Author`s name Pravda.Ru

Fradkov to preside over a conference in Voronezh on aircraft building in Russia

Russia's Prime Minister Mikhail Fradkov will make a working trip to the Central Federal District city of Voronezh late on Thursday, reporters were told at the government press-service.

The premier will tour the production premises of the Voronezh aircraft building JSC and attend a ceremony at which an IL-96-300 will be handed over by Ilyushin Finans Co to Krasnoyarsk Air Lines.

At the plant Fradkov will chair a conference on the development of aircraft leasing and support for the export of civilian aircraft.

Besides, the prime minister will visit ZAO Promkor, where he will familiarise himself with agricultural and dairy production, and discuss the development of the agricultural complex. On the evening of the same day Fradkov will return to Moscow.

A government source told RIA Novosti that the main subject to be discussed during the premier's visit will be prospects for aircraft production in Russia.

At present Russia has three functioning state-controlled aircraft making plants - in Voronezh, Ulyanovsk, and Kazan. Each of these enterprises can turn out 18 to 20 planes a year. To break even each plant must assemble three to four aircraft annually. In 2002, these factories produced seven planes and in 2003, 11. In the current year they have already rolled out seven aircraft, with 15 in the pipeline.

The source explained that Russia's aircraft building is beset by a number of problems, which effectively form a "vicious circle" - the problem of demand, the problem of supply and the problem of transfer from industry to the air carriage sphere.

At the moment the Russian air fleet is heavily outdated, and by 2008 it is necessary to replace about 180 airliners.

In Russia, there are 219 air carriers, with 20 of them accounting for 80 per cent of the flights, and with four of these 20 responsible for 50 per cent of the traffic.

"Most of the lines are small and weak, unable to spend large sums on fleet renovation," the source said. In this context the state decided to focus state support for the aircraft industry on air leasing.

The state currently has controlling stakes in two leasing companies - Ilyushin Finans and Finansovaya Lizingovaya Kompaniya.

In 2003, Ilyushin Finans received from the federal budget $80 million and raised $70 million in