Still awaiting the Uzbekistan connection

Published: 4/27/2000

The formation of the consolidated Ilyushin company still remains unresolved despite the decree for the formation of the joint stock company Ilyushin signed by Yeltsin in 1994. The formation of the new company to be known as MAK (intergovernmental aviation company) Ilyushin, reflecting the Russian/Uzbek locations of the new company, has yet to be fully resolved. The government has approved the documents for the establishment of the Russian side of the enterprise, reflecting a process begun in early 1999, when the federal authorities accepted that it would be difficult to merge all the desired entities at one time and tried to combine the design bureau Tupolev with aircraft producer VASO based in Voronezh to the south of Moscow. The plan however, took a great deal more time than expected and the deadline for the creation of the first stage the new company suffered several setbacks due primarily to changes in government in the interim period. The deal for the Russian side of the company however, is now done and Victor Livanov formerly General Director of Ilyushin Design Bureau has become the General Director of MAK Ilyushin. According to the sources, the catalyst in closing the deal was the active involvement of Ilyushin"s bankers National Reserve Bank in acquiring shares in VASO and overcoming any misgivings held by involved parties regarding the ultimate split of the shares in the new company. Ilyushin now have a clear majority over VASO, although the exact specifics of ownership remain unclear. A marked contrast to the deal currently being proposed for Tupolev, which leaves the design bureau the clearly junior partner to the government and Aviastar with 4.5% of the proposed company. Ilyushin will however,have to tolerate seven government representatives representing the government"s interests on their 12 man board when the board is elected. The next stage of the deal is for the new company to absorb TAPO based in Tashkent in Uzbekistan. Although confident of resolution, Livanov is reluctant to set a timetable for the merger, under which Ilyushin would seek to have 51% before merging. The rumours of US interest in the TAPO plant are largely fantasy, although P&W have been working closely with the plant to re-engine the Il-114-100 with a P&W engine. The primary problem for any merger lies in the fact that the Uzbekistan government is the plant"s primary shareholder and will require considerable reassurance that the loss of control of the plant will not jeopardize its future. For Livanov in the short term, the major challenge will be making sure that the orders for Il-96-300s from Aeroflot follow through and that additional funding is obtained for the US powered and avionics Il-96T/M, to keep alive the almost dormant VASO plant, which has been surviving on life extention work on Il-86s. He has however the able assistance of Alex Rubstov of the Ilyushin Finance Company and National Reserve Bank. Who has lobbied for the government not only to enforce the terms of customs waivers on the import of foreign aircraft by matched purchases of Russian aircraft by Aeroflot and Transaero. He has also persuaded two state controlled banks, Sberbank and Veneshkombank to provide $200m as the intial capital for Ilyushin Finance Company, allowing it to lease, according to reports, at reasonable rates compared with financing available elsewhere in Russia. The scheme will also provide leasing for Tupolev products, suggesting that it may become the first viable aircraft leasing company in Russia offering recognizable financial leases.

Article ID: 1562