Ukrainian aviation industry in new conditions


9.03.2015 Władysław Sokołowski

Maximus Air Company from The United Arab Emirates, the carrier that specializes in the leasing of the cargo planes and the transfer of non-standard cargo on the route between the Middle East, Europe, Africa and Asia showed interests in the latest Ukrainian transport plane An-178. They announced the promotion of the Ukrainian offer on the markets of the Middle East and North Africa [1]. It is very good news for the producer- Antonov Production Plant and the Kiev government, but the future of Ukrainian aviation industry remains unclear.

In September 2013, when the Ukrainian media informed, that Antonov had started the production of the first transport jet plane An-178, the piece of news contained an important political message, related to the Russian pressure towards the Ukrainian association with the EU. The part of the association agreement was the real downscaling or the announcement of the downscaling of the cooperation in the high-tech areas for the outer space discoveries and modernization of the army. In August 2013 Russian Vice-Prime Minister Rogozin, responsible for military- industrial complex, claimed that Russia is about to give up the Russian- Ukrainian aviation projects [2[.The United Company of Aviation Production had blocked the production of the An-124 Ruslan aircraft before and Aeroflot gave up the production of the airplanes An-148 in favor of the native aircraft Superjet-100” and the orders of An-70 [3] aircraft were regularly cut.

Russia plans to limit cooperation with Ukraine in the aviation industry caused negative reactions of Kiev. The former Ukrainian Ambassador to Moscow W. Jelczenko said that both countries have the greatest potential for cooperation in three industries – aviation, aerospace and nuclear, exceeding by 7, 9 and 15 years competitors’ achievements. According to Jelczenko, combining Ukrainian and Russian effortis in these areas could result in creating “a product competitive on the world market”. He added that it it more important goal than “running dispute on where, whom and with who it will be better, which unions join or not join”. Ukrainian diplomat gave a clear suggestion that the Russian announcement on limitations in cooperation with Ukraine of production of aviation have political context associated with the preparation of Kiev to sign the Association Agreement with the EU and the refusal to join the Eurasian Customs Union [4].

It seems possible that in case of Kyiv’s resignation of signing association agreement with the EU, Russia could withdraw some of the pressure instruments, although the analysis of the development strategy of the Russian aviation manufacturing industry indicates that, mentioned by Ambassador Jelczenko, cooperation was accompanied by growing competition, designed to limit Antonov’s business opportunities.

The Russian-Ukrainian conflict on the Antonov State Company goes back to the Soviet era, as well as to recent and extensive scientific and industrial cooperation with Russia and Ukraine in the field of space manufacturing and armaments that was interrupted by the Crimea annexation and the war in Donbas. It is worth remembering the “Soviet history” of the company that has a current, multidimensional importance for Russia. Antonov State Company was founded as Research and Design Bureau No. 12 in 1920, later the name was changed to the National Enterprise Kiev Aviation Plant. Initially the plant renovated foreign aircraft production, but already in 1925 it started to build passenger aircraft K-1 and ChAI-1. The serial production of the aircraft An-2 started in 1948 and the one of the An-24 in 1959. The An-26 series was produced between 1969-1985 and there have been 18 strategic airlifters of the An-124 “Ruslan”. Released. The company produced the An-225 “Mriya” in 1988 that has since been the world’s largest and heaviest aeroplane. The An-178, a military transport based on the An-158, is aimed to improve the old-fashioned An-26 and An-32.

Ukraine has preserved and carefully guarded its rights to documentation and production of aircraft type An, which inhibits the plans to modernize the Russian armed forces and to develop cooperation with partners from other countries (such as India). As Viktor Livanov, the General Designer of the Russian JSC Ilyushin Aviation Complex, announced in autumn 2013, Russia may work on improving the Ukrainian An-124 Ruslan without the permission of the Department of the “Antonov” State Company. He stated: “the amendment to the AP-21 was adopted, so that the Russian Design Bureau can get the right to work on the modernization and maintenance of aircraft of foreign production, obtaining the consent of the Russian authorities in a situation of failure to communicate with the owner of the copyright to the plane “.[5] He announced that Russia will get almost immediately to “fine-tune” An-124, after consulting the details with the Ministry of Defence. He concluded saying: “the revival of the military-transport aviation of the Russian Federation is to begin. It has been lost as a result of the disintegration of the Soviet Union.” Livanov complained that Antonov and Ilyushin relations are bad, even though there is one school and one market, and even if “for our Ukrainian fellows the basic market is the market of Russian Federation”. He reproached Ukrainians with misunderstanding of this fact and acting on their own detriment, through the cooperation with China, which on the basis of “Antonov” and in cooperation with Kiev began production of a truly competitive aircraft Y-20 [6].

