solved in 2012, was the completion of the process of consolidation of the JSC Sukhoi Company. From 1st January 2013 the Sukhoi Company will unite within its framework not only the managing company, but also the Sukhoi Design Bureau, KnAAPO (JSC Komsomolsk-on-Amur Aircraft Production Association) and NAPO (JSC Novosibirsk Aircraft Production Association). They will become subsidiaries of the Sukhoi Company. Bearing in mind the key role of the Sukhoi Company in the development of UAC, the share of the volume of production of the Sukhoi Company in the overall structure of the UAC amounts to more than 40% at present and will continue to do so for a sufficiently long period to come. I consider that that the consolidation of resources and efforts of the company and the optimisation of activities of the Sukhoi Company will provide a substantial possibility for lowering the costs and improving the economic results of the Company’s activity.

Yet another important element of the restructuring, to be implemented in 2013, will be the further integration of the Russia Aircraft Corporation MiG (RSK MiG) and the JSC Nizhny Novgorod Aircraft-building plant “Sokol”. Today these enterprises are already maintaining very close so-operation. In the future they will be merged into a unified entity.

In the segment of strategic and special-purpose aviation one of the key tasks connected with the restructuring of the activities of UAC in 2013 will be the merger of the Tupolev Design Bureau and the Kazan Aircraft Production Association (KAPO). Integration of these two enterprises, in our opinion, will make it possible to ensure more efficient interaction between them for the purpose of attaining the goals which are facing these enterprises in the field of the strategic and special-purpose aviation. This year we have been able to note the successful functioning of Beriev Aircraft Company and TAVIA (JSC Taganrog Aviation) after their merger into a joint company.

An important task in the framework of restructuring the UAC will be the implementation of the integration process in the segment of the transport aviation involving the managing company “UAC – Transport Aircraft”, the Ilyushin Design Bureau, the Myasishchev Design Bureau and the Ulyanovsk-based Aviastar-SP. All this must, from our point of view, help considerably improve the efficiency of management of these assets and to ensure better economic results of their activity in each of these segments.

Yet another key element of the restructuring is the establishment of competence centres. We understand that in order to be competitive on the world market, we must concentrate our resources on the tasks of top priority. One of these key tasks came to be the creation of modern production facilities for the manufacture of units and structural elements made of composites. Nowadays it is impossible to be competitive, be it in the field of military aircraft or in the field of civil airliners, without mastering these technologies and creating modern production facilities in this segment of the aircraft manufacturing business.

This year we have made much effort to prepare the launching of the manufacture of units based on new production methods and involving the use of composites; this was done on the basis of the Aerokomposit Company which is a subsidiary of UAC. The task for 2013 is to put into operation two main plants. These include a plant in Kazan which will manufacture strap-on units, wing high-lift devices and tail units, and a plant in Ulyanovsk which will manufacture large-size items and handle the assembly of composite wings for the MS-21 programme and the subsequent programmes in the field of civil aircraft.

In 2012 the work was completed on the establishment of a centre intended to create integrated avionics suites. The main task to be tackled by this centre in 2013 will be to develop an integrated avionics suite for the MS-21 programme and for the subsequent upgrading of civil airliners which will be conducted by UAC.

A competence centre for the manufacture of radiotransparent fairings (radomes) is working on a stable basis. Activities of this kind are concentrated on rather narrow segments, but they are very important for the aviation hardware, both military and civil. In 2013 we shall continue our efforts on the establishment of competence centres in the key segments of activity. According to our appraisals, the formation of such competence centres, as compared to conducting the same work at plants engaged in the final assembly of aircraft and units, will permit to improve by 20% to 30% the economic efficiency in the present-day production segments thanks to consolidation of orders, to introduction of new production methods, to introduction of new patterns of labour management and to increasing the share of new equipment.

Speaking about the main plans for 2012-2013, I cannot fail to mention one more task on which we have already embarked and which we are going to pursue in the nearest forthcoming period. It is the creation of a system of after-sales support for civil aircraft. This year we, together with our colleagues from Aeroflot, have made much effort for the purpose of setting up a system of after-sales support for the Sukhoi Superjet 100 airliners. In 2013 this task will be of still greater importance for us because, in addition to Aeroflot, we have delivered the first airliner to Yakutia Airlines. Before the end of 2012 we shall deliver the first aircraft to Sky Aviation – our Indonesian customer. In 2013 we shall deliver the first aircraft to Laos (it is to be completed in 2012). In 2012 we delivered two aircraft to Superjet International – our subsidiary set up jointly with Alenia Aeronautica; the aircraft are to be customised by this subsidiary and delivered to a Mexican customer - the Interjet airline.

