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. Last Updated: 07/27/2016

MiG Chief Fired, Head of Rival Irkut Takes Over

MiGDefense analysts said giving Fyodorov control of MiG could be a prelude to a merger with Irkut and further industry consolidation.
Prime Minister Mikhail Fradkov has fired the head of state-owned MiG Corp., Valery Toryanin, and replaced him with Alexei Fyodorov, the head of rival fighter manufacturer Irkut, in a move that analysts said may be the government's first step toward industry consolidation.

Fradkov approved Fyodorov's appointment, put forward by the Industry and Energy Ministry, on Saturday, according to a statement posted on the government's web site Monday.

No reason was given for the change, although Toryanin was widely viewed in the industry as a temporary manager when he took MiG's reins last November.

A source in Irkut said that at the time, Fyodorov was also under consideration for the top MiG job.

The personnel change was long expected, a source in MiG said. "We didn't know who it would be, but Fyodorov looks like a logical choice."

Fyodorov will head a company that has more than $1.4 billion in orders on its books and unites nearly a dozen enterprises nationwide with more than 45,000 employees.

Neither Fyodorov nor Toryanin were available for comment.

"I hope that Fyodorov's appointment will be the first step to an Irkut-MiG merger and a real consolidation of the industry," said Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies.

The Federal Industry Agency has been pushing for the creation of a new company, Unified Aircraft-Building Corp., or OAK, that would bring state-controlled companies Sukhoi, MiG, Tupolev and Ilyushin, as well as Fyodorov's privately controlled Irkut, under one roof.

Toryanin has been a vocal opponent of OAK, saying that it would mean the redistribution of property and cash flows away from MiG.

Fyodorov, however, has supported the idea. Just last week he said that private business and the government should work hand-in-hand in the defense industry.

"I think that Alexei Innokentyevich [Fyodorov] is one of those who understands this synergy very well," said Sergei Nedoroslev, head of private aerospace group Kaskol.

Kaskol controls Nizhny Novgorod aviation plant Sokol, which it is moving to integrate into MiG.

Yelena Sakhnova, an industry analyst with United Financial Group, cast some doubt whether Irkut would be able to merge with MiG anytime soon.

"It will be difficult to unite a private and a totally state-run company," Sakhnova said. "The state could increase its stake in Irkut by giving it MiG."

The state holds 13 percent in Irkut, which is majority controlled by its management. Fyodorov himself holds a blocking stake.

It was not clear on Monday whether Fyodorov will retain his post as president of Irkut, which is a manufacturer of the Sukhoi fighter jet.

"He may keep both posts for an initial period," Irkut spokeswoman Yelena Fyodorova said by telephone from Irkutsk.

"Irkut management is one of the most effective in the aviation industry," she said, adding that it will be able to follow through on its strategic planning even without him.

It would not be the first time that the Irkut president has had to wear more than one hat -- Fyodorov is also a top official in the Irkutsk branch of United Russia.

Fyodorov, who has worked his way up the ladder in aircraft manufacturing, from designer in the Irkutsk plant in the 1970s to top manager, turned the plant into a corporation in 2002.

"He is a very knowledgeable industry specialist, a modern-style manager who learns very fast and is headstrong in achieving goals," Nedoroslev said.

Under Fyodorov's management, Irkut has racked up $4.5 billion in orders -- mostly for Su-30 fighters for India and Malaysia.

The company was the first in the domestic defense industry to audit its books to international accounting standards. Earlier this year Irkut floated 23 percent of its shares on two Moscow bourses, attracting $127 million in the largest domestic initial public offering ever.

European aerospace giant EADS is now seeking to acquire 10 percent of the company.

Irkut has been actively looking to diversify its product range into civil aviation with its Be-200 multi-mission amphibious plane. It has also worked to boost its designer school by snapping up 75 percent of Yakovlev Design Bureau earlier this year.

MiG has $1.4 billion worth of orders on its books, with another $1.5 billion in potential deals pending. The company, however, is burdened by a $290 million debt.

It is unclear what will happen to the company's product range, as some of its jets are direct competitors, like the MiG-AT trainer and the Irkut-supported Yak-130.