Still waiting for funding

Published: 4/24/2000

It seems that the long rumoured contender for the Russian avionics market may have appeared, with the announcement of the formation of a new avionics company called Kronstadt by Rosvooruzheniye, Eurofinance Bank (reported to be 81% owned by Eurobank an affiliate of Russia"s Central Bank) and Tranzas, a St Petersburg based group of companies established in 1991, which manufacture navigation systems with annual sales, according to reports, of $30m. The prominent role of two state bodies in the enterprise suggests that the move may not be entirely without official sanction and may have connections with the military and elements close to the Kremlin who were rumoured to be planning such a venture. Tranzas is primarily a development company and assembles its products abroad according to a report in Russian newspaper Vedmosti, selling its navigation equipment to customers worldwide. The company began producing navigation systems in 1995 and has produced avionics for a number of clients including helicopter maker Kamov, who have received landing systems for their products. The new company, which is owned in equal parts by the three shareholders, still requires to be funded according to sources, before it will be able to begin its activities. It is also unclear exactly how the company will be structured given Tranzas"s previous development experience with manufacture undertaken by third parties. Currently only two companies in Russia have the experience and capability to produce integrated avionics and one on them Russian Avionics has had its licence suspended in a wrangle with the Ministry of Economics suspected to have been engineered by MiG through its close relationship with Deputy Prime Minister Klebanov. The other producer being Ramenskoye Instrument Making Design Bureau (RSKB), which produces avionics for many of the high profile military aviation programmes including the Su-30 and the MiG-29Ks for the Indian Navy. It would seem likely however, that RSKB may experience a fair degree of competition in the future given that a large proportion of the avionics business that RSKB is currently receiving is coming through contracts broked and administered through Kronstadt shareholder Rovooruzheniye. For Rosvooruzheniye, the entry into production rather than acting as an intermediary is a departure from its primary function of acting as agent for many of Russia"s defence producers. It has however, selected a very lucrative part of the market, as much of the upgrade market for Russian equipment internationally is primarily made up of avionics. It is also evident that the government is putting increased pressure on the industry to consolidate. For Rosvooruzheniye direct investment may be the start of an effort to make sure that it is still in the game at the end of the consolidation, which will undoubtedly reduce the need of many of the major producers for their services given the development of internal resources. The company itself has publicly stated that it intends to continue to invest in R&D at least as resources become available.

Article ID: 1579