We are faced with a prospect of a serious expansion of the market for our products. In consequence, the task of establishing a modern system of after-sales support for the entire range of aircraft produced by UAC (both the Sukhoi Superjet 100s and the An-148s operated by Rossiya Airlines) is one of the key tasks. Today we are concentrating our efforts on the attainment of these goals.

Unquestionably, yet another most important task for 2012 and 2013 is the establishment of an effective system of financing the sales. In 2012 the supervisory board of Vnesheconombank, which is our shareholder, took a decision to grant a loan limit to the amount of $2.5 milliard for financing the sales of aircraft from the civil type range of UAC for the period of 2013 to 2015. Today the first deliveries of the SSJ 100 to Indonesia and Laos, which I have already mentioned, are financed exactly from the credit line granted by Vneshekonombank. Undoubtedly, competition on the world market of civil aircraft is not possible without creating modern conditions for financing the sales of aircraft.

I think that this comprehensive approach which we practice in the development of UAC enables us to say confidently that we are on the right path and that we shall attain the goals which we pursue. These are the goals of creating a truly diversified corporation which not only displays stable activities in the segment of military aviation but also holds the positions of one of the world leaders in aircraft manufacturing. Here I might well finish my brief introductory presentation; now I am ready to answer your questions”.

Answering the question about the role and place of RSK MiG (Russian Aircraft Corporation MiG) in UAC, M. Pogosyan noted that in the course of the last three years the MiG Corporation had held a stable third place in the structure of the UAC. “I have already noted that the Sukhoi Company is responsible for the bulk of the volume of production; the Irkut Corporation ranks second as regards the volume of production, while RSK MiG occupies a stable third place in this respect. In 2012 the returns amounted to some 20 milliard roubles. But, if we wish to be able to say that all the problems of the MiG Corporation are a matter of the past, we must, naturally, increase the volume of production considerably as compared to the present level. In this respect I think that the task for 2013 facing the MiG Corporation is not limited to the implementation of the current contracts on the delivery of the MiG-29K aircraft for the Indian Navy. In 2012 we started the deliveries of the MiG-29UPG – an upgraded version for the Indian Air Force. In 2013 we are to start the deliveries of the MiG-29K aircraft for the Russian Ministry of Defence, for the Russian Navy.

In 2013 we shall have to accomplish a large volume of work, and in the nearest future we shall have to complete negotiations on the terms of delivery of the MiG-35 aircraft for the Russian Air Force. A matter of great importance for us is to ensure a stable operation of the MiG-29SMT aircraft. Therefore, the launching of series manufacture, increasing the volume of this production and performing the upgrades must enable the MiG-29 to rise to a new level. Undoubtedly, the MiG Corporation must play a big role also in the development of UAVs. We are considering a project in which the Sukhoi Company at present plays the role of the leading developer; it is a project which will be pursued in narrow co-operation with RSK MiG. Furthermore, I think that the MiG Corporation both needs and wishes to make use of its engineering potential and programmes associated with other segments of aviation technology. For example, today we are discussing and studying the eventual participation of RSK MiG in the military transport aviation. In consequence, all these things combined must make it possible to attain a qualitatively new level”.

Answering a question on the present state of work on the MS-21 aircraft, M. Pogosyan disclosed some details concerning the progress of this aircraft on its “road map”. “At present, - said he, - the project has reached the stage of detail design. This marks the beginning of preparations for production, finalising the terms of contractual relations with our partners both at home and abroad. This programme, too, is being implemented in the framework of broad international co-operation. I think that at present I have every reason to say that the first MS-21 aircraft will enter its test flight stage in 2015. We plan to start the deliveries of these aircraft in 2017.

On what are we going to base our competitiveness? On the new level of technologies that will be incorporated in this project. The world leaders in aircraft manufacturing are contemplating the development of their baseline products –the Boeing 737 as the Boeing 737 MAX version and the A320 as the A320neo version. They will be based on the existing airframes. Each of the two manufacturers envisages re-engining these aircraft; they are to be fitted with modern engines which will permit to achieve an improvement of approximately 10% in economic efficiency. We, in addition to the same measures, envisage the use of composite wings. From our point of view, this will afford, in comparison with upgrades based on existing products, an additional advantage from the point of view of economy. We assess these advantages to be at the level of 7 to 10 per cent.

