The initial enthusiasm for East-West joint projects appears to be waning.
Alexander Velovich/MOSCOW
AT THE END OF THE 1980s, political and economical changes in the Soviet Union opened the way for a series of co-operative agreements between Western and Soviet aerospace companies. Now, five years after the disintegration of the Iron Curtain and the collapse of the Soviet Union, the fruits of this co-operation should be ready for harvest. The fact that there are only a few signs of ripening suggests that all is not well.
At the Paris air show in June, Aeroflot- Russian International Airlines (ARIA) and Russian manufacturer Ilyushin signed a contract worth $1.5 billion for delivery of 20 Ilyushin Il-96M/T widebody transports, powered by Pratt & Whitney PW2337 turbofans and equipped with Western avionics integrated by Rockwell-Collins. Prominent among the 18 Western companies supplying parts and systems for the aircraft are MTU, Vickers, Dowty Aerospace and AlliedSignal.
SECOND ORDER
ARIA's order, only the second confirmed interest in the aircraft since the project was launched in 1990, is for ten passenger (Il-96M) and ten cargo (Il-96T) aircraft, to be delivered during 1996-8. The aircraft are to be assembled at the Voronezh production plant and, as the production capacity of the factory is only eight Il-96 aircraft a year, this one order will represent an almost full manufacturing loading for the plant until 1999.
It sounds straightforward enough, but, unfortunately, the order is subject to many of the uncertainties typical in Russia today. Although it is being described as a "firm" contract, the agreement document does not explain fully, how it is being funded.
It was planned that Russian and US partners would provide bank loans in equal shares to finance the order, but, several weeks after the contract was signed, ARIA deputy general manager Anatoliy Brylov is now saying that the financial side of the deal "...has been thought over". This suggests that substantial work, still have to be done to formalise the transaction. ARIA is confident that the Russian Government, will provide the necessary resources, as it owns a 51% share in both the airline and the Ilyushin holding company, which unites the Ilyushin design bureau and the Voronezh factory and was formed by a presidential decree, signed by Boris Yeltsin in 1994, to support Il-96 production. Non-Government sources for financing the deal also are being investigated.
On the US side, the picture is far from clear. P&W and the other US suppliers are anxious to receive loans from the US Export Import (Exim) Bank to pay for their involvement in the project, but US manufacturer Boeing has strongly objected to Exim's support of the deal.
Robert Rosati, P&W senior vice-president for Russian programmes, says: "We believe that we have a perfect right to use Exim bank loans for our engines. Boeing gets Exim bank loans for aircraft with foreign engines, plus parts of their aircraft are built in parts of the world outside of the USA. We understand their position and they understand ours. I am not quite sure who is going to win, but the end result is that we'll have to do something else if we don't get [loans], and we think we can."
An official P&W statement says: "While it is anticipated that arranging Exim support will necessitate some very complicated financial transactions, such support is absolutely critical if sales of these aircraft are to go forward".
United Technologies, P&W's parent company, has indicated its serious strategic intentions by opening an office in Moscow and appointing Rosati, a corporate veteran with 52 years experience in the aviation business, to co-ordinate P&W programmes in Russia. He says that Boeing "...builds about 650 aircraft a year; Ilyushin builds less than ten. It's a ridiculous situation." He adds that the purpose of keeping the Il-96M going is to supply the Russian market, claiming that it will not sell in the West for some time because the demands of the home market will take all the aircraft Ilyushin can produce.
RUSSIAN HOPES
When the alliance between Ilyushin and its US partners began, the Russians thought that Western engines and avionics installed in a Russian aircraft would help them to gain a share of the market outside the Soviet Union and its traditional East European and Third World customers. Igor Katyrev, Ilyushin chief designer, says that an aircraft equipped with Russian engines and avionics is sufficient for Russia, "...but we have to advance our aircraft to foreign markets, and we have to adjust ourselves to the operational requirements of foreign airlines". Ilyushin had hoped that P&W engines on the Il-96 would make it more attractive for operators whose infrastructures and "habits" are built around Western products.
