Russian Officials Ate Tupolev 214
20.04.2010 — Analysis
The management of "United Aircraft Corporation" JSC (UAC) has announced the termination of the production of Tupolev 214 aircraft. The air carriers are advised to reorient for the more up-to-date models being developed by Russian designers. Experts reckon that UAC managers were too fast with the decision; new designs will not come to the market tomorrow and they might turn out to be no more profitable than Tupolev 214 has been. The RusBusinessNews observer established that the aircraft building sector in Russia is not aimed at the production of competitive planes and that it will take years to tune up the industry.
The mid-range Tupolev 214 plane created as a counterpart of Boeing 757 and Airbus А-321 has been used by Russian air carriers since 2001. According to Serghey Bykhal, the Manager of the Press Sevice of Transaero air carrier, the plane has all necessary flight qualities to compete with imported machines. The problems only happen with spare parts and the after-sale service of the craft. Transaero fleet has three Tupolev 214 planes. The contract dated 2005 planned the supply of 10 planes within two years but the manufacturer has not managed to provide the planned quantities.
Experts say that the announced price of the plane turned out unaffordable for carriers and they preferred to purchase second hand craft from abroad, having lobbied the customs concessions on this kind of import in the Government. Some air carriers agreed to buy Russian planes, having signed very lucrative contracts which are not so lucrative for the manufacturer. The latter had to make concessions because Tupolev 214 was equipped with the unfinished PS-90A engines. The Perm engine builders have perfected the power unit only in 2009 and the new engine is undergoing the certification procedure. All these years Tupolev 214 has been made in small batches at the Kazan plant. For instance, two planes have been built for monitoring of the environment within the Open Sky programme, an order placed by the Russian Federation Government has been completed.
The crisis has made this situation worse, there are no orders for Tupolev. Aleksey Fyodorov, the President of UAC, said that the production cost of Tupolev 214 is very high which is why it is difficult to run the commercial operation. A decision has been made to stop the production of this model. It happened two months after the Russian Minister for Industry announced UAC's plans to make ten Tupolev 214 planes in 2010- 2012.
Valeri Poklad, the Chief Designer of "TUPOLEV" PSC, said that this statement made by Mr. Fyodorov is too hasty. According to the expert UAC managers are blinded by the prospects of SuperJet 100 and MS-21 coming to the market. It has been officially announced that the Sukhoi Corporation will start the batch production of the Russian-foreign plane in the middle of 2010 and that Irkut will master the Russian "long range plane of the 21st century" in 2014. Mr Poklad thinks otherwise, that SuperJet will not come to the market before 2011 and it would take at least 8-10 years to start the production of MS-21. The designer asserts that the today's demand from air carriers amounts to 300 planes due to the regularly missed production deadlines. In this situation Tupolev 214 would not be superfluous at all.
The Deputy Engineer of one air carrier, demanding to remain anonymous, told RusBusinessNews that Tupolev 214 is a good plane, a foundation on which the aircraft building sector could be developed. All shortcomings of Tupolev are due to the current system of the Russian economy. Everything has to be reconstructed, from the extraction of ore to the training of specialists. Competence in aircraft building is developed over a number of years and competitive products are conceived in competition of design schools. Attempts to resolve the problem by joining all design bureaus into one corporation or by splitting the design teams into "combat" and "commercial" will not result in anything good. Aleksandr Shengard, the Chief Designer of "TUPOLEV" PSC, has already said that denying the bureau the option to design commercial planes will result in the inevitable loss of the domestic aircraft building school with all ensuing consequences for the defence capabilities of the country.
Experts reckon that the production of Tupolev 214 has been stopped not due to the production cost. The profitability of SuperJet raises just as many questions. Starting in 2003 the project cost has been growing continuously. According to mass media, it was planned to spend 440 million dollars for research and development. In 2004 the research and development work was assessed at 600 million, in 2005 - 751 million. Then experts calculated that taking into account the costs of the engine the cost of one plane will amount to about 30 million dollars which automatically excludes Russian air carriers from the numbers of its buyers.
However, in 2008 members of the State Duma of the RF have conducted an enquiry which established that further 900 million dollars is needed to start batch production of this plane. The result of such generous funding if the production of 12 certified engines in 2010 and in 2011 - at most another forty. In order to achieve large batch production, a modernization of production facilities turns out to be needed. Where the money has been going before this point can only be fathomed by the Accounts Chamber of the RF.
It is evident to experts that the sales of the extremely expensive plane are impossible without preferences offered by the State. Concessions would enable SuperJet, made almost entirely out of imported components, to be sold in the Russian market at the same price as An-148 which is 70% Russian. The losses made on the discounted sales of the "golden" plane will sooner or later have to be covered by the State, which means all tax payers. This in itself would not be unusual, one has to pay for the high tech products, if not for the "evil" figures; for the money invested into SuperJet foreign companies manage to make planes which they then sell without any discounts.
Mentioning that the disintegration of the Russian economy affects the cost of Russian planes does not convince the specialists; during the war all the industry has been built from scratch and then in 2-3 months time people managed to resolve much more complex problems than now. Experts believe that the cause is different, that in the country the system has been established at the foundation of which there is not the drive to create a competitive product, but to use up the budget money. On the whole the project for the production of the mid range SuperJet 100 is a nice feeding trough for the Russian lobbying officials. Tupolev 214 plane has been sacrificed to their commercial interests.
The consequences of the establishment of the economy according to the officials' moulds will manifest themselves more than once. China, which got used to doing everything fast, is going to be present with A-320 planes, the production of which it is mastering now, in the same markets as Russians with their planes. There is no doubt that the Chinese products will be cheaper. So, today nobody can give guarantees that tomorrow UAC managers are not going to say that the production of SuperJet and MS-21 is unprofitable and thus the project will have to be shut down.
Aleksandr Lebedev, an entrepreneur, who gave a lot of effort to get An-148 into the market, made announcements in the media that Russian capitalism reeks of Soviets. "I have a feeling that the State-run sector of the USSR with all its rules, values, and regimens has migrated into the private sector. People are the same, made of the same material, the same topcoat".
It is obvious that while the key positions in the industry are not taken by people educated in Harvard and the like and trained to make competitive products rather than use up the allocated money, Russia is doomed to lose the economic competition to its neighbours.
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