AUTHOR: MICHAEL NIKOULICHEV

U.S. EMBASSY - MOSCOW, JANUARY 1998

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 1997. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES

SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

STATISTICAL DATA . . . . . . . . . . . . . . . . . . . . . . . .3
     General economic indicators:. . . . . . . . . . . . . . . .3

MARKET ASSESSMENT. . . . . . . . . . . . . . . . . . . . . . . .5
     Background. . . . . . . . . . . . . . . . . . . . . . . . .5
     Competition and tendencies. . . . . . . . . . . . . . . . .6

END-USER PROFILE . . . . . . . . . . . . . . . . . . . . . . . .6
     Airlines. . . . . . . . . . . . . . . . . . . . . . . . . .6
          Aeroflot . . . . . . . . . . . . . . . . . . . . . . .6
          Vnukovo Airlines . . . . . . . . . . . . . . . . . . .6
          Transaero. . . . . . . . . . . . . . . . . . . . . . .6
          Regional airlines. . . . . . . . . . . . . . . . . . .7
          Tendencies . . . . . . . . . . . . . . . . . . . . . .7
     Domestic production . . . . . . . . . . . . . . . . . . . .7
          MiG-MAPO complex . . . . . . . . . . . . . . . . . . .7
          The Sukhoi Military Industrial group . . . . . . . . .8
          The Ilyushin Production Complex  . . . . . . . . . . .8
          ANTK Tupolev production group  . . . . . . . . . . . .9
     Modern Russian commercial fleet . . . . . . . . . . . . . 10
     Aircraft engines manufacturers    . . . . . . . . . . . . 10
          Rybinsk Motors . . . . . . . . . . . . . . . . . . . 10
          Perm Motors  . . . . . . . . . . . . . . . . . . . . 11
          Ufa Motors . . . . . . . . . . . . . . . . . . . . . 11
     Research in Aerospace . . . . . . . . . . . . . . . . . . 11

MARKET DEMAND. . . . . . . . . . . . . . . . . . . . . . . . . 12
     Passenger transportation. . . . . . . . . . . . . . . . . 13
     Cargo transportation. . . . . . . . . . . . . . . . . . . 13

MARKET ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . 13
     Customs . . . . . . . . . . . . . . . . . . . . . . . . . 13
     Procurement methods . . . . . . . . . . . . . . . . . . . 14
     Leasing . . . . . . . . . . . . . . . . . . . . . . . . . 14
     Major problems: . . . . . . . . . . . . . . . . . . . . . 15
     Investment opportunity. . . . . . . . . . . . . . . . . . 15

Conclusions: . . . . . . . . . . . . . . . . . . . . . . . . . 16

Exhibitions and Conferences. . . . . . . . . . . . . . . . . . 17

Key contacts . . . . . . . . . . . . . . . . . . . . . . . . . 17
     Design Bureaus: . . . . . . . . . . . . . . . . . . . . . 17
     Major manufacturers . . . . . . . . . . . . . . . . . . . 21
     Space:. . . . . . . . . . . . . . . . . . . . . . . . . . 24
     Research. . . . . . . . . . . . . . . . . . . . . . . . . 24
     Russian Government contacts:. . . . . . . . . . . . . . . 26
     American Embassy. . . . . . . . . . . . . . . . . . . . . 26
     US Firms Resident in Russia . . . . . . . . . . . . . . . 27
     Publications. . . . . . . . . . . . . . . . . . . . . . . 30

This report is an analysis of the Russian aviation industry market. The Russian aviation industry was seriously afflicted by the market reforms. Starting 1990 government subsidies to industry were reduced, procurement of new aircraft, equipment and spares were cut significantly, and as a result the factories have been operating at only a fraction of their capacity. The state-owned airline Aeroflot was divided into the International carrier and numerous local airlines, and unclearly defined privatization process added to the chaos. Without timely replacements, aircraft and equipment will suffer from aging: up to 95% of the fleet consists of aircraft designed in the 1960s and 70s. While according to the Ministry of Economy the industry has a current capacity to produce nearly 650 aircraft, in 1996 only 5 aircraft were manufactured for the Russian airlines which is the lowest index for over 50 years.

Human factor is another dimension of the problem. Brain drain from the leading research facilities has reached tremendous proportions: from 1991 approximately 2000 scientists and researchers have left the country annually. On the average Russian scientific community has lost over 40% of its scientific potential, and the aviation industry was one of the most affected. Outflow of the well-educated personnel into other sectors of economy, and cutback in the highly-skilled labor at aviation factories contribute to the comprehensive crisis in the industry.

Nonetheless, Russia remains a country with tremendous market for aviation services. Various sources estimate the need to acquire 1000 to 1200 medium and long-haul aircraft by the year 2001 (the conservative government estimate is 600). Huge proportions of the country will inevitably require more domestic air traffic. Moreover, after decades of restrictions on traveling abroad during the Soviet period, many Russians are now using the opportunity to travel extensively on business and as tourists in ever increasing numbers. In order to cater to this demand Russian airlines and aviation industry need to overcome the current crisis and develop an improved aviation infrastructure. However, the available resources are insufficient for such a comprehensive task.

As the Russian aerospace industry consolidates it is integrating more and more into the world market. The most important factors are:
- dramatic decrease in domestic defense orders;
- decrease in acquisition potential of the Russian aircarriers following the collapse of Aeroflot monopoly;
- absence of a well-organized leasing system;
- significant reduction in state investments into research and development;
- certification of foreign aircraft that opened the way to upgrade the Russian fleet with Western aircraft.
It is inevitable that air transport in Russia will acquire due importance, as the economic conditions in the country stabilize. Huge distances, unsatisfactory railroad services and highway infrastructure will ensure that the role of air transport will consistently grow. The Federal Aviation Service of Russia predicts a gradual increase in air traffic after almost seven years of stagnation and negative growth.


STATISTICAL DATA

General economic indicators:
Out of over 400 enterprises within the former Ministry of Aviation Industry (USSR), 15% were lost overnight when Russia shrunk to its present borders. Economic lapse in Russia continued throughout 1996 and GDP decreased 6% against 3% in 1995. The industrial production dropped 5% against 1995. The effect on the aerospace sector is disastrous: in 1996 only 13 commercial aircraft were sold. At present the Russian Aviation sector comprises over 300 enterprises and organizations involved in the design, development, testing and manufacture of aircraft and helicopters, including 133 engaged in R&D and testing and 131 - in producing commercial aircraft.

Industrial Indices:   1990  1991  1992  1993  1994  1995  1996
GNP (gross national 
product),in trillion 
Roubles:              0.6    1.4  19.0  171.5 630.0  1659  2256
% to a previous year -1.0   -4.7 -14.7   -8.7 -12.6  -3.0  -6.0

GDP (gross domestic 
product), in trillion 
Roubles:              n/a    n/a   17.3  120.4 344.4  989.0 1274
% to a previous year: -2.0  -8.0  -18.0  -14.0 -21.0  -3.0  -5.0

Aerospace Imports to Russia from the U.S. (official statistics of the Department of Commerce)

               1995                USD 186 million
               1996                USD 39.5 million
     Aircraft            - $ 21,462,381
     Aircraft Engines    - $ 357,170
     Engine Parts        - $ 183,190
     Missiles and Space  - $ 1,783,509
     Avionics            - $ 1,990,906
     Parts               - $ 13,712,614
               1997                USD 51 million (Jan-Sept)
     Aircraft            - $ 1,335,195
     Engines and Parts   - $ 4,864,966
     Missiles and Space  - $ 43,477,770
     Avionics            - $ 28,874
     Parts               - $ 1,205,763

Aircraft acquisition from Russian manufacturers (supplied by
Interfax):
1992   1993    1994    1995    1996
 282    179      47      31      12

Import to Russia of civilian aircraft from various countries:
1995      - 158 pieces at $ 119.8 million
1996      - 218 pieces at $112.0 million

Total market volume for the next two decades:
$ 70 billion.