I think that we shall benefit from the co-operation that had been established within the framework of the Superjet 100 programme, and from some practical results that had been accumulated thanks to this co-operation. These include not only the experience associated with developing the aircraft, but also the experience of certification. In 2012 we received the type certificate from EASA, and a supplement to the type certificate which we had received from the IAC Aviation Register in 2011. It must be noted that this certificate has been validated in Indonesia, Mexico and Laos. This very important experience which has been accumulated up to now will be used to the full extent in the MS-21 programme.

To ensure the observance of the pre-planned schedule, we have invested much money into the establishment of specialised types of production. The competence centres that we have set up are intended primarily to ensure the success of the MS-21 programme which is the most complicated one among the programmes implemented by us today. The wings as separate units will be assembled in Ulyanovsk, but the final assembly of the aircraft will be performed by the Irkutsk aircraft plant which is a part of the Irkut Corporation”.

Journalists also put some questions about the state of affairs as regards the An-148 aircraft. “Concerning the An-148 airliners, at present we are setting the task of reaching the rate of production – 8 to 10 aircraft per year. This will be a sufficient production capacity for the volume of orders that we have today. This year we have delivered 3 aircraft to Angara Airlines in addition to the three aircraft which are operated by Rossiya Airlines at present. Basically, we (together with our Ukrainian colleagues) are satisfied with the economic results of operation of these aircraft in Rossiya Airlines The servicing of these aircraft performed by VASO (Voronezh Aircraft Production Association), and the support coming from the Antonov Company permits the An-148 to log an amount of flight hours which is quite good for a regional aircraft. Therefore, when one discusses the operation of these aircraft, such discussions must be conducted primarily on the basis of appraisals of economic efficiency.

We consider that at present the results of operation of these aircraft by the airline are fairly good. It may well be that that the route network is nor yet the most suitable one for the operation of these aircraft. We have discussed it with the management of Rossiya Airlines: we ask them together with us and with Aeroflot to take a closer look at the economic results of the operation of these aircraft. We consider that the reliability of these aircraft and the average number of flight hours logged per day are good for an aircraft of this class. As regards the increase of the volumes of production, this year a decision was taken to prepare a consolidated state order for the procurement of civil aircraft for the state needs of the Russian Federation. At present such work is being conducted in accordance with instructions issued by the President of the country. In the framework of this consolidated order we envisage, in particular, the deliveries of the An-148 aircraft. At present we are at the stage of finalising the technical configuration of this aircraft for the specific customers from among state agencies. I think that the rate of production amounting to 8-10, possibly 12 aircraft per year corresponds to the volume of the market available at present, taking into account the orders which we have and the orders which we hope to obtain in the future.

In addition to the An-148 programme, we maintain a sufficiently close cooperation with our Ukrainian colleagues on the An-124 programme in the framework of repairing and upgrading these aircraft to meet orders from the Ministry of Defence. Our plans for the future include cooperation in the resumption of the series production of these aircraft which is envisaged in the state armaments programme. As regards the An-70 programme, we have started the process of transferring the documentation on this aircraft from the Antonov Company to UAC for the purpose of examination and preparations for the manufacture of this aircraft. But final decisions on the further development of the An-70 programme will probably be taken in 2013.

We have good relations with our Ukrainian colleagues. But there is a whole range of objective factors which require consideration. When evolving our projects, we could not ignore the state of their production facilities. I think that production facilities of the Antonov Company need serious modernisation. And I think that this, probably, hampers a closer cooperation and speedier development. Antonov’s design potential, in my opinion, is quite adequate. But, probably, we all have to strive jointly for closer cooperation, because the production potential is a serious question which requires attention”.

Concluding the press-conference, M. Pogosyan noted: “The main achievement of 2012 is, in my opinion, the fact that UAC which was initially a group of companies united by administrative ties is gradually turning into a unified structure which works for a final result and final objectives. The main tasks which we are to tackle in 2013 include the raising of the volume of production, a restructuring of the company, the setting up of modern mechanisms for the after-sales service… All these steps constitute a movement towards the creation of one of the world leaders in the field of manufacture of modern aircraft and their sales on the world market”.