Sukhoi Turns Swords Into Ploughshares


Financial Times
July 14, 2008 Monday
London, England


It armed the Soviet military, but now it has civilians in its sights,
writes Miriam Elder

On an airfield in the Far East in mid-May, a sleek mid-range jet
touched down smoothly after a maiden, one-hour voyage, marking Russia’s
anticipated entry into the world of global civilian aviation.

With the SuperJet-100, Sukhoi – which made its name arming the Soviet
Union and its allies with bombers and fighter jets – is hoping to
overcome the stereotypes that cling to Russia’s ailing civilian air
industry and lead the country’s foray into the global market.

Yet the project, marked by delay and a strong state presence, indicates
the day Russia can challenge the domination by western companies could
be a long way off. "Our first task is to become the best in terms of
regional jet manufacture, and we consider our competition the likes
of Bombardier and Embraer," Mikhail Pogosyan, the general director
of Sukhoi, says in an interview at the firm’s Moscow headquarters.

SuperJets are regional aircraft likely to seat 75 to 95 passengers
and the first aircraft fully designed in the post-Soviet era. Mr
Pogosyan says 70 per cent will be destined for customers in Europe,
the United States, and south-east Asia.

"Of the 75 orders we already have, 12 are going to a foreign country,"
he notes. ItAli of Italy has ordered 10, and Italy’s Alenia, a
subsidiary of defence giant Finmeccanica, owns a 25 per cent stake
in the Sukhoi SuperJet project. The other two planes were ordered by
Armavia of Armenia. Hungary’s Malev has floated the idea of ordering
15 of the aircraft, which are expected to cost about $25m apiece.

"We’re certain that soon we’ll see a host of new contracts," Mr
Pogosyan says.

Previous attempts to market post-Soviet civilian aircraft to western
markets, including the Tu-204 and Il-96, failed, but Sukhoi is hoping
Alenia’s involvement as its marketing agent will mean that this is
not the case this time around.

An increased focus on safety – the SuperJet will fly 80,000 test
hours instead of the 20,000 flown by its predecessors – could help
change that too.

Yet the question remains as to when the SuperJet will get off the
ground commercially. It has flown five of an expected 600 test flights,
and its target launch date of late 2008 has already been pushed back
by at least one year.

"A plane is like a child," says Mr Pogosyan, commenting on the secrecy
that surrounded the SuperJet’s maiden test flight in May. "It can be
born two days early or three days late. The most important thing is
that the baby is healthy and develops well."

Sukhoi, along with Russia’s military jet design agencies and
manufacturers, has been folded into the state-controlled United
Aircraft Corporation, in line with the Kremlin’s desire to build
national champions in strategic industries. It is chaired by a deputy
prime minister, Sergei Ivanov, who has said he hopes to see Russia
become number three globally in civilian and transport aircraft by
2025, winning up to 12 per cent of the market, up from around 1 per
cent today.

Yet many remain sceptical about the state stamp on Sukhoi’s global

"Privatisation is almost certainly a necessary pre-condition for
any Russian jetliner recovery," says Richard Aboulafia, an aerospace
expert at the Teal Group. "The SuperJet is more about maintaining a
flagship project. It’s a way to defend a bit of what they had."

In building the SuperJet, Sukhoi has succeeded in casting off the
integration problems that plagued its erstwhile predecessors, the
Tu-204 and Il-96.

Some 40 global companies, from Thales to Goodrich, are contributing
parts to the jet, and Boeing has acted as a consultant to the $1.4bn
project since its inception at the turn of the century.

"This new aircraft, with good technological characteristics, can
compete and can get a niche in the global market," says Elena Sakhnova,
an aerospace analyst at VTB, the Russian bank.

Mr Pogosyan says the SuperJet is just the beginning. It is likely the
company will look next at a regional jet aimed at business class –
a VIP jet to match Russia’s teeming oil-driven wealth.

"We’ll present to the market a broad nomenclature of trade on the
basis of this SupetJet-100," says Mr Pogosyan.

He expects civil aviation to surpass the military’s share in Russia’s
aerospace industry within five to seven years. "This is not because
the military portion will end its work – it might even grow – but we
want to boost the amount of civil aviation."

Mr Aboulafia, of Teal, says that in future Russia will need to follow
the Japanese model and link up with Boeing or Airbus to produce larger
competitive jets.

"Unfortunately, the thrust of Russian aerospace initiatives right now
involves national jetliners, which is not a promising way forward,"
he says.