Politicians discuss merger of Aviastar, Aviakor and KAPO (491 words)

Published: 3/5/2001

Moscow daily, Kommersant, has reported that Konstantin Titov, the Governor of the Samara region, has recently met with former Prime Minister Yevgeny Primakov and leader of the State Duma's OVR faction and come up with the idea of merging Aviakor, KAPO, and Aviastar into a single company. According to Titov, the effect of such a merger will be to optimise efficiency of the three plants' combined capacity and overcome the current crisis at Aviakor. Titov is proposing that the plants, all based in the Volga region and normally vertically integrated, should split production with Aviakor, provided that aircraft wings are produced at Aviastar and KAPO. Titov's desperate efforts to save the plant are however, unlikely to succeed, given a number of factors: · Talk of merger comes at a time when the government is re-organizing the industry. This particular merger is unlikely to be a permutation, given the known plans. · Aviastar and its supporters have been lobbying hard to get the An-70 transferred to Aviastar in Ulyanovsk, from Aviakor. · The Republic of Tatarstan has spent considerable amounts of money retaining the independence of KAPO and is unlikely to welcome a merger that would dilute its considerable commitments to programmes such as the Tu-324 and the struggling Il-114. · Siberian Aluminium - which controls Aviakor and has extensively restructured into six subsidiaries (passing social assets back to the regional government) - appears to be, at least publicly, committed to the idea of producing the An-140 and overhauls of the Tu-154. The right offer may garner a different response, given the wider ambition of this acquisitive conglomerate. What is in no doubt, is the poor condition of the plant as commented upon by General Director Vladimir Belogub, appointed in June of last year. He stated in a recent press release that the plant (ZAO Aviakor-Aviation Plant) had substantial excess capacity despite producing components for auto producer AutoVAZ and bus manufacturer PAZ. According to Belogub, the plant's major business remains the overhaul of the Tu-154. It has prepared the An-140 for serial production, though as yet there are no orders, despite expressions of interest for a reported 40 aircraft. The cost of commencing production is reported to be substantial. These costs, along with the expense of documentation from the aircraft's designers, are pushing the price of the aircraft above $6.5m; a level viewed as being acceptable to potential operators. Belogub remains confident of producing the An-70 that has recently had its future production supported by both Ukraine and Russia after its only prototype crashed. The new international regulations are keeping the upgrade business brisk, with operators requiring installation of TCAS and other equipment for their aircraft to fly in Europe. The company expects 40 orders for such upgrades, though those ordering the work are, in the main, unable to pre-pay for the work. This creates a working capital problem for the company.

Article ID: 2394