Published: 3/9/2000

Putin is an unusual creature within the Russian scene, straddling both the left and right of the political spectrum. According to Boris Nemtsov, a leading economic liberal and, like Putin, a graduate of the St Petersburg privatisation programme, the acting President still subscribes to liberal economic philosophy, evidenced by his choice of advisers. An ideal course for Putin would be to allow the worst of the industry to go to the wall and give capable industry managers their head. Well-directed state funding would also be welcome. Turning the industry around will involve a considerable amount of streamlining and consolidation. This will not be an easy task, given vested interests, but the state remains a major shareholder in most of the enterprises and a key provider of finance. It is, therefore, motivated to succeed, particularly if it is less beholden to those groups that have blocked reform in the past. The recent conversion of Sukhoi into a joint stock company, however, emphasises the scale of the problem that the government will face. KnAPPO, based in the Far East, has clung to its state ownership, after an aggressive campaign by local government and workers to prevent the next stage of privatisation. What it has gained from this is unclear, other than an innate belief in the security offered by the state, but it does reflect the general level of resistance to change. Private sector investment is just beginning to rear its head, with financial holding company, Kaskol, funding the development of the M-101T Gzhel. Similar deals are now likely to emerge. Individual aerospace companies are also more optimistic, with Tupolev reaffirming its intention to develop the regional aircraft the Tu-414, seemingly without government support, using the Saratov Yak-42 production line. Yak and Saratov are also developing a 90-seat version, designated the Yak-42-90. Such enthusiasm is driven by the realisation that Russia's civil fleet is dwindling. In 1999, as an example, flying Yak-42s, the mainstay of many fleets, fell from 75 to 54. Even for the reasonably financially liquid carriers, the pool of available aircraft, such as Tu-134s, Yak-42s and Il-76s from a total of 7,500 civil aircraft at the beginning of the nineties, is beginning to dry up. Operators such as East Line, which has been inclined to treat aircraft as disposable after use and replaceable often at a significantly lower price, are now beginning to review the need for new or upgraded aircraft and have recently talked about buying the PS-90 re-engined Il-76MF. While the response to the Tu-134 $3m upgrade has been poor, the shortage of aircraft, which is set to grow, is clearly indicated by the more positive reaction to the less ambitious $1m Tu-134 upgrade. A resurgence of military orders, exemplified in the recent claim by the Russian Army that it will need 200 Ka-60s over the next ten years, shows that the military may be emerging from the doldrums. This looks set to continue in the short term generally suggesting a more positive outlook.

Article ID: 53