Russia’s United Aircraft (UAC) is still finding ways to fend off rival Chinese combat aircraft manufacturers and maintain its client base, despite a slow pace of internal structural reform and financial sanctions from the USA.
Indeed, since Russian President Vladimir Putin founded UAC in 2006, via a decree that combined Soviet brands Ilyushin, Irkut, Mikoyan, Sukhoi, Tupolev and Yakovlev into a new joint-stock company, consolidation in the Russian aerospace industry has been painfully slow. Aerospace companies have been merged in name, but do not necessarily operate as a unified corporate entity, with design bureaus and manufacturing plants maintaining a degree of separation, say analysts.
Most recently, in March, UAC parent company Rostec announced plans to push UAC, Sukhoi and RAC MiG closer together by creating a single corporate aircraft manufacturing centre, which would consolidate the management of aircraft programmes.
Yet, despite plans to co-locate design bureaus within a “Unified Engineering and Design Center” in Moscow, Sukhoi and MiG will remain independent schools. Each will receive funds for new aircraft development efforts, says Rostec. And, reforms will not be swift, but will take place over several years.
DESIGN COMPETENCIES
“We are forming in Moscow a unified management organisation and a unified centre of design competencies for all UAC companies,” said Sergei Chemezov, general director of Rostec, in the March announcement. Systemic reforms should improve financial stability, he added.
Plans to keep funding independent combat aircraft design bureaus come despite few foreign orders for MiG aircraft. The Algerian air force has 12 examples of the MiG-29M on order, while the Russian air force has two MiG-29UBs and two MiG-35UBs on order, according to Cirium fleets data. Since the collapse of the Soviet Union, Sukhoi has been the dominant combat aircraft manufacturer in Russia, selling large quantities of fighters to China and India, in particular.
“MiG products have struggled to find markets, which also mirrors the low recent adoption rate in the Russian air force, although some countries like Algeria and Egypt have purchased the latest variant of the MiG-29,” says Derek Bisaccio, military markets analyst with Forecast International.
Notwithstanding a dwindling backlog, UAC chief executive Yury Slyusar says he is bullish on the future of MiG.
“We will continue the production of MiG aircraft through implementing existing orders for delivery of these aircraft and we are quite positive with our market outlook with regard to light fighters to which class the MiG-29 or MiG-35 belong,” he says. “Besides, the fleet of MiG aircraft supplied in previous years is really huge, there is always need for the repair, overhaul, maintenance and upgrades, which we all can provide to our customers.”
According to Cirium, there are 1,624 MiG fighters in service today – offering plenty of work for aftermarket sales. The bulk of these, some 413 fighters, are operated by the Russian armed forces. The second largest operator, India, operates 249 MiGs of various types.
Since the fall of the Soviet Union, Sukhoi has had more success. There are some 2,338 Sukhoi fighters of various types in service and 191 examples on order, according to Cirium. Yet, MiG keeps holding on.
“For the past couple of decades, it’s been a pretty good series of export wins for Sukhoi, with the whole Su-30 series,” says Richard Aboulafia, vice-president of analysis at Teal Group. “At times, it looks like they defeated the MiG-29 and MiG-35. But, they can’t quite administer the coup de grace. The -29 and -35 are still out there, primarily the -29 in crucial markets like India and Egypt.”
Ultimately, UAC hopes MiG and Sukhoi will gain from greater efficiencies after restructuring.
“The point is that the work of our design bureaus can be more optimal, that is, they can use the same administrative infrastructure – lawyers, financiers, human resources,” says Slyusar. “In fact, we are repeating the path of consolidation that most of the same companies have gone through including Russian Helicopters with the Mil and Kamov design bureaus. Both design bureaus are working but they have the same administrative infrastructure.”
SPECIFIC SPECIALITIES
He points out that Sukhoi and MiG have different specialties. Sukhoi has more experience developing heavy fighters, while MiG’s strength is in the lightweight segment.
Moscow may have its reasons for keeping MiG alive, says Aboulafia.
“It could be they want some redundancy in the industrial base,” he says. “It could be that there’s simply a place in the market, for the -29 or whatever it is. It’s not going to be industrial logic that kills it.”
Time will tell if the merger of back-office functions will reinvigorate MiG, Bisaccio says.
“One project to watch moving forward is the PAK DP, a replacement for the MiG-31 interceptor, which has generally been under the purview of MiG Corporation,” he says of the stealth fighter-interceptor also known as the MiG-41. “The pace of its development will be an indicator of the overall effectiveness of the Sukhoi-MiG merger.”
Slyusar says UAC is focused on “traditional markets where Soviet and Russian aircraft were supplied”.
Likely major customers include Algeria, China, Egypt, India and Vietnam, says Bisaccio.
“Some of Russia’s neighbors in the post-Soviet space, moreover, present sales opportunities as well, such as Armenia, Azerbaijan, Belarus, Kazakhstan and Uzbekistan, although typically for smaller batches of jets,” he says. “With the arms embargo on Iran now lifted, it can be expected that UAC will seek re-entry into the Iranian market, given the large number of ageing jets in Iran’s air force.”
