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. Last Updated: 07/27/2016

Aeroflot Offers to Buy 30 Regional Jets

Aeroflot tentatively agreed Monday to order up to 30 regional jets built by Sukhoi and Ilyushin in cooperation with Boeing Co., a deal that aircraft makers no doubt hope casts a good omen on their chances to clinch contracts at this week's Moscow Air Show.

The so-called Russian Regional Jet will consist of a family of planes seating 50 to 95 passengers and flying a range of up to 6,000 kilometers, officials from Sukhoi, Ilyushin and Boeing said at a joint news conference Monday.

The three companies first announced plans to build the plane at the Paris Air Show in June, saying they would jointly design, produce, certify, market, sell and service the plane, which is targeted at airlines in Russia and throughout the world.

They said Monday that they hoped to finish feasibility studies by the end of this year and have a prototype built for test flights in 2004 or 2005. Deliveries are to start in 2006.

Sukhoi, producer of military jet fighters, will spearhead the design and production of the new plane under its recently formed Sukhoi Civil Aircraft unit, while Ilyushin will deal with the domestic and international certification of the aircraft. Boeing is to help market the plane.

Aeroflot deputy general director Alexander Zurabov said at the same news conference that the airline was prepared to become the first customer to place a solid order for the plane.

"We are ready to buy at least 30 of these aircraft," Zurabov said.

He said each plane would not cost more than $10 million.

The jet will cost 20 percent less than similar planes on the market, said Sukhoi general director Mikhail Pogosyan.

He estimated demand in Russia at 350 planes, as airlines phase out aging An-24s and Tu-134s. He added that demand from abroad should also be at 350.

Overseas, the plane would have to compete with popular regional aircraft produced by Canada's Bombardier, U.S. Fairchild Corp. and Embraer of Brazil.

Boeing stressed Monday that the plane would be home-grown.

"It's a Russian jet proposed by our Russian partners," said Sergei Kravchenko, Boeing's vice president in charge of international projects in Russia. "We have been invited to share our experience and unique technologies in work with the airlines to help define the design requirements … help with certification when aircraft are made."

While the plans for the new aircraft are taking shape, it remains unclear who will finance its development. "It will cost several hundred million of dollars," Pogosyan said, adding that no financing from the state was expected.

The Aton brokerage estimated that development costs would run from $300 million to $500 million.

The Troika Dialog brokerage has been appointed as the financial consultant to Sukhoi in assisting with developing the business plan. A Troika representative said funding could come from an international lending organization like the European Bank for Reconstruction and Development.

Also unclear Monday was which Russian facility would build the aircraft and which engines would power it. Preliminary plans call for the engines to be produced in Russia in either a joint venture or under a license.

Pogosyan said talks would be carried out with Perm Motors and Rybinsk Motors in Russia and General Electric, Pratt & Whitney and Snecma abroad.

Pogosyan said that in addition to marketing the plane at home, the partners would focus on Third World countries. "We believe that together with Ilyushin and the experience of Boeing we will make a product that will be able to compete on the international market," he said.

Yury Koptev, head of the Russian Aviation and Space Agency, said the plane would not compete with other domestic regional jet projects such as the Tu-334 100-seater and the Tu-324 50-seater. These projects heavily dependent on state financing are progressing slowly.

Aviation industry players hailed the new project as a step toward boosting the Russian aviation sector.

No. 2 airline Sibir said it was keeping an eye on the development of the plane.

"It will have a lot of potential if it isn't worse than Western aircraft and costs less," said Sibir spokesman Mikhail Koshman.

"If the project gets financing, it will be viable given the improving economic situation and growing passenger traffic," said Yelena Sakhnova, a transportation analyst at Aton.

Moscow-based aviation analyst Paul Duffy said that although Embraer and Bombardier have strong positions on the market, the plane has a good chance of success because of Boeing's backing.

"If Boeing markets the plane, it will be able to compete," he said, adding that Aeroflot needs the smaller plane to feed passengers to its international routes.

The tentative Aeroflot order came a day before the opening of the weeklong Moscow Air Show in Zhukovsky, where dozens of aviation companies will be trying to hawk their wares.

Among the deals hoped for is a contract with Germany to refurbish the MiG fighters inherited from East Germany and dozens of leases for Russian-built aircraft. The air force said last week that it hoped the government would be inspired by the display at the air show to draw up plans to upgrade — if not buy — jet fighters and other military aircraft.