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. Last Updated: 07/27/2016

Putin Brings Reproaches, Money to MAKS

ReutersPutin listening to Air Force Commander in Chief Alexander Zelenin as they watch planes performing on Tuesday.

The biannual MAKS air show opened Tuesday with record defense deals and a stern rebuke by Prime Minister Vladimir Putin.

After Sukhoi Civil Aircraft landed several state deals, Putin slammed the industry for its “lack of discipline,” while simultaneously pledging more money from state coffers.

Deputy Defense Minister Vladimir Popovkin and Sukhoi CEO Mikhail Pogosyan signed three agreements that will see Sukhoi provide the Air Force with 48 Su-35S strike fighters from 2010 to 2015; 12 Su-27SM jet fighters from 2009 to 2011; and four twin-engine Su-30M2 fighters by 2011, Sukhoi and the ministry said in a joint statement.

The long-term contracts will give the aircraft builder a chance to focus on new production rather than modernizing existing models used by the Air Force, Pogosyan said in the statement.

The orders are worth more than 80 billion rubles ($2.5 billion) — a “record sum,” Putin said.

In addition, Sukhoi will receive a capital injection of 3.2 billion rubles from the state budget, Putin said. The government is also considering giving 15 billion rubles to MiG, another fighter manufacturer that, along with Sukhoi, is part of the Unified Aircraft Corporation.

Sukhoi also reached an agreement with Vneshekonombank, the state’s bailout bank, whereby VEB would finance Sukhoi’s investment programs, as well as the construction and production of the Su-35, a multifunctional fighter.

VEB is expected to expand its support for Sukhoi, including financing a program for leasing Superjet aircraft to Aeroflot. VEB chief Vladimir Dmitriyev said the deal would not be signed during the show as Industry and Trade Minister Viktor Khristenko had earlier announced because of “technical reasons.” VEB has already given its subsidiary VEB Leasing its first credit line for the purchase of 10 planes, which is “about $250 million,” he said, Interfax reported.

Sergei Karpukhin / Reuters
A Sukhoi Superjet flying at the opening of MAKS-2009 at Zhukovsky near Moscow on Tuesday. Prime Minister Vladimir Putin criticized the aviation industry for losing money and offered them some more.

VEB also signed a partnership agreement with Ilyushin Finance to finance deliveries of up to 70 aircraft. The number will include six planes for Rossia Airlines worth about 3 billion rubles. Ilyushin Finance is UAC’s subsidiary and finances the leasing of most aircraft made by UAC. It will lease 45 aircraft to Atlant Soyuz under a $1.2 billion contract expected to be signed Thursday, Interfax reported.

Putin held a government meeting on the sidelines of the air show where he discussed the state of the aerospace industry.

He did not appear to change his public relations strategy from 2007’s MAKS, however. Putin posed for photographers wearing familiar sunglasses and stopped by an ice cream stand to get an ice cream sandwich. He succeeded this time, but when he tried to buy an ice cream after his 2007 visit to MAKS the vendor was so shocked by his patronage that she could not complete the sale.

Putin castigated UAC at the government meeting, saying the aerospace industry has a “lack of discipline” and that UAC “signs loss-making contracts.”

The industry’s problems are not caused only by the financial crisis but lie in “systematic issues,” including poor corporate governance, a high cost of production and low labor productivity, Putin said.

Putin ordered First Deputy Prime Minister Igor Shuvalov to prepare a report by Oct. 1 that would propose ways to make the industry more financially viable.

UAC, a state-owned corporation chaired by Deputy Prime Minister Sergei Ivanov, is expected to subdivide into three business units as part of a restructuring — a military, commercial and “special aviation” unit, RBC Daily reported last month. The corporation, headed by Alexei Fyodorov, now contains 17 different companies.

Putin also met with the Russian Knights flying acrobatic team, which lost its squadron leader on Sunday in a midair collision.

Two other pilots injured in the crash are now in a military hospital, while one of the three local residents wounded by the plane’s debris is currently in critical condition. Four dachas were destroyed by the debris and the consequent fire Sunday.

While the Ramenki district administration said Monday that they expected homeowners to pay for the damages themselves, the Moscow region administration said they would compensate people for damages, without giving any figures.