Background

Beginning in 1990, the Russian aviation industry was divided into four agencies: Ministry of Aviation Industry, Ministry of Industries, State Committee of Defense Industries and Ministry of Defense Industries. The latest change occurred in May 1997 when the Ministry of Defense Industries that was responsible for the military-industrial complex and civil aviation was dissolved and incorporated into the Ministry of Economy in the form of a Department of Aerospace Industry and Shipbuilding. On August 21, 1997 the reorganization of airspace and defense industry was formally announced to enable it to have a more equitable share of foreign arms sales. The new Minister Yakov Urinson continues strong advocacy for the military-industrial reforms.

In early September 1997 after heated debates at the Ministry of Economics the plan entitled "Concept of Restructuring the Russian Aviation Industry Complex" was finally made public. Essentially the plan presupposes vertically-integrated structures and large-scale merges and consolidation among aerospace organizations and research institutions. At the initial stage the program calls for integrating 39 major enterprises involved in the research and development, testing, and manufacture of aircraft engines, and 47 enterprises which develop and manufacture avionics and major aircraft system components. The immediate aim is the increased competitiveness, development of new technologies and designs, production of new aircraft and improved aftersale service.

The program clearly defines the extent of economic protection that the state will offer to the ailing industry. According to the program, "the foreign share of aviation market should not exceed 15-20%". Considering the fact that at present the foreign share barely covers 1% of the market, the program opens avenues for a considerable inflow of investment and foreign aviation equipment into the country.

Other steps include the elimination of redundant and unprofitable enterprises, privatization of R&D and production facilities (about 50% of all enterprises in aerospace sector are still state owned) and setting a limit on foreign share in privatized companies during the transition period. At present the number of enterprises in the aerospace sector exceeds 300. According to the restructuring program more than half of these will lose federal status and state support.

Apart from the major four holdings, 10-15 second-tier corporations will be formed on the basis of the existing producers of avionics, engines and spares.

The plan calls for the support of the six core aviation R&D institutes:
- Central Aerohydrodynamics Institute;
- Siberian Scientific Flight Research Institute;
- Central Institute of Aircraft Engine Building;
- All-Russia Institute of Aviation Systems;
- Gromov Flight Research Institute;
- All-Russia Institute of Aviation Materials.
As the government funds are limited, financial support will come primarily from foreign sales of military equipment. The industry analysts however recommend creating a centralized agency for aviation and space industries similar to NASA and granting a priority status of state support to the six leading state research centers.

Competition and tendencies

In spite of all the negative factors affecting Russian economy and aerospace sector, Russia remains the third aircraft-building center (after the USA and the European Airbus Industrie Consortium) and one of the leading aviation world powers. The technological and financial consolidation of the major aerospace companies such as Boeing, Lockheed or Airbus Industrie gives them an edge over the Russian aircraft producers.

The aviation market is seriously affected by political decisions and tendencies. In conditions when Russia experiences the ever-increasing American pressure and its traditional east-European and third world markets are taken over by Western goods and technologies, Russia naturally looks for new strategic partners. A series of negotiations between Russia and China, contracts signed with India, Vietnam and Malaysia are indicative of the current shift of emphasis from Europe, Middle East and Africa to the Far East. If that happens, it will lead to the emergence of a new transasian centre of aviation industry that would be capable of competing with both Boeing and Airbus Industrie.

END-USER PROFILE

Airlines

Aeroflot
The largest carrier company "Aeroflot", formerly a country-wide monopoly and now limited to international and a few in-country routes, owns 98 local aircraft (Il-96-300, Il-62M, Il-86, Tu-154-M/B, Tu-134A, Il-96TD) and leases 13 foreign aircraft (B-767-300ER, A-310/308/324/325 and DC-10-30F). The fleet includes 39 long-range, 47 middle-range, 12 short-range and 13 transport aircraft. In 1996 Aeroflot carried 3.9 million passengers.

Recently AI Trade Finance Inc., U.S.National Reserve Bank and Aeroflot signed agreement to finance first 7 Il-96MT through a specially created leasing company to be registered off-shore.

Vnukovo Airlines
second largest carrier and main competitor of Aeroflot, embarked on an ambitious program of significantly expanding within Russia and adding 15 new routes to the existing 30. In 1996 Vnukovo Airlines carried 2 million passengers. Large scale of operations allows the company to reduce tariffs for passengers by 15-20% and seriously undermine the chances of small local airlines for survival.

Transaero
Russia's first commercial airline (6th biggest in Russia), was established only in 1991. At present its fleet consists of 14 aircraft (Boeing, McDonnell-Douglas and one Il-86). Its pretax profits for 1997 are projected to reach $58 million. Aggressive marketing results in significant increase in load factor, passenger traffic and cargo tonnage. The company embarked on a 10-year modernization program with leasing and acquisition of Boeing and Ilyushin aircraft. Transaero announced plans to acquire 10 Il-96 aircraft by 2001 and lease two Boeing-737-700 and four Boeing 767-300 by the end of 1997.

Regional airlines
As the air services monopoly of "Aeroflot" was broken in 1990, numerous local air carrier companies were formed, half of them privatized. At present there are over 300 airlines registered on the territory of Russia and approximately 200 airlines in other CIS countries (15 largest airlines handle over 75% of the market volume). It is natural that with the available assets of the aviation market distributed so thin, small airlines are doomed economically since they are unable to renew their fleets. Many companies (facetiously called babyflots' by The Moscow Times) have one or two crafts, sometimes in poor technical condition. Frequently operating on the brink of bankruptcy, these "midget" airlines constitute an economical problem and a potential threat due to the falling flight safety standards.

FAS is preparing new regulation which will allow registration to companies with no less than three aircraft. meanwhile small airlines fare badly in the present economic environment. As the large airlines, namely Aeroflot and Vnukovo Airlines, started competing for the local routes, the regional airlines started losing business. Moreover, passenger traffic dropped almost 30% in 1996 which put about 100 domestic carriers out of business. However FAS expects turnover to start rising beginning 1998. By 2001 domestic and international traffic is expected to rise to 40 million passengers as compared to 26.3 million in 1996.

Tendencies
Now that the thrill of independence is gone, there is a strong tendency for the regional airlines to merge. In August 1997 when Vladivostok Avia (4 transport, 3 passenger aircraft and 17 helicopters) and Sakhalin Aviatrassy (3 Boeing 737, 7 An-24, 4 An-26 and 4 Mi-8) merged to withstand the heavy pressure from Aeroflot expansion.

In December 1997 several regional airlines from Chita, Omsk, Blagoveshensk, Mineralny Vody and Chelyabinsk established a joint company "Ancor" and quickly registered it at FAS. 51% of the new airline belongs to Chelyabinsk Air, and its General Director Sergej Yashin became the director of the newly formed company. From January 20, 1998 Ancor will begin regular flights to 15 destinations from the Moscow airport Domodedovo. This venture strongly supported by the Moscow mayor Luzhkov breaks the monopoly of the Moscow-based airlines and will seriously change the situation at the Russian air transport market.

Domestic production

Four core enterprise groups will emerge to promote 5-6 families of Russian aircraft within the country and in the world market:
MiG-MAPO complex (military industrial group);
the Sukhoi group;
the Tupolev group and
the Ilyushin group.

