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. Last Updated: 07/27/2016

Aeroflot Files Suit Over Ilyushin Jets

Itar-TassAn Il-96-300 jet on display in Voronezh last July. Aeroflot is suing Ilyushin over a delivery contract for six such planes.
National carrier Aeroflot said Tuesday that it had filed a lawsuit against Ilyushin Finance Co. over an unfulfilled contract for the delivery of six Il-96-300 passenger jets.

Ilyushin denied it was to blame and said said it was Aeroflot that was seeking to terminate the deal.

If Aeroflot fails to buy the planes, the Economic Development and Trade Ministry may ask it to pay off import duties for foreign-made planes it has already bought.

In 2004, after years of negotiations, Aeroflot agreed to lease six long-haul jets from Ilyushin. The first aircraft was due in mid-2005. In June 2005, the contract, estimated to be worth around $350 million, was amended.

"They haven't given us bank guarantees and don't allow us to go ahead with the contract," Lev Koshlyakov, Aeroflot deputy general director, said by telephone Tuesday. Aeroflot had thus not made any payments, he said.

Under the deal, Koshlyakov confirmed that Aeroflot was to make an advance payment of $16.5 million toward the leasing costs. He added that Aeroflot's lawsuit was intended to either get Ilyushin to guarantee the loan or prove that Aeroflot could not be blamed for the current situation.

Andrei Lipovetsky, a spokesman for Ilyushin, said Tuesday that Aeroflot was looking for any pretext to break the contract. "The lawsuit is absurd," Lipovetsky said, adding that Ilyushin could not guarantee the loan as Aeroflot had not fulfilled some of the terms of the contract, including the provision of specifications for the planes to be built at Ilyushin's Voronezh factory. "Aeroflot is scuttling the deal," he said. "We need to resuscitate the agreement."

Citing copies of the correspondence between Aeroflot and Ilyushin, Kommersant said Tuesday that the contract between the two companies was no longer valid.

Aeroflot's Koshlyakov denied that the contract was invalid and stopped short of saying that Aeroflot was no longer interested in the planes. He indicated, however, that Aeroflot was not entirely satisfied with them. "We are insisting on the observation of a number of strict parameters," he said, adding that Aeroflot was not interested in buying "half-ready skeletons."

Aeroflot is currently considering whether to award a $3 billion order for 22 new long-haul airliners to U.S. aircraft giant Boeing or its European rival Airbus. The lease of six Ilyushin planes was part of a deal with the Economic Development and Trade Ministry, under which Aeroflot would be allowed to buy 27 foreign-made planes duty-free.

Koshlyakov said Aeroflot did not want to face sanctions from the ministry. He declined to say how much the duty would be if the ministry held Aeroflot responsible for not leasing the Ilyushin planes, saying only that the amount would be "large." Without the waivers, import duty plus valued-added tax on a foreign-made plane comes to more than 40 percent of the cost.

A spokesman for the ministry said it expected Aeroflot to honor its end of the deal but could not immediately say whether it would ask Aeroflot to pay the import duty.

 The Zimbabwean government has agreed to buy five Il-96-400 planes, worth more than $320 million, Ilyushin's Lipovetsky said Tuesday, adding that the deal would be announced by end of the week.