Airlines Say Zubkov Decree Favors Transaero

The government announced on Monday a temporary suspension of import duties on passenger aircraft of 300 seats or more, drawing fire from airlines that say the measure was designed to help just one carrier.

Prime Minister Viktor Zubkov signed the decree calling for the suspension of the 20 percent import duties charged on foreign aircraft of this size beginning in February. When coupled with 18 percent value-added tax, which also has to be paid, the duties pose a crippling burden for domestic airlines looking to modernize their fleets, analysts said.

But while foreign manufacturers welcomed the move, domestic aviation industry representatives said its impact would be limited.

Because of the narrow time frame and the minimum size restrictions, the decree seems likely to benefit only Transaero, the country's second-largest international carrier, which had already announced its plans to import 11 planes of this type by 2010.

Transaero wants to buy five Boeing 747-300s, with 468 seats, and six jumbo Boeing 747-400s, which will hold at least 524 passengers each.

Two other Russian airlines, Aeroflot and S7, expressed concern that the government appeared to be singling out one company for better conditions, rather than providing improved long-term conditions for the industry as a whole.

"They are not introducing a systematic solution," said Lev Koshlyakov, a spokesman for Aeroflot. "This is the result of lobbying."

Igor Volkov, a spokesman for S7, said the decree was unexpected and raised a number of questions.

"The government must create equal conditions for all, rather than act in the interests of specific airlines," he said.

Transaero spokesman Sergei Bykhal was out of his office and unavailable for comment Monday afternoon, his aide said.

Zubkov's decree would not affect major deals the carriers signed earlier this year with Boeing and Airbus, the airlines said.

In June, Aeroflot and S7 agreed between themselves to buy 37 of Boeing's 787 Dreamliners, with deliveries due to start in 2014.

Also in June, Airbus signed a deal to sell 22 revamped A350 wide-bodied aircraft and five A321 planes to Aeroflot. S7, meanwhile, ordered 25 single-aisle, medium-haul A320s.

The Dreamliners and Airbuses ordered by the two companies will seat from 220 to 240 people.

Cabinet spokesman Alexander Zharov's office referred all questions Monday to Stanislav Naumov, an official at the Industry and Energy Ministry. Naumov was in a meeting and unavailable for comment Monday afternoon.

A more comprehensive suspension of import duties for airlines remains a distant prospect after President Vladimir Putin called for caution in the matter at a session of the advisory State Council just a month ago.

Putin said he would refrain from immediately ordering the government to cut duties on certain types of aircraft that the country does not make. Stressing that he was not totally opposed to the measure, Putin urged further consideration of the effect that lowering duties could have on domestic producers as they attempt to move into the production of these types of planes in the future.

"We must implement plans for our own production," Putin said during the council's Nov. 13 session in Krasnoyarsk, which was dedicated to transportation issues. "But I repeat once again: I am not against this; it simply needs some proper deliberation."

Despite the decree's limited nature, foreign manufacturers still greeted the news warmly.

"This is important for Russian airlines," said Dmitry Krol, Boeing's director of communications for Russia and the CIS. "We believe that any proposed tariff reduction for aircraft of more than 300 passengers is an important step forward."

Gregor Kursell, a spokesman for EADS, the parent company of Airbus, said it also welcomed the government's decision.

"At least it looks like the Russian government is willing to listen," said Stephen Thompson, an analyst with Concise Aerospace, which monitors the Russian market.