MiG-MAPO complex
was created by the Presidential decree # 92 in January 1996 and unites 14 enterprises that design, produce parts and assemble MiG fighters and Ka-helicopters. The complex employs 60,000 people. The current programs include modification of MiG-29, creation of a light multi-purpose fighter MiG-35 and the sixth generation 1-41. The research is conducted by Mikoyan, Kamov and Klimov R&D design bureaus, R&D Electorautomatics (St. Petersburg), R&D Soyuz (Tushino). The plants include:
- MAPO MiG, Moscow - MiG-21,29,31;
- Sokol, Nizhni Novgorod - MiG-family;
- Progress, Arsenjev - Ka-helicopters;
- Chernishov plant, Moscow - engines;
- Myasischev Electromechanical plant - engines;
- Perm Pribor, Perm - avionics;
- Kursk Pribor, Kursk - avionics;
- Ryazan Pribor, Ryazan - avionics;
- Red October, St. Petersburg - components.
In 1995 MiG MAPO signed contracts for almost $1 billion. 1996 was a disastrous year with no contracts signed. A breakthrough came in 1997 with an estimated $800 million export order for 40 fighters MiG-29, 12 Ka-50 Black Shark and several Ka-52 Alligator helicopters. Today almost 4.5 thousand MiGs of various modifications fly in different countries. Therefore, MiG MAPO centers its marketing strategy around modernization of outdated MiGs to the level of a new MiG-29.

The Sukhoi Military Industrial group
was created by a Presidential decree in August 1996. The group consists of 32 enterprises and 4 R&D bureaus. The main products of the Sukhoi group are supersonic Sukhoi fighter jets and Beriev hydroplanes. The Su-27 fighter gradually replaces its competitor MiG-29 as a basic model for Russian Air force. The major companies within the group include:
- Sukhoi Design Bureau;
- Beriev Design Bureau;
- KNAAPO (Komsomolsk);
- IAPO (Irkutsk);
- NAPO (Novosibirsk);
- Ulan-Ude helicopter plant;
- TAVIA (Taganrog);
- Dubna Machine Building Plant;
- Tushino Machine Building Plant.

Recent contracts:
Aircraft model Country   Type of contract    Estimated value
Su-30MK        India          Sale             $1.8 billion
Su-27          China          Manufacturing 
                              license          $2.5 billion
Su-27          Vietnam        Sale             $180 million
                              Sale (pending)   $800 million
Su-30K         Indonesia      Sale             $360 million

The Ilyushin Production Complex
was created in January 1997 to include all designers and producers of Il-family planes. At present the Ilyushin Complex includes
- Ilyushin R&D bureau;
- VASO (Voronezh Aircraft Manufacturing Enterprise);
- TAPOiCh (Tashkent Chkalov Aircraft Manufacturing Enterprise).
The main challenge for the Ilyushin Complex is production of Il-96M/T. Powered with Pratt&Whitney engines and equipped with Rockwell-Collins avionics it remains the only Russian long-range aircraft of good quality. The Aeroflot ordered 20 Il-96 and Transaero placed an order for another 12 to be produced at VASO and financed by $1 billion loan from U.S. ExImBank and Russian Reserve Bank.

In August 1997 an agreement was signed with Boeing for joint design of the overhead baggage compartment for Boeing 777 airliner. Recently a new Russian-American research program was initiated to construct a economically viable commercial supersonic aircraft. Since VASO was manufacturing Tu-144 supersonic passenger jets in 1970 (only 16 jets were made) it may certainly benefit from the ongoing project.

ANTK Tupolev production group
is still in the process of creation. The issue of consolidating production facilities around Tupolev design bureau in the form of state-controlled Tupolev Holding is debated in the government. ANTK Tupolev is deeply in debt (approximately $230 million) and is actively searching for ways to overcome crisis situation with the help of international cooperation. ANTK works with Boeing and NASA to design a supersonic passenger jet on the basis of Tu-144LL and with "Airbus Industrie" to develop a high capacity European aircraft "A3XX".
The enterprises that may form the core of the new Holding are:
Tupolev design bureau;
Aviastar (Uljanovsk Aviation Industrial Complex);
Aviacor (Samara International Aviation Corporation);
KAPO (Kazan Aviation Production Complex).

The Ukraininan Design Bureau ANTK Antonov has developed a 52-passenger An-140 (projected cost $7-9 million) which is similar to a Russian model Il-114. In 1996 ANTK Antonov and A "Aviacor" (Samara) signed an agreement to start producing this Ukrainian aircraft in Samara with the approval of FAS (Federal Aviation Service). "Aviacor" immediately established an "Aviacor-140" joint venture with the British "Atlas Management Project Plc." Several other Russian aircraft factories working at half of their capacity expressed interest in getting production orders.

Russia has recently confirmed its decision to contribute 80% to the research and development costs for An-70, a long-range four prop-fan military transport, which made its public debut at the MAKS'97 air show in Zhukovsky. The concept of the plane was jointly developed by Antonov Design Bureau and Russian Central Aerodynamic and Hydrodynamic Institute (TsAGI).

The Russian Il-114 has already been certified in Russia. It costs approximately $1 million more than An-140 but enjoys a government support. The plane will be manufactured at Tashkent Aircraft Complex after Chkalov (Uzbekhistan) which is a member of FPG "Iljushin" (other members include Iljushin Aircraft Complex and Voronezh Aircraft Factory).

A new aircraft in the Tu-family is Tu-204 powered by Rolls-Royce turbofan engines and Rockwell avionics. The collaboration makes this aircraft attractive for both domestic and foreign buyers as it combines sturdy Russian airframe with essential Western components. Ten Tu-204-120 very recently certified and leased to Krasnoyarsk airlines by Sirocco Aerospace International led by Egypt's Kato Aromatic. Russian government and Moscow Aviation International have set up the Russia Aviation Consortium specifically to finance and support the project for manufacturing 20 Tu-204 with Perm PS-90A engines for Vnukovo Airlines.

Scheduled for certification in December 1997, Tupolev Tu-214 was another Russian plane initiated at MAKS'97 air show. Financed by Menatep Bank the first three machines were manufactured at Kazan Aircraft Production Organization (with seven more at various assembly stages).

Modern Russian commercial fleet
Old model      Total     New model Produced in 1996-97 at
Il-62          176       Il-96-300    14               VASO
Tu-154         572       Tu-204       17         Aviastar, KAPO
                          Tu-214      15         Aviastar, KAPO
Yak-40         526       Yak-42        8       Saratov, Smolensk
Tu-134         444        Tu-324       15        Taganrog, KAPO
Il-76          300        Il-76TD       -              VASO
An-24          882        Il-114        -              VASO

Aircraft engines manufacturers
The restructuring program for the Russian Aviation Industry presupposes creation of several (at present there are four) first level corporations that will promote main families of airplanes and helicopters and 10-12 second level corporations for promotion of engines, avionics and components. Thus, the engine manufacturers fall into the second priority list and have to expect less state support.

Rybinsk Motors
is the leading Russian manufacturer of aircraft engines.
At present Rybinks Motors supplies engines for nearly 60% of Russian middle- and long-range aircraft and for over 80% of military transport planes. Research centers on creating a low emission combustion chamber for Tu-154M in accordance to ICAO requirements, developing TVD-1500 (turboprop and gas turbine engine) for An-38 and T-701 "Grach", RD-600B for Ka-62 helicopter and DH-200 (diesel engine) for small aircraft.

The factory has recently signed several large contracts for manufacture of ground oil and gas pumping stations. The sales in the nine months of 1997 exceeded 875 billion roubles (approximately. $146 million). In spite of the general depression, Rybinks Motors is busy with orders for the overhaul and manufacturing of engines and has direct support of Incombank and Gazprom. In 1997 the factory established a joint venture with General Electric to produce engines for small passenger aircraft and helicopters of T-7 type and LM-2500 for gas pumping stations.

Perm Motors
is another large aircraft engine manufacturer with 17,000 employees. "Perm Motors" in cooperation with Pratt&Whitney developed and produces new engine PS-90A for Il-96. It is the only engine that meets Western Stage 3 noise mandate for international flights. In November 1997 the restructuring plan for Perm Motors was approved by the Government. On the first stage the three subsidiaries specializing on specific types of engines were formed: Proton-PM, Kaskad-PM, and Reduktor-PM. The second stage calls for setting up another subsidiary, a joint venture with Pratt&Whitney, Perm Motors Plant Ltd. where Pratt&Whitney will own 25% of shares in return for a $125 million investment. At present "Perm Motors" works at only 50% capacity: manufacturing is limited and most time is taken by engine repairs. "Perm Motors" is the founding member and major shareholder of a large research base "Aviadvigatel". Alexander Knivel, head of the Department of Aerospace Industry and Shipbuilding at the Ministry of Economy was recently elected Chairman of the Board of "Aviadvigatel" which is indicative of the state support for the industry.