Ilyushin does have one potential Western customer in Dutch leasing firm Partnairs, which has issued a letter of intent to buy Il-96M/Ts. This order, however, and any others which may follow from abroad, depends on the certification of the airliner to Western standards.
For more than two years, the US Federal Aviation Administration and Russia's State Aviation Register (SAR) have been working hard to sign a Bilateral Airworthiness Agreement (BAA). The Il-96M/T has been used as a pilot aircraft to verify requirements of US Federal Aviation Regulations (FAR 25) and corresponding Russian AP-25 certification, while a four-seat Il-103 is being used to double-check FAR 23 and AP 23 regulations applicable to general-aviation aircraft.
Katyrev says: "We have held 41 meetings, 21 in Russia and 20 in the USA, discussing certification procedures of FAR-25/AP-25 regulations, and definite progress has been achieved. Mutual understanding has been established on several chapters." He says that some requirements of Russian regulations are stricter than those of the FARs, because of specific operational conditions for commercial aircraft, and an airfield network of somewhat lower class than that in the USA.
Valentin Sushko, SAR chairman, says that a meeting in Washington in April agreed the protocol to advance further the signing of the BAA. Ilyushin and other Russian design bureaux and diplomats from both countries participated in the discussions, and it was agreed first to proceed with the Il-103, a small aeroplane, which is relatively easy to certificate. About three months after the SAR has issued the Russian type certificate for the Il-103, the FAA will conduct "shadow certification" and, on completion of that, an agreement on light aircraft will be signed.
The same approach will be used for the Il-96M/T. Katyrev says, that he expects Ilyushin will receive its type certificate, for the aircraft from the SAR in early 1996, which, if the BAA is signed as planned, would lead to FAA certification in the first half of 1996, opening prospects for export sales.
Michael Hristik, president of United Technologies' representation in Moscow, says: "It will be very difficult for the new airliner to get through to the international market, but its economical efficiency, reliability and low maintenance costs will allow it to compete successfully with other manufacturers' products."
DOUBTS ABOUT FINANCING
Valentin Sushko of the SAR is concerned, however, about insufficient financing to complete the work on the BAA with the FAA. "Now everything is in the hands of Russia. If we have done everything in time, we will get a very important result which will provide significant advances for our industry," he says. He adds, however, that the Russian Government has provided "...not a single dollar, not one single rouble for this work: all is being done on enthusiasm".
While progress on getting Western certification for the Il-96M/T can be considered satisfactory, the situation with another major East-West programme, the Tupolev Tu-204-124, powered by Rolls-Royce RB.211-535 engines, is far less advanced, according to Sushko. "Unfortunately, we have not made such impressive advances towards mutual certification of the Tu-204 as we have with the Il-96," says the SAR chairman.
While the Il-96-300, with Russian Perm/Aviadvigatel PS-90A, engines has been flown on regular passenger routes for almost a year now, the twin-engine Tu-204, with the same engines, only received Russian type certification, with certain flight limitations, in December 1994. It has not yet gone into regular passenger service.
Sushko cites economic difficulties of the Tu-204-124 programme as a major reason for the lack of progress. In late 1994, the Tupolev design bureau and the Ulyanovsk Aviastar production plant publicly expressed their disillusion with Fleming Russia Investment (FRIC), their major Western partner in the Tu-204-124 programme. FRIC is a Russian-registered subsidiary of the Robert Fleming Bank, which worked out the financial side of the project.
At the time, Nickolay Kachalov, Aviastar deputy general manager, claimed that, in all joint projects with Aviastar, FRIC "...has not fulfilled its obligations as a financial participant, putting the projects on the brink of liquidation".
Oleg Alasheyev, Tupolev deputy general designer for the project, says that, through inexperience, agreements on the re-equipment of the Tu-204 were not made clear enough and did not define the financial obligations of FRIC. "That was a substantial mistake on the Russian side," he says.
