In May this year, Russia's deputy economics minister Andrew Svinarenko told the Aviaexport/Flight International conference in Moscow that the industry must change, and that the Government cannot and will not continue to support the present mix of over-diversification and over-capacity. That is a fine sentiment, but one of little substance unless Government and industry can agree to put it into practice.
The evidence from the latest Moscow show is that Russian industry, together with the former-Soviet satellites in the other CIS states is, simply, still trying to do more than either its own resources or its markets can support. There are at least four major CIS civil-aircraft producers vying for shares of their home market, competing not only with each other, but with the big Western manufacturers as well. If the global market can now support only two Western manufacturers of large airliners and an ever-decreasing pool of regional-airliner makers, how can the CIS market support an additional three airliner product lines?
Similarly, if the ever-fewer Western combat-aircraft builders are having to pool resources to compete in the only big remaining single market (the USA), what chance is there for three to survive in the almost-destroyed CIS markets? Their plight is all the worse because much of their traditional "export" markets are being hotly contested by the West.
None of this is made easier for the CIS industry by its Byzantine structure. Although much progress has been made in pulling design bureaux together with production plants, the market is still hamstrung by far too much duplication, only enhanced by local political rivalries within the CIS. Just as the European industry needs to follow its US competitors into even greater production rationalisation, so does the CIS industry - but its rationalisation is needed just as much in product-planning.
Neither can the CIS industry hope to grow fat on the current levels of production in its home aircraft market. There may be plenty of demand, but ,for the time being at least, there is still a scarcity of hard dollars (or roubles)to pay for the scale of re-equipment required by either civil or military operators.
The obvious solution in both civil and military markets is for the CIS manufacturers to carve out niches for products which will have a genuine international appeal. In the marketing parlance with which these manufacturers must become much more familiar, their USP(or unique selling point) is that their costs (and therefore their selling prices) are much lower than those of their Western competitors.
Their airliner products might not have the image to appeal to the sophisticated international business traveller, or the reliability to appeal to the most demanding international armed service, but they are cheap. Western airliner manufacturers acknowledge that they cannot afford to build the $20-million 100-seat regional jets which many of their customers want. The CIS manufacturers do have the low cost bases which just might allow them to tap into such markets with no-frills airliners, especially if they adopt Western approaches to product quality, marketing and product support. Attacking this market offers a great deal more to those manufacturers than trying belatedly to re-invent the massively sophisticated Boeings and Airbuses.
The military market poses a bigger problem: while the niche export market may be in the cheap-and-cheerful sector, the Russian armed forces are still looking for US-style technology and performance which (unlike their civilian counterparts) they cannot yet buy from the West. Their indigenous manufacturers must therefore continue to develop that technology, but cannot rely on their home customers to fund them - so they must also develop viable exports.
Svinarenko has made bold promises (or threats)of Russian consolidation into as few as two major integrated civil/military groups. That would give it the chance to cut out duplications and pointless rivalries, but it will only happen if politicians and industry alike are prepared to rethink their priorities. The real battle for Russian industry is not to defend its home ground, but to invade that of its competitors with products they cannot match.
Source: Flight International