According to recent analysis, the total production capacity of Russian aviation engine manufacturing plants exceeds that of the whole world. Considering relatively inexpensive and highly skilled labor, these factories may become attractive for the long-term investment or joint ventures once they are privatized and new management takes the necessary but extremely unpopular decision of cutting down the excessive workforce.

Ufa Motors
Ufa Motors produces aircraft engines for fighters (Su and MiG families), spare parts as well as engines for automobiles, gas pumps and turbines and performs different maintenance and support services for its clients. In 1995 the company was granted export rights. Ufa Motors is one of the most profitable engine manufacturers with steadily growing sales.

Research in Aerospace
The Government intends to continue support of state-controlled corporate structures only. The Government will withdraw support of enterprises and research organizations that are not included into the newly created Aviation Complexes and corporations of the e first and second level. Thus, unless they are profitable and capable to successfully market their products and services these organizations will have to convert to non-aviation products.

The Russian science is negatively affected by the lack of resources and is ready to strike any deal that would bring immediate cash returns. However, this may not continue for long. The decision was already formulated by the Ministry of Economy to move away from the practice of individual contracts and know-how transfers to establishing long-term strategic alliances and joint ventures focusing on technologies with both commercial and military applications.

The Presidential Decree #880 of July 14, 1997 identified a list of scientific organizations and enterprises that retain Russian Federation State Scientific Center Status. The aerospace facilities in the list include:
- Central Aero-Hydrodynamic Institute imeni Zhukovskiy;
- Central Institute of Aviation Engine Building imeni P.I.Baranov;
- All-Russian Scientific Research Institute of Aviation Materials;
- State Scientific Research Institute of Aviation Systems;
- Flight Research Institute imeni M.M.Gromov.
It was estimated that the 10% reduction of direct maintenance cost will result in $23 billion profit for all existing Russian airlines. However, the research institutions require approximately $140 million a year to develop new technological procedures capable of reducing maintenance cost by 10-15%.

MARKET DEMAND

Forecast availability of aircraft  (supplied by Interfax):
Make      1996  1997   1998   1999   2000    2001
Tu-154B    435   364    311    264    215     165
Tu-154A    267   208    191    176    159     139
Il-62M     108    86     79     72     66      63
Il-76T     210   155    152    140    133     124
Il-86       77    66     57     44     39      35
Yak-42      86    69     52     49     43      39
Yak-40     381   328    259    220    174     114

Forecast demand of Russian airlines for new aircraft (Aviamarket)
Type           1997-2000 (units)   2001-2005 2006-2010 2010-2015
Long-range          40               67         53         65
Medium-range        17               72         65         90
Short-range        115              435        520        530
Cargo               61              178        168        160
Total aircraft 
  in service       286              964        1026      1050
(to satisfy this internal demand the Russian aviation industry
must produce annually approximately 30-40 aircraft).

The Russian Federal Aviation Service (FAS) forecasts that Russia will need to acquire 652 aircraft, including 350 long-range aircraft, and 211 helicopters, between 1997 and 2001. Approximately one third of the expected demand will be satisfied by aircraft of Tu-family.

By 2015 Russia will need up to 6,500 new aircraft and helicopters of all type. In the near 10-15 years Russia may need about 100 long-range aircraft of Il-96 type. To remain competitive and maintain the existing level of international flights, Russian aviation needs to acquire only the modern types of aircraft like Il-86, Yak-42 and Tu-154. All other types of aircraft should be written off irrespective of the technical feasibility to extend their service life. Thus, the approximated value of the required aircraft to be delivered by the year 2015 amounts to $46 billion at the current price level.

Passenger transportation
According to first deputy Director of Federal Aviation Service (FAS) Viktor Galkin, in October 1997 73% of Russian airlines reported operating losses and a continued drop in passenger traffic. The crisis is caused by the falling purchasing power of the population and poor financial status of the most airlines, their low investment activity and poor passenger booking system. Currently the price on aircraft fuel exceeds the European by 30% and American prices by 50%. The aerospace industry operates at a fraction of its capacity, the aircraft park is quickly aging while the tariffs for airport and air traffic control services are excessively high. To overcome crisis situation FAS recommends return to government regulation and certification of airlines and consolidation of small airlines to strengthen their financial potential.

Starting with 1990 the living standards in Russia were on a decline, thus causing a nearly 60% drop in air travel. The volume of passenger traffic in 1997 after several years of decline has finally stabilized at the level of 1989. The analyses project growing population mobility related to a moderate economic growth in the years to come, with greater emphasis on international travel (in 1997 the share of international travel reached 46% of total traffic).

In late November 1997 the Russian Government sponsored a round table on tourism and expressed concern about growing interest in foreign travel as opposed to traveling to traditional Russian resorts. As one of the ways to attract people to traditional Russian resorts and ensure growing domestic travel (air travel primarily due to huge distances), it was suggested that taxes must be increased on tourist agencies dealing in the international travel. In November 1997 the First Deputy Chairman of the Government Boris Nemtzov sharply criticized the administration of Russian airports for the inappropriately high airport taxes which affect ticket price and ultimately discourage people from local air travel. At present the airport taxes amount to approximately 16% of a domestic ticket price, thus, making a 1.5 hour local trip Moscow - Sochi (the Russian Black Sea resort town) equivalent in price to a 2.5 hour flight Moscow - Antalia (resort in Turkey).

Cargo transportation
Cargo transportation experienced a moderate 13% growth in 1995-97 after dramatic 40% decline in 1990. With the domestic production falling, the obvious tendency was the increase of international air freight which is expected to grow even further in 1998-99. The recovery of the freight turn-over to the level of the pre-crisis period is expected by the year 2001.

MARKET ACCESS

Customs
In the Russian classification all flying air- and spacecraft and spare parts are coded as a Group 88. The current tariff for all manufactured crafts is 30% irrespective of their general designation or size. The tariff for spares of all flying crafts listed under 8801-8802 sections, including spares for civil aircraft and helicopters, is 5%. All other items, including planes, helicopters, spacecraft of various specifications for both civilian and military applications fall under a 30% tariff. With an average aircraft amortization period of 12 years, a 30% import tax becomes a nearly unsurpassable barrier driving the interested airlines into the necessity to lease rather than buy more efficient and cost effective Western aircraft.

According to the adopted concept of restructuring of the Aviation Industry the Government intends to continue using "reasonable" customs barriers and taxation for foreign aircraft. The Ministry of Economics has outlined a plan to support the domestic aviation industry. Among other issues it calls for:
- stimulating Russian airline's fleet with new domestic technology through granting the rights to the most desirable air routes to the operators of new generation Russian aircraft;
- regulating the price structure of ground support services under the control of state agencies to promote and encourage the operation of new Russian aircraft during their debut on the market;
- employing customs and tax barriers unfavorable to the import of foreign aviation technology;
- providing financial incentives for companies to use leased domestically-produced Russian aircraft.

Procurement methods
Major domestic companies and government agencies now open tenders to acquire the necessary equipment and services. Regional governments and airlines increasingly opt for specific one-on-one transactions with U.S. firms interested in helping to arrange financing for major purchases or airport developments. Currently Russian banks prefer to support export-oriented military aircraft producers. The largest banks involved are Uneximbank, Inkombank, Vneshtorgbank and National Reserve. However almost all forecasts for the coming decade for payable demand are moderately pessimistic.

