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. Last Updated: 07/27/2016

Orders Boost Civil Aviation Industry




The Russian civil aviation industry may be on the edge of a modest recovery after years of slow and sometimes even non-existent sales, analysts say.


In recent weeks, Russian airlines have announced the purchase or lease of just under 20 domestically produced airplanes.


National carrier Aeroflot announced last week that it will acquire six Il-96-300s as part of a deal with the Russian government, whereby it was allowed to lease four American-made Boeing 767-300s without paying punitive import duties.


Late last year, charter airline Transaero, which pioneered Western-style service in the Russian market, announced it would acquire 10 Tu-204-100s; the airline had previously operated only Boeing aircraft. And Sibir airlines, a major regional player, is already operating its own Tu-204, which was put in service at the end of last year, and says it intends to eventually lease several more.


The Il-96 family of aircraft is a long-range, four-engine aircraft that seats nearly 300 passengers. The Tu-204 is a smaller twin-engine airplane similar in appearance and performance to a Boeing 757.


Although analysts warn that optimistic pronouncements of Russian airlines regarding acquisitions of new airplanes should be treated with caution, there is reason to hope that the latest orders will be completed.


"There is a definite tendency toward the acquisition of Russian-made airplanes," said one analyst, who declined to be named. "Since the [1998 financial crisis], fares have gone down in dollar terms, which makes it difficult for Russian airlines to lease Western airplanes for hard currency."


Meanwhile, he added, the Russian aviation industry has largely succeeded in closing the gap in fuel efficiency and reliability that separated its airplanes from their Western-built counterparts, and is slowly finding its feet in the post-Soviet economic environment.


"If five years ago, the aviation industry was not at all ready to work with [private-sector] clients, then today aircraft producers are learning how to function in the new conditions, although perhaps not as fast as one would like," the analyst said.


Over the past few years, a variety of leasing schemes for engines and airframes has been devised that makes it easier for cash-strapped domestic airlines to use Russian-made equipment.


However, the recent airplane orders, if they are realized, will represent only a tiny fraction of what Boeing or Airbus, the two remaining Western airline manufacturers, deliver every year.


Last year, for example, Boeing alone delivered 620 aircraft.


However, even modest sales to Russian airlines would provide domestic manufacturers with operating capital to fill out their product lines, something they have lacked for most of the past decade, Paul Duffy, an independent aviation analyst, said.


Ilyushin's Il-96M, which is fitted with American engines and avionics, has been stalled in development for several years, due to delays in receiving a $1 billion U.S. Export-Import Bank loan.


The delay has cost Ilyushin dearly, as the compnay has had to sit by and watch while its airplane's niche on the international market was occupied by Western competitors.


"If Ilyushin was a Western company with good finances, the Il-96M would already exist in three or four different versions, with several combinations of engines and avionics," Duffy said. "Time is passing it by."


As it is, the future of the entire Il-96 program is in doubt.


"The Il-96-300 will be out of customers after this [Aeroflot] order," he said. "This basically just clears the pipes for the Il-96M, and gives them some money to move the certification for this program forward."


Even then, he said, the market for the Il-96M is limited.


However, analysts said that the future for the Tu-204 looks more promising than that of the Il-96.


"The Tu-204 is a smaller plane with characteristics better suited to the Russian domestic air travel market," an analyst said.


Meanwhile, the airplane is slowly gaining a toehold on the international market.


Twenty four Tu-204s outfitted with Western engines and avionics have been ordered by an Egyptian-based leasing company, with several already delivered, according to Duffy.


However, he added, the Russian aviation industry would not see a full-fledged recovery until flat passenger volumes pick up, giving domestic airlines sorely needed cash to finance new aircraft acquisitions.