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. Last Updated: 07/27/2016

West Shifts Sales Pitch to Business Jets




ZHUKOVSKY, Moscow Region -- Two years ago, Boeing brought a brand-new jetliner filled with high-ranking company execs to the Moscow Aviation and Space Exhibition, Russia's biennial international air show.


This year, the U.S. aerospace giant put on a more modest show, led by a handful of public relations and sales representatives sent here to pitch the Boeing Business Jet, a modified 737 airliner designed to ferry business elites on globe-hopping expeditions.


"We're selling to the whole world; we don't want to ignore any part of it," said Fred Kelley, public affairs director for Boeing Business Jets, a Boeing spinoff joint-venture with General Electric.


Boeing's low-key presence at the air show, which runs until Sunday at the Zhukovsky airport in Moscow, seemed a tepid endorsement for a Russian airline market that once had international aerospace giants clawing to get in.


Judging from the sparse turnout among Western aviation manufacturers, Boeing's estimation of the Russian market was shared by many. The U.S. company's rival Airbus did not even bother to open an information booth this year.


"People used to think there was money here," a representative from an American aerospace firm said when asked to explain why so few foreign firms showed up at the show.


The crash of the Russian currency and banking system last Aug. 17, a year to the day the Moscow air show began this week, was blamed by industry representatives for the slipping fortunes of Western aerospace manufacturers on the Russian market.


"We had two deals close to being signed last August," said Michael DeWitt, a senior sales representative for Cessna, a U.S.-based firm that builds light aircraft and business jets. "The people we were working with had promised to buy our airplanes after working out a few last details of the financing agreement, but by the time they were ready to sign, the crisis had already hit."


The onset of the crisis wiped out contracts for a half dozen of the 10-seat, single-engine turboprop Caravan transport, which sells for about $1.6 million not including financing charges, DeWitt said.


"There is a demand for 20 or 30 of these per year in Russia," he added. "But there is a wide gap between the need and the ability to pay to satisfy it."


Cessna still managed to sell a handful of its business jets to Russians last year, which may be a reason it brought two Citation jets and the smaller Caravan.


France's Dassault brought one of its Falcon jets, but other private jet manufacturers that flew in for the 1997 air show were noticeably absent.


If the handful of aircraft on display were any indication, Western manufacturers are focusing on selling high-end business jets while taking a wait-and-see approach on larger aircraft.


Industry representatives and analysts said Russia still has large firms in the energy and banking sectors that could, in contrast to most Russian airlines, afford expensive, Western-made jets.


Passenger traffic growth has been flat in Russia over the past year, making it hard for airlines to afford foreign-built aircraft, which are typically leased. Transaero was forced to return several of its aircraft after the onset of the crisis.


The one exception in the commercial aviation sector has been the nation's largest air carrier, Aeroflot, which operates 24 Western jets and is buying a few more. A deal currently being negotiated between the two sides calls for the purchase of four 767 airliners to replace older 767s whose lease term has expired.


Against this backdrop, even a handful of business jet sales look significant.


Boeing officials declined to make any sales predictions for their 737 business jet, but they acknowledged that they have yet to make a sale in Russia.


Paul Duffy, an independent aviation analyst, said he believed that a dozen of the $50 million aircraft could be sold in Russia over the next few years.


"There is big potential for this market," agreed Peter Smutey, a consultant for Boeing Business Jets. "But a couple of things directly impact how much it is possible to sell here."


Import duties of 30 percent and the difficulty of arranging financing in Russia, which is considered a high-risk market by foreign credit firms, were the two main obstacles, he said.


"Financial institutions outside Russia want to know that they can repossess the airplane if that becomes necessary," Smutey said. "In Russia, the war and risk insurance payments are as high as the monthly payments for the aircraft itself."