Financing remains the most difficult challenge to U.S. firms selling in the Russian market. A leasing transaction, with lease financing provided by U.S. leasing firms, is a typical transaction for commercial aircraft sales. For airport reconstructions, a wide variety of financing options, including municipal bonds and concession rights, are possible. Financing for state-owned airlines is performed through "Aeroflotbank". Independent commercial financial groups are important sources of financing for independent carriers.

Financial assistance programs are available from the U.S. Ex-Im Bank. For example, $1 billion was pledged to supply American-made components, engines and avionics for Il-96M and Il-96T (cargo) powered with Pratt&Whitney engines and equipped with Rockwell avionics. Other U.S. public finance resources include OPIC, Private Export Financing Corporation, and the U.S. Trade Development Program.

Leasing
According to the American Chamber of Commerce, "one of the most important impediments to the rebirth of the Russian aircraft industry is the lack of legislation and capital to allow aircraft financing in Russia. Until this problem is solved it will be more financially attractive for Russian airlines to obtain foreign aircraft under lease than to pay full purchase price to Russian manufacturers who have no access to the leasing company."

Prior to restructuring, the Russian Government used to fully control the aerospace industry. The Ministry of Civil Aviation served as a state leasing company that would procure aircraft from manufacturers and hand them over to the state controlled Aeroflot. The airline would transfer all profits to state budget, and the Ministry of Aviation Industry would use it to finance research and production of new aircraft.

At present the Federal Aviation Service (FAS) is capable to procure aircraft exclusively for the needs of the government. As a result the program of centralized state-controlled leasing was destroyed. While military aviation survives on export sales, civilian aircraft producers may rely exclusively on state support. The 1997 budget set aside $800 million to restore the leasing program but the money did not survive the subsequent sequestration. Under the 1992 government program on developing civil aviation R&D secured some though irregular financial support. In 1996 it received the status of the presidential program but resources remained scarce. Moreover, the Russian government is reluctant to offer sovereign guarantee to foreign banks and leasing companies that could provide considerable resources for the procurement of new aircraft.

While the state is deliberating on the need to reconstruct centralized leasing system, new Western leasing companies are set up to help Russian airlines buy Russian aircraft. For example, recently a privately owned TransEuroAsian Aviation Leasing Company announced plans to finance leasing of 60 Tu-204 (airliner) and 12 An-124 (cargo) in 1997-98 to Russian airlines.

ANTK Tupolev has announced plans to create a leasing company with participation of Vnukovo Airlines, Perm Motors and Samara Aviacor. Though still a project, it is indicative of the tendency to fill the existing gap in the market.

At present various airlines lease 31 (30 passenger liners and one transport) foreign aircraft, about 1% of the total fleet. However, the leased aircraft are more effective and carried almost 8% of all Russia's passengers in 1996. Annual payments amount to $126 million which accounts for almost 24% of all funds spent on technical upgrade of air fleet. Leasing is a very attractive method of tax evasion and large corporations are using it to their full advantage. According to the Russian Ministry of Transport, Russian airlines will lease about 100 foreign aircraft by 2000. Boeing, British Aerospace, Airbus Industrie and Gulfstream have already been certified.

According to the guidelines in restructuring of the Aviation Industry the leasing of foreign aircraft for use on the Russian territory will be mildly discouraged by adjustable customs fees and taxation. Simultaneously, the leasing mechanisms for Russian aircraft will be stimulated.

Major problems:
- Adaptation to the competitive market.
- Low levels of wages in the industry (even lower than in other sectors of economy).
- Unfavorable economic conditions.
- fluctuating exchange rate;
- unstable fuel prices.
- Low financial support from the State.
- Brain drain.
- High taxes.
- No good sophisticated regulatory basis.

Investment opportunity
In September 1997 a list of aerospace enterprises to be auctioned in 1998 was published.

EnterpriseState-controlled   Shares to be   Starting price,
                  shares, %    auctioned, % mln.roubles.

Domodedovo airlines      no        75             600
Vladivostok TransAvia     no       20             120
Vnukovo airport   Gold share  25.5     1200
Koltsovo airport 
  (Sverdlovsk)         Gold share  25.5           900
Sheremetjevo airport   Gold share  100      2300
Aeroflot          Gold share  51            1200
Domodedovo "Aeroservice"  no       85        600
MAPO MiG             51       25        650
NAPO                 51       35        500
KnAPO (Khabarovsk)      51         35             600
Aviation enterprise 
Pulkovo (St.Petersburg) no         100           1800
Khabarovsk united 
   airlines           no      100           1500
KomiAvia             no       100            900

In August-September 1997 the shares of Russian aviation enterprises were in great demand by mostly small and middle investors. The large banks continue to observe and refrain from active buying.

Conclusions:
According to the analysis published in the "Aviation Week", "Russia may lose both Air force modernization and the industrial capability to rebuild the military... The nation could skip a generation in aircraft development. The result of this technological pause could be unparalleled aerial supremacy for the U.S." (April, 1997)

The heavy import tax on Western aircraft remains the major obstacle to fast fleet modernization.
The most promising subsectors remain:
- Leasing of passenger aircraft
- Airport modernization program
- Air traffic control equipment
At present, sales to the Russian market are inhibited by chronic lack of financing. However, as the country is opening to the world market, there appear many opportunities for mutually profitable cooperation with the technologically advanced Russian aerospace firms. The long-term potential for U.S. company sales remains high, too.

Additionally, Russian aircraft manufacturers are eager to make their aircraft attractive and competitive by installing Western avionics and jet engines, another area that offers rich opportunities. As the sales of large airliners is not expedient due to high tariffs, leasing remains as an option. Direct sales of the smaller aircraft, especially business-class jets, is often possible to private Russian companies willing to register them offshore to avoid taxes.

As the regions in Russia receive more and more financial independence there is a marked tendency to attract foreign investment, thus improving transport infrastructure on a priority basis. Hence, the ambitious airport modernization programs in many areas of Russia receive immediate support of the local governors, e.g. Samara International airport.

In addition to aircraft sales, potential exists for sales of avionics and jet engines to Russian aircraft manufacturers (more than half of the Russian-made aircraft are expected to be equipped with foreign components to the level of 40-50% in order to remain competitive and maintain the required safety levels), sales of general aviation aircraft, and sales of air traffic control systems and airport equipment. At present, attractive transactions include leasing aircraft to Russian carriers, joint ventures with Russian aircraft manufacturers, direct sales of light aircraft to large companies and airlines, and competition on tenders to improve Russian airports and air traffic control systems. The most important competitive factors are high quality, competitive prices, availability of services, and an active advertising policy.

The American Chamber of Commerce in Moscow closely follows all developments in the Aerospace sector and has recently published a White Paper which recognizes that the "demand for products and services in the field of aviation is beginning to stabilize and American companies are successfully working with Russian customers and partners to fill this demand." However it expresses concern with the Russian Federation compliance with the 1995 MOU on Aircraft Market Access. The market access in Russia is limited by the protectionist customs policy and extremely confusing certification process of aircraft and aircraft components.

While the Russian government considers aviation a strategically important sector of economy and erects considerable protectionist barriers to aircraft import and investment, it also lacks resources to support aerospace industry, provide subsidies, finance big orders and allow it to adjust to a competitive market economy. However, recently Russian officials have voiced the opinion that favorable conditions would be created for those foreign aerospace companies that would be willing to initiate joint ventures and create workplaces in Russia. It is obvious that the mutual cooperation between the two largest aerospace countries, USA and Russia, could improve competitiveness of the Russian industry and benefit the U.S. market.

Exhibitions and Conferences
MAKS is an international aviation exhibition held biannually in Zhukovsky, a small town and an aircraft research center 35 km outside Moscow. The exhibition is quickly growing and acquiring a status of an important international event. MAKS 97 attracted over 300 companies from 23 countries. The next exhibition will be held in August 1999.