Forecast International projects that UAC will produce 485 fighters over the 2021-2030 timeframe, representing a 12.4% share of the global fighter market. Top sellers currently include the twin-engined, two-seat Su-30 and the single-seat Su-35.
SALES PROSPECTS
The Su-35 is pricier, but its export sales are picking up. Egypt received its first five examples in February. “Their sales prospects have been helped along by the fact that the Russian air force has procured these jets in large quantities, and also put them to use in combat operations in Syria,” says Bisaccio.
Sales of the Su-57E, the export version of Russia’s stealth fighter, are targeted at advanced militaries, says Slyusar. “Of course, this is a very demanding aircraft. And, countries with highly skilled air forces that understand all of its advantages are the first in line to be potential customers for its export version,” he says.
Although a joint production deal for the Su-57 between India and Russia fell apart in 2018, UAC has not ruled out similar deals with other interested parties.
“We are ready to consider joint manufacturing of the Su-57 with some customers in the future,” says Slyusar. “One should note that the Russian side has an excellent experience in joint manufacturing and transfer of technologies through licences to our partners. Suffice it to recall the examples of the Su-30 with India and China.”
Because Russia plans to fill orders for its own air force first, exports of the Su-57E are unlikely to begin until the latter half of the 2020s at the earliest, says Bisaccio. The Russian air force has 75 Su-57s on order.
One of the main challenges Russian aircraft exports continue to face is the USA’s Countering America’s Adversaries Through Sanctions Act (CAATSA), a law punishing countries and companies that do business with Russia.
At the MAKS air show in 2019, Victor Kladov, director of international co-operation and regional policy for Rostec, complained that Indonesia was wary of buying Russian aircraft due to the threat of US sanctions. Jakarta has yet to complete a planned purchase of 11 Su-35s for $1.14 billion, even though the deal was first announced in 2017.
“Russia has sought to circumvent CAATSA through several ways, such as switching the currencies used in the transactions to roubles or euros, or even offering barter deals,” Bisaccio says. “Russia has also sought to shield its financial sector by reconstituting Promsvyazbank as the primary handler of the state defence order, and the bank may also be involved in export agreements as well.”
Some countries have defied CAATSA and bought Russian equipment regardless. For example, Turkey bought and then received the Almaz-Antey S-400 Triumf surface-to-air missile system in 2019. Consequently, it was ejected by the USA from the Lockheed Martin F-35 Joint Strike Fighter programme and was sanctioned in late 2020.
India has also purchased the S-400 and is scheduled to receive the weapon system between October and December 2021. The country is an important counterweight to China for the USA and because of this analysts wonder if US President Joe Biden will sanction New Delhi.
“India is simply too important to not give them a waiver,” says Aboulafia.
Although China is one of Russia’s largest export customers, Beijing is pushing hard to develop a domestic military aviation industry, which will compete globally. In fact, last November, the Royal United Services Institute concluded that China has eclipsed Russia in manufacturing combat aircraft. The UK-based think tank said Chinese sensors, datalinks, weapons and low-observable technology were superior, while Russia kept an edge in aircraft engines.
Yet, China has struggled to find international customers for its combat aircraft.
“The Chinese seem to be stuck in a kind of an export rut. If we’d had this conversation 20 years ago, you would have said, Pakistan, Myanmar, North Korea and African countries [are current customers],” says Aboulafia. “Here we are 20 years later, their aircraft have gotten better, but their market position hasn’t changed at all.”
One challenge facing Chinese fighter exports is its reliance on Russian engines. The Chengdu/Pakistan Aeronautical Complex JF-17 relies on a single Klimov RD-93 engine – the same powerplant as the MiG-29. The JF-17’s export success has been modest. It is in wide use in Pakistan, which co-developed it, but only Myanmar and Nigeria have acquired the type.
The more capable Chengdu J-10 still relies mainly on the Russian Saturn AL-31, but operational J-10Cs have been spotted with the Shenyang WS-10 Taihang.
This dependence on Russian engines gives Moscow a degree of leverage over Beijing’s fighter sales. Yet, as China’s engine capabilities mature, it is entirely possible that Chinese fighters might secure sales that would ordinarily go to Russia.
Until then, China’s most promising export fighter, the J-10, is likely to struggle. “It’s not a bad plane,” says Aboulafia. “And they haven’t scored a single export customer.”
FOREIGN POLICY
China needs to find a country willing to take a chance on its aircraft. However, at the same time, Beijing has taken up ‘Wolf Warrior’ diplomacy, a form of confrontational and combative foreign policy that has hardened many populaces’ stances toward it.
The country’s diplomatic practices may make nations wary of doing business with it, says Aboulafia.
“It’s possible that their habit of working with sharp elbows abroad is hampering [aircraft sales],” he says.
It appears that Moscow keeps an edge with a sort of geopolitical customer service that Beijing lacks.
“The Russians have always been clear that they’re really good when it comes to building a high-end jet,” says Aboulafia. “They’re never going to say, ‘You need to ask to use the keys before using [the] jet’. They say ‘We will always support you’.”
