Airbus orders for a number of Russian companies (757 words)

Published: 4/11/2001

According to reports in German daily Handelsblatt, EADS is about to award the Russian aerospace industry contracts worth $3.2 billion after negotiations on the fringe of the current summit between President Putin and Chancellor Schroeder in St.Petersburg. Neither side is commenting on the detail of any agreement, but the Russian side led by Deputy Prime Minister Ilya Klebanov is reported to be discussing the production of components for the Airbus and potentially, according to Handelsblatt's sources, the manufacture of tail sections of Airbus aircraft. The discussions between EADS and the Russians about more detailed involvement in Airbus started last December, so the news of talks in themselves are not significant according to EADS spokesman Gregor Von Kurzel and represent the natural progression from the initial memorandum to a more detailed agreement to be finalised at some point in the future. The release of the information has obviously been premature, but it seems likely an announcement can be expected in the near future, possibly at the Paris Air Show in June. Despite the ambiguity on the timing of this particular announcement, Kurzel did say that EADS had been in discussions recently with a number of Russian aerospace companies, including designers, production plants including component and assembly producers such as titanium component producer VSMPO and landing gear manufacturer Gidromash. Airbus already has a number of Russian suppliers including VSMPO, which has a contract worth $200m over five years, under which deliveries started in September 2000. Samara-based Sameko also produces parts that are certified for inclusion in the A-340. Nizhny Novgorod-based Gidromash has exported components for inclusion in the landing gear of Airbuses, through contracts with EADS and Messier Dowty. TsAGI has also participated in development work on wake vortex studies and wing sensitivities with Tupolev since 1998 under contracts negotiated by the European-Russian Aviation Consortium (AERC). The latter body was founded in February 1998 on the recommendation of the Economic Development and Trade Ministry and includes Aviastar, Gidromash, Tupolev, NIAT and TsAGI among its members. The consortium prepared a feasibility study with Airbus for the involvement of the Russian industry in the A-3XX as far back as June 1999, recommending that Russian companies should be involved in both current and future projects. Russian partnership involvement in the Airbus programmes is not entirely new. During the mid nineties at the early stage of the development of the A-380, Sukhoi was approached as a potential partner. However the bureau's General Designer Mikhail Simonov decided that the offered participation was not sufficiently large opting instead for continuing development of the KR-860, Sukhoi's own ultra large project that apart from a brief appearance as a model has languished on the drawing board. German enthusiasm for a larger cooperation with the Russian industry comes after considerable political wrangling around the adoption of the An-70 as a military transport aircraft for a number of NATO countries. The contract ultimately went to Airbus A400M, but not without considerable debate in German political circles and considerable support for the candidacy from German industry. There have and are a number of deals currently ongoing between Russian and Western aviation companies that have fallen or failed to flourish for a variety of reasons ranging form Russia's Byzantine tax systems to reluctance on the part of Russian companies to adapt to their change of situation. However the attitude over the last few years has changed considerably with Ilyushin particularly leading the way in design development work with Boeing on the development of cargo variants of the 757/767 series at considerably lower costs than elsewhere. It also appears to have been accepted within at least parts of the industry that the chances of the industry surviving in any viable shape is dependent on its accepting the basic realities of global aerospace and the need to integrate the Russian industry into that global structure. If Klebanov wins this particular deal it is likely to give considerable weight to his efforts to push the restructuring of the industry forward as outlined in the aerospace restructuring plan. The thornier problem for Klebanov in negotiating a comprehensive deal may be the offset tariff relief on Airbus products being imported into Russia, as it seems unlikely that the Europeans will make huge contractual commitments to a country that effectively bars entry of its products to its markets. This is a political hot potato as recent protest have demonstrated, but the offset of work for entry and the reported 4000 jobs, may be an acceptable compromise for some of the more recalcitrant elements of the industry.

Article ID: 2483