On February 12-13, 1998, Aircraft Economics and Airfinance Journal will conduct the 6th Annual CIS Airfinance Conference that will focus on the current tendencies in the development of Russian Aerospace Industry, financial status of Russian airlines and implications for asset based financing and leasing. All information is available at tel: (44-171) 779-8791 and fax: (44-171) 779-8603.

Key contacts
(and possible joint venture partners) include:

Design Bureaus:

Beriev Design Bureau
Aviatorov Sq.,1
Taganrog, Russia 347923
Tel: 7-86344-499-01
Fax: 7-86344-414-54
Gennady Panatov, President & General Designer

Ilyushin Design Bureau
Leningradskiy Pr. 45G
Moscow, Russia 125190
Tel: (095)-943-8116
Fax: (095)-212-0275/ 2132
Genrikh Vasilievich Novozhilov, General Designer
Tel: (095) 943-8121
Yuri Yudin, Deputy General Designer on Commercial Issues
Tel: (095) 943-8264
The Bureau currently employs 5000 people. The aircraft of the Il-series are manufactured at Moscow Research and Industrial Complex MAPO MIG, IAPO, RosVertol, KAPO (Kazan Aviation Production Complex), TAPO, Voronezh aircraft factory (VASO), LMZ, Kumertau Aviation Complex (KumAPO). The Ilyushin Aviation Complex is currently promoting several new aircraft types, including the Il-96-300 long-range passenger airliner powered by Russian-built PS-90 engines. Its modification Il-96M/T is powered by Pratt & Whitney PW2337 engines and equipped with Collins avionics. Ilyushin also developed Il- 96M/N 96M/N 96M/N, available in both passenger and cargo versions, and Il-76MT cargo plane.

Kamov Design Bureau
Ul. 8 Marta, 8
Moscow Region,
Lubertsi, Russia 140007
Tel: (095)-700-3204
Fax: (095)-700-3071
Sergei Mikheyev, President & General Designer
Veniamin Kasjanov, 1st Deputy General Designer
Tel: (095) 700-2108
Established in 1948, the Kamov company is one of the leaders in the development and manufacture of helicopters of various types. The company's helicopters are noted for their flight and operational performance and its range includes the Ka-25 shipborne anti-submarine warfare (ASW) design which led to the development of the larger Ka-27 multi-purpose military helicopter and variants such as the Ka-27PS search and rescue version and Ka-28 ASW model. The Ka-62 high-speed design, while the Ka-52 is being developed as combat trainer. The company occupies lead position in Russia in the application of polymer composites and highly automatic avionics installations for helicopters to ensure day/night operation in VFR and IFR, in any region, over land or sea. Kamov employs 4200 people and maintains a subsidiary in the Ukraine. Russian Government keeps a 49% stock of the enterprise. Organisationally, Kamov consists of a design bureau, factory in Ukhtomsk, R&D testing centre. The helicopters of Ka-series are manufactured at Ukhtomsk factory, Strela (Orenburg), Kumertau Aviation Complex (KumAPO) and Progress Complex.

Mikoyan Design Bureau (MiG)
Leningradskoye Shosse, 6
Moscow, Russia 125299
Tel: (095)-158-1872
Fax: (095)-943-0027/ 250-8819
Rostsislav Belyakov, General Designer
Tel: (095) 155-2315
Anatoly Belosvet, Deputy General Director
Tel: (095) 158-2452
Apart from military aircraft of the MiG-series, MAPO MiG manufactures civilian aircraft Aviatika-890, T-110 Grach, Il-103 and Il-1D. The total number of employees at MAPO at the end of 1996 was 20,000 people.

Mil Moscow Helicopter Plant Joint Stock Company
Sokolnicheskiy Val, 2
Moscow, Russia 107113
Tel: (095)-264-9083
Fax: (095)-264-5571
Viktor Sinelschikov, General Designer
Aleksei Radin, Director of Foreign Relations Department
Tel: (095) 264-4762
The major manufacturer of the Mil family helicopters. Established in 1947, it has produced over 20,000 helicopters since then, of which about 6,000 have been exported to many countries around the world. Mil Helicopter company is fully privatised. Structurally, Mil enterprise consists of Design Bureau, R&D Complex, pilot plant and testing grounds. Apart from the Mil plant itself, Mil-helicopters are manufactured at U-UAZ, Progress Complex and RosVertol.

Molniya Design Bureau
Svoboda Str., 33
Moscow, Russia 123459
Tel/ Fax: 7-095-493-5053
Fax: 7-095-492-9371
Alexander Sergeevich Bashilov, General Director
One of the largest Russian aerospace companies and the designer of the Buran aerospace vehicle, the Russian equivalent of the Shuttle. The company is mostly engaged in the design of multipurpose aerospace systems.

Myasichchev Design Bureau
Zhukovskiy-5,
Moscow Region, Russia 140160
Tel: (095)-556-7829
Fax: (095)-556-5583
Valery Novikov, General Designer
Tel: (095)-556-7694
Valery Slutski, 1st deputy General Designer
Initially specialized in strategic bombers. At present develops business-class planes M-101T Gzhel and M-102 Duet and some other versions within the framework of conversion process. Currently employs a little over 1000 people.

Sukhoi Design Bureau
Polikarpov Str., 23A
Moscow, Russia 124284
Mikhail Simonov, General Designer
Tel: (095) 945-6525
Mikhail Pogosyan, Deputy General Designer
Tel: 7-095-945-6525
Fax: 7-095-200-4243
Vladimir Yakovlev, Head of the Information Department
Tel: (095) 941-1007
The combat aircraft of the Su-series are manufactured at Novosibirsk Aviation Complex (NAPO), Tbilisi Aviation Complex, Ulan-Ude Aircraft factory, Komsomolsk-na-Amure Aircraft Complex, Dubna Machine-building factory, Irkutsk Aircraft Complex, Tushino Machine-building factory (Moscow).

Tupolev Design Bureau
Naberezhnaya, 17
Moscow, Russia 111250
Tel: 7-095-267-2508
Fax: 7-095-261-7141
Igor Shevchuk - General Director
Tel: (095) 267-2444
Alexai Tupolev, General Designer
Tel: (095) 263-7067
Yuri Vorobiev - Chief Designer - Tel: (095) 267-2672
Alexander Romanov, Head of the Foreign Relations Department - Tel: (095) 203-3358
Fax: (095) 261-7141
A Tupolev Holding company includes: ANTK Tupolev (currently 10,500 employees), Aviacor, Takom-Avia, Uljanovsk aircraft factory. ANTK Tupolev is a member of the Financial-Industrial group "Russian Aviation Consortium". The aircraft of the TU-series are produced at Aviastar, KiGAZ, Aviacor, KAPO Gorbunova, Takom-Avia and Arnaks aircraft factories.

Yakovlev Design Bureau
Leningradskiy Pr., 68
125315 Moscow, Russia
Tel: (095)-157-1734
Fax: (095)-157-4726// 3661
Alexander Dondukov, General Designer
Tel: (095) 157-5737
Vladimir Dmitrijev, First Deputy General Designer
Major industrial enterprises that manufacture aircraft of Yak-series: IAPO (Yak-112), Progress Complex (Yak-55M), Strela (Yak-3), SAZ (Yak-42D, Yak-142, Yak-130, Yak-54), SmAZ (Yak-18T), Sokol (Yak-130), TAGO (Yak-58).

Antonov Design Bureau (Ukraine)
Tupoleva street, 1
252062 Kiev, Ukraine
Petr Balabuev, Director/ General Designer
Tel: (044) 443-0212
Fax: (044) 442-7098
Viktor Bolgak, Deputy General Designer, Marketing and Foreign Relations
Tel: (044) 442-7304
Fax: (044) 442-7098
The aircraft of the An-series are manufactured at Aviastar, Polyot (Omsk), KiGAZ, Aviacor, Novosibirsk Aviation Complex (NAPO), Kharkov Aviation company, Progress, TAPO aircraft factories. ANTK Antonov is currently working on the following projects: An-38K (light cargo carrier), An-74T-200 (light cargo carrier convertible into passenger plane), An-140 (regional passenger plane), An-180 (regional passenger plane), An-218 (Airbus-type passenger plane).