In 2013 Ukraine took certain defensive actions as a reaction to the Russian pressure. M. Korolenko, Ukrainian minister of industrial policy, announced that “Antonov” – in a new organizational structure of an aviation holding (after incorporating the 410thCivil Aviation Centre and the Kharkiv State Aviation Production Enterprise) – aims at finalizing the modernization of the An-125 Ruslan plane and preparing for its mass production. Additionally, the holding planned to produce the first An-178 in 2014 and start its trials [7]. It is worth noticing that this last construction (created in 2010) changes the outdated An-26 and An-32 models and is in fact based on the passenger model An-158, which recently went into mass production. The Russian-Indian middle-sized transport plane MTA, designed for replacing the An-12 and An-26 in the Russian air forces and the An-32 in the Indian air forces, is a serious competition for the An-178. Therefore, despite what Livanov claimed, Ukraine could not count on the Russian and other markets (especially in Asia) to buy its new product.

The Economic situation of Ukrainian tycoon in aviation industry has not been so good. The best proof is the number of new incoming contracts signed by Antonov (by the way thanks to a Russian mediator) during previous International Aviation & Space Salon MAKS-2013 [8]. Ukraine sold couple airplanes: An-158 and An-148 for 100 million USD while the representatives of Russian aviation industry signed deals worth milliards of USD. According to experts, the reason for such situation is that Ukraine and its airplanes can’t offer commutative contracts [9]. O. Panteleyev, Director of Analytical Agency stated that „according to global standards the down payment is rarely more than 15% of the contract. The rest of payments are preferential loans offered by the producer. Ukraine has problems offering such options. It is hard to expect the Antonov production plant to face such requirements in the current economic situation.

As for the above mentioned AN-178, the company’s PR department announced in January 2014 that the first model of the aircraft had been ready and that the company carried out tests scheduled for completion in March 2015. AN-178 is designed as a military transport aircraft to perform multi-role duties such as delivering military equipment and airborne forces, transportation of the injured or airdrops. One of the important merits of the plane is that it can transport virtually almost every type of cargo, including heavy sea containers. Estimations show that the global demand for AN-178 up to 2032 will rise up to approx. 200 units (earlier on this number went up to 800 units).

The issue of “Ruslan” and the future of the Ukrainian air industry is no longer the matter of the political bargain between Russia and Ukraine because of Kiev’s decision to choose the path of the European integration. At the same time, there is no clear answer to the question about the future of this highly important sector of the Ukrainian economy in the EU integration process.

Many questions arise: Will Ukraine be able to continue a very expensive production before the first contracts appear, and therefore the funds? Will the Russian-Indian or Russian-Chinese cooperation in this sector not change the world market to the detriment of the Ukrainian offer? Will Russia’s own production based on documentation and specialists from Ukraine not hamper the plans of Kiev? What will be the response of the European Union partners to the development of (competitive?…), Ukrainian production?


Sources:

[1] http://www.avianews.com/ukraine/2015/02/28_an178_maximus.shtml [accessed 2015.03.08]

[2] http://www.expo-plus.ru/currentnews/Open_2.html [accessed: 2015.03.08]

[3] ; http://forbes.ua/business/1350954-prezident-antonova-rossijskie-samolety-nam-ne-konkurenty [accessed: 2015.03.08]

[4] http://vpk-news.ru/news/15413 [accessed: 2015.03.08]

[5] http://zn.ua/WORLD/rossiya-sobiraetsya-dorabatyvat-ukrainskie-samolety-an-124-ruslan-bez-soglasiya-antonova-129904_.html [accessed: 2015.03.08]

[6] http://news.eizvestia.com/news_economy/full/rossiya-imeet-prava-na-ukrainskij-an-124-ruslan-viktor-livanov [accessed: 2015.03.08]

[7] http://ura-inform.com/ru/society/2013/09/23/v-2014-ukraina-zakonchit-stroitelstvo-an-178-korolenko [accessed: 2015.03.08]

[8] International Aviation & Space Salon MAKS is held every two years.

[9] http://www.kommersant.ru/doc/2266694 [accessed: 2015.03.08]