He acknowledges that FRIC conducted the advertising campaign, but argues that expenses for participation at air shows were disproportionally high. "It is difficult to get rid of the impression that a significant part of allocated resources were spent on itself and that the bank does not invest enough in aviation projects," he says.
FRIC vice-president Mark Jarvis counters: "Some Russian enterprises have an impression that foreigners will give as much money as will be demanded." He believes that Fleming fulfilled its obligations in the Tu-204/R-R project, having displayed the Tu-204 at several air shows. He says that Fleming put on hold its investment in the venture about a year ago, adding that a lack of operating capital "...did not help the Tu-204 certification or sales".
KEY TO PROGRESS
A key to progress in joint programmes with Russian companies is the willingness of the Western partner to share financial risk and to provide expertise and equipment without demanding immediate payment from the Russian side. P&W, Rockwell-Collins and other Western participants in the Il-96M/T project provided their components for the Il-96MO prototype, which was assembled at the Ilyushin plant in Moscow, free of charge. It was anticipated that the deliveries for the production phase of the programme would be properly paid for, but firm financial guarantees for the first order have not yet been obtained. Despite that, however, Western partners keep delivering engines and equipment to the production plant in Voronezh, and this is the major reason for the programme still being alive.
According to Rosati, P&W has so far spent about $50 million on its operations in Russia, bringing in people and equipment and hiring Russian personnel, without any firm guarantee that this investment will show a return. He explains the reasons: "The first premise is that this country will solve its problems. We certainly believe that it will become a world economic power."
This approach is not universal, and General Electric and CFM International show less confidence in the future of Russian aviation. For many years, discussions about re-engineing the Ilyushin Il-86 with CFM56 turbofans have been going on, so far with little result. Ilyushin's medium-range wide-body transport, 102 of which have been manufactured since 1981 by the Voronezh plant, badly needs modern engines to meet new European ecological requirements and be more fuel-efficient. Re-engineing with Western engines is seen as one of the ways to solve this problem.
Recently, Ilyushin approached Russian and CIS operators flying Il-86s with a business proposal to replace current Kuznetsov NK-86 engines with more efficient Western ones, and received positive written replies from five airlines which have a combined fleet of 26 Il-86s. Ilyushin specialists estimate that this number is sufficient to make the whole project economically viable.
Il-86 chief designer Igor Katyrev thinks that a specialised enterprise, possibly a joint venture with the Ilyushin design bureau, the Voronezh factory, CFM International and, possibly, the interested airlines and other investors, should be established to realise the project.
Katyrev says, that the programme had been advanced to the stage when, Ilyushin had even manufactured pylons for the new engines, but the lack of financing and the unwillingness of GE management to accept the sort of conditions of co-operation, which had been agreed by P&W on the Il-96M/T programme, froze the project. "It's still frozen," concludes Katyrev.
Peter Balabuyev, general designer at the Antonov design bureau, who spoke at the recent international conference "CIS Aerospace 95" held jointly in Moscow by Flight International and Aviaexport, expresses the bitterness of the CIS aerospace industry caused by its unsuccessful experience of international co-operation. He says that many years of meetings and discussions have proved that the interests of the CIS aircraft industry do not always coincide with those of the established Western aviation companies.
He says, that there are three major groups of proposals received by the CIS from the West, the delivery of Western aircraft to the CIS, the manufacturing of Western aircraft at CIS factories and the establishment of "all sorts of centres and groups to sign contracts, for acquiring and implementing technologies, in which we have achieved certain successes previously".
Balabuyev concludes that, unfortunately, all three directions are "...ruining our industry. Where those proposals find their way, state interests, are constantly being overwhelmed, by the interests of foreign companies and only naive people do not notice this. It is especially pitiful that some state officials do not see this."
Fortunately for both East and West, examples of successful co-operation appear to exist as well, but practically all of them have not advanced to the phase where this political or administrative success can be measured in roubles, dollars or pounds. The industry will have to wait for two or three years more, to see if East West co-operation is as fruitful as it is hoped for.
Source: Flight International