Major manufacturers

Rybinsk Motors, JSC
(aircratf engines for TU-154M, IL-62M, IL-76)
152903 Rybinsk
Yaroslavl region, Russia
Tel: (0855) 243-100
Fax: (0855) 262-398

Perm Motors, JSC
Komsomolski Ave., 93
614600 Perm, Russia
Vadim Isachenko, General Director
Tel: (3422) 45-31-95
Fax: (3422) 45-20-49/ 45-13-20
Yuri Reshetnikov, General designer
Tel: (3422) 45-20-19
Ivan Usmanov, Financial Director

Aviastar (Uljanovsk aviation industrial complex)
Akademika Antonova street, 1
432062 Uljanovsk, Russia
Tel: (8422) 20-72-26
Fax: (8422) 20-95-61
Victor Mikhailov, General Director
Tel: (8422) 20-25-75
Nikolai Kachalov, Commercial Director
Tel: (8422) 20-12-14
Big, new and well equipped aircraft assembler. Main products are An-124-100 Ruslan heavy weight cargo plane and new Tu-204 and Tu-214. The company is committed to supply 30 Tu-204 airliners with Rolls-Royce engines to Egyptian Sirocco Aerospace and 20 Tu-204 with Perm PS-90A engines to Vnukovo Airlines.

Aviacor (Samara International Aviation Corporation)
Pskovskaya street, 32
443052 Samara, Russia
Tel:(8462) 29-42-78
Fax: (8462) 27-04-77
Lev Khasis, President
Tel:(8462) 27-03-87
Leonid Terentjev, First Vice President
Tel:(8462) 27-03-30
Aviacor currently produces the Tupolev Tu-154 aircraft (most common aircraft of the Soviet era) and new Tu-154-100; it also provides tooling to Boeing. Negotiations are in progress to produce B-737 and B-757 for Boeing. In summer 1997 Mr. Khasis was appointed ANTK's (Tupolev Aviation Production Complex) Chairman but on December 18, 1997 he was removed from this position that was taken by Vasilij Alexandrov, who represents Russian government and is generally considered a figurehead. Mr. Khasis nonetheless appears to be influential in the Russian aerospace sector and will probably play a major role in the reorganization process. In addtion, Honeywell is working with Aviacor in building the Tu-334 (100-seater prototype and the main Russian competitor of Ukrainian An-70) and has submitted a request in for financing with ExImBank. Honeywell will also support the program of upgrading avionics on a large fleet of Aviacor-produced older generation aircraft.
In 1994-95 Aviacor sold about 20 aircraft and only 2 in 1996-97. Approximately 20 aircraft remain on the assembly lines in various degrees of completion. In 1996 Aviacor signed an agreement with ANTK Antonov for production of An-140 (approximate cost $6.5 million) which is supposed to gradually substitute the outdated An-24, -26, -30, -32 and Yak-40.

NAPO (Novosibirsk aircratf industrial complex)
Polzunova street 15
630051 Novosibirsk, Russia
Nikolai Bobritsky, General Director
Tel: (3832) 79-85-01
Magmal Smoyan, Commercial Director
Tel: (3832) 79-85-29
Fax: (3832) 77-10-35 // 77-10-55
The Novosibirsk Aircraft industrial complex (NAPO) is one of the major aircraft-building enterprises in Russia and retains the status of a strategic state enterprise. Founded in 1936, the NAPO has developed a large number of different types of aircraft for over half a century. Today NAPO manufactures the An-38. It's a reliable, simple and efficient multi-purpose airplane for short-haul operation, developed by the Antonov Design Bureau. NAPO is the main producer of Su-32 fighters.

IAPO (Irkutsk Aviation Enterprise)
Novatorov street, 3
664020 Irkutsk, Russia
Tel: (3952) 42-1450
Fax: (3952) 45-3089
Alexei Fedorov, General Director
Vladimir Kovalkov, Chief Engineer
Set up in 1932, the company currently employs 15,000 people. Major products are Su-27 and Su-30 and their modifications. Under a new venture with Beriev design bureau, IAPO started manufacturing two-engine twin-turboprop Be-200. The company claims that the production capacity is 120 aircraft a year. The company was awarded $1.3 million TACIS technical assistance grant for the research on Be-200 and Be-103.

VASO (Voronezh aircraft factory)
Tsiolkovskogo street, 27
394029 Voronezh, Russia
Tel: (0732) 49-90-17
Fax: (0732) 44-86-66
Albert Mikhailov, General Director
Vjacheslav Kudinov, Head of the Foreign Relations Department
Tel: (0732) 49-07-00

Sokol (Nizhny Novgorod aircraft factory)
Chaadajeva stree, 1
603035 Nizhny Novgorod, Russia
Vladimir Pomolov, General Director
Valery Drobyshevsky, General Designer
Tel: (8312) 46-71-03
Fax: (8312) 24-79-66// 46-70-59

Saratov Aircraft Factory (SAZ)
Ordzhonikidze pl., 1
410015 Samara, Russia
Alexander Yermishin, General Director
Tel: (8452) 44-81-01
Alexander Lebedev, Commercial Director
Tel: (8452) 44-82-03
Fax: (8452) 44-36-07

Aeroprogress/Roks-Aero Joint Stock Company
Volokolamskoye Shosse, 65A
Moscow, Russia 123424
Tel: (095)-145-8044
Fax: (095)-145-9477

Aviaexport Foreign Economic Enterprise
Ulansky Per., 22
Moscow, Russia
Aleksei Didenko, Director
Tel: (095)-207-0046
Fax: (095)-207-07800
Aviaexport represents Russian aircraft manufacturers and looks for foreign markets on their behalf.The company is the legal successor to the former V/O Aviaexport State Company established in 1961 which until 1988, operated within the structure of the Ministry of Foreign Trade of the USSR, transferring to the Ministry of Aviation Industry in that year. In 1993, it was transformed into a Public Limited Company..
Space:
Khrunichev State Research and Production Space Centre
18, Novozavodskaya St.,
121087 Moscow, Russia.
Tel: (095) 145-9802
Fax: (095) 142-5900
The Khrunichev plant is taking an active part in many international projects. In recent years many well known foreign firms have become partners with the Russian enterprise. These include Boeing, Lockheed-Martin, Loral, European Union Satellite System, Inmarsat, Iridium, Motorola, Panamsat, Hughes, which plan to use the launch vehicle Proton for their space programmes. The Space Centre is one of the investors in the Iridium system's services on the territory of Russia and the CIS. During its period of use more that 240 launches have been accomplished with the help of the Proton launch vehicle. Work has begun on the development of a modernized launch vehicle, the Proton-M. At the same time an oxygen-hydrogen booster and a booster block Breeze-M are being developed, the use of which will after the significant increase in the energy-mass characteristic of the new launch vehicle. At present the Khrunichev plant is developing a heavy class rocket launcher, Angara, while in the context of a conversion programs, SS-19 inter-continental ballistic missiles are being developed to Rokot light class launch vehicles.

Zvezda, R&D and Production complex
(crew emergency escape and survival systems)
39 Gogol street
Tomilino, Moscow region
140070 Russia
Tel: (7 501) 88 22 279
Fax: (095) 557 3388
Crew emergency and survival systems for all types of aircraft and spacecraft: ejection seats and shock -absorbing seats; protective gear and oxygen equipment; space suits and manned maneuvering units; means to prevent adverse effects of weightlessness; emergency escape slides, life rafts, life jackets; aircraft fire detectors and fire extinguishers, in-flight refuelling systems, emergency/rescue and medical equipment.

Research

TsIAM, Central Institute of Aircraft Engine Building
Aviamotornaya str., 2
111250 Moscow, Russia
Donat Ogorodnikov, Director
Anatoly Cherkasov, Head of Foreign Relations Department
Tel: (095) 200-2215/ 361-6481
Fax: (095) 267-1354

GosNIIAS, All-Russia Institute of Aviation Systems
Viktorenko str., 7
125319 Moscow, Russia
Evgeny Fedosov, General Director
Tel: (095) 157-7047
Fax: (095) 157-3127
GosNIIAS currently employes about 6000 people. Joint research projects are conducted with participation of Rockwell, Hughes Aircraft Co., Collins Avionics etc.

VIAM, All-Russia Institute of Aviation Materials
Radio str., 17
107005 Moscow, Russia
Radij Shalin, Director
Tel: (095) 267-2044
Fax: (095) 267-8709/ 8609
VIAM currently employes about 700 people. Nearly 96% of all aviation materials used by Russian manufacturers were developed at VIAM.

Volga Research Institute of Aircraft Engines, materials and technologies
29 Alma-Atinskaya street
443051 Samara, Russia
Tel: (8462) 58-3718
Fax: (8462) 58-3854

TsAGI, Central Aerohydrodynamic Institute named after Zhukovsky
140160 Zhukovsky-3
Moscow region, Russia
Vladimir Neiland, Director
Tel: (095) 556-4021
Fax: (095) 556-4337
Elena Tolchennikova, Foreign Relations Department
Tel: (095) 556-4054

Gromov Flight Research Institute
140160 Zhukovsky, Russia
Tel: (095) 556-5607
Fax: (095) 556-5334
Felix Zolotarev, Director

Strela, R&D
(ground radar facility development)
Gorky street, 6
300002 Tula, Russia
Tel: (0872) 770-560
Fax: (0872) 341-104

Scientific-Research Institute of Aircraft Equipment / NIIAO
Tupoleva street, 18
Zhukovsky-2
140160 Moscow region, Russia
Boris Abramov, Director
Vasily Velikov, Sales and Foreign Relations
Tel: (095) 556-2322
Fax: (095) 556-2328

Russian Government contacts:

Alexander Knivel, Head
Department of Aerospace Industry and Shipbuilding
Ministry of Economy
Tel: (095) 251-0427
Fax: (095) 250-0758
Vladimir Babkin, deputy Head of Department
Tel: (095) 251-7134

Vladimir Kachnov, General Director
State Transport Committee
Tel: (095) 436-8135

Federal Aviation Service (FAS)
Gennady Zaitsev, Director;
Leningradsky Pr., 37
Moscow
Russia
Tel: (095)-155-53-95
Fax: (095)-155-6883

American Embassy

Mark Weaver
Commercial Officer
Michael Nikoulichev
Commercial Assistant, Aerospace
U.S.FCS
Tel: (095) 967-3412/13/14
Fax: (095) 967-3416

American Chamber of Commerce
Scott Backlin, President
Bld.1, 8th Floor
Kosmodimyanovskaya nab. 52
Moscow 113054, Russia
Tel: (095) 961-2141
Fax: (095) 961-2142
Carl Watt, Chairman, Aerospace Committee
Tel: (095) 157-1548
Fax: (095) 157-0683

US Firms Resident in Russia

Anser Center for Aerospace Cooperation
Mrs. Catherine Bell
Mrs. Susan Kizer
Tverskaya 16/2, building 3, office 12
Tel: (095) 935-7057
Fax: (095) 935-7056

Clintondale Aviation Inc.
Mr. Konovalov Yuri, Chief Operation Officer,
Mr. Walt Marshall
Business Center West Bridge
37A Leningradsky Prospect, Building14,
Moscow, Russia, 125167,
Tel: (095) 258-0651/52/ 53/ 54
Fax: (095) 258-0655

Westinghouse
Mr. Wenseslav Novak, CIS Manager,
Verhnaya Krasnoselskaya street,
Building 8/3
Moscow, Russia, 107140
Tel: (095) 264-6738
Fax/Tel: (095) 263-14-91

Rockwell-Collins
Mr. David Williams
Mr. Carl Watt
22/25 Bolshoi Strochenovsky pereulok,
Office # 403
Moscow, Russia, 113054
Tel: (095) 230-6010/11/12/13
Fax: (095) 230-6015

Motorola
Mr. Hassan Tavokoly,
Country Manager
53 Leningradsky Prospect,
Moscow, Russia, 125468
Tel: (095) 929-9030 (9035)
Fax: (095) 929-9034/33

Raytheon International Inc.
Mr.Russell Johnson, Vice President
23 Tverskaya-Yamskaya 1st street,
Moscow, Russia, 125047
Tel: (095) 252-7990
Fax: (095) 252-7989

Allegheny Teledyne Inc.
Mr.James Balaschak, Managing Director,
55 Leningradsky Prospect,
Moscow, Russia, 125468
Tel: (095) 943-9402
Fax: (095) 943-9403

United Technologies
Mr. Mark Pitts,
Petrovsko-Razumovsky Projezd 19/1
Moscow, Russia, 125289
Tel: (095) 755-8388
Fax: (095) 755-8387

United Interiors International
Henrik Konarkowski, Vice President
Ul. Dovzhenko, 12, bld.1
Moscow, Russia 119590
Tel: (095) 956-7940
Fax: (095) 956-7941

General Electric Aircraft Engines
Mr. Per Jonson
Mr. William H. Hurebaus
52 Kosmodamianskaya naberezhnaya,
building 1,
Moscow, Russia 113054
Tel: (095)-935-7211
Fax: (095)-935-7210

Honeywell
Mrs.Alla Weinstein
11/13 Trehprudny pereulok,
Moscow, Russia, 103001
Tel: (095) -299-5425/7842
Fax: (095)-299-4001

Lockheed Martin
Jim Sackett, Systems Engineer
Russia
Tel: (095) 214-0727
Email: sackjw@glas.apc.org

Hughes Aircraft
Richard W. Schnabel, Chief, Logistics Control
Moscow, Russia 117908
Tel: (095) 290-9040/ 42/ 43
Fax: (095) 290-9041

KLM-United
Sales Manager Mrs. Lludmila Vladimirovna Morosova,
35 Usacheva street,
Mosco w, Russia 119048
Tel. (095)-258-3600
Tel: (095) 258-3600/3605
Fax: (095) 258-3606, (095) 578-4542

Allied Signal Aerospace Service Corporation
Mr. Sergei Pritulenko
Rozanova street 8V,
Moscow, Russia, 123007
Tel: (095) 795-0880
Fax: (095) 795-0881

Boeing
Mr. Douglas Davidson
Mr. Vernon Steele
Gazetnyi pereulok 17/9
Moscow, Russia, 103009
Tel: (095) 956-9840
Fax: (095) 956-9841

Aeromar
Mr. Jonathan Knaus
Sheremetievo Airport-340
Moscow, Russia, 103340
Tel: (095) 578-2083
Fax: (095) 232-6536

Continental Airlines
Toubia Hacham, CIS Representative
15 Neglinnaya street,
Moscow, Russia, 103045
Tel: (095) 925-1291, 921-1674
Fax: (095) 923-4275

Delta Air Lines
Mr. Robert Hannah, District Manager
12 Krasnopresnenskaya naberezhnaya,
entrance 3, office 1102A,
Moscow, Russia 123610
Tel: (095) 258-1288, 258 -1170
Fax: (095) 258-1168

Publications

Aerospace Journal
Mr.Alexander Degtiarev, General Director
Mr.George Lyssenko, Chief Editor
Mr. Vasily Karply
Electrichesky per., 1
123557 Moscow, Russia
Tel: (095)-253-5613
Fax: (095)-253-0495

ANSER (Centre for International Aerospace Cooperation)
Susan Kizer, Director, Moscow Office
Tverskaya str., 16/2, bld.3, Suite 12
Moscow, Russia 103009
Tel: (095) 935-7057
Fax: (095) 935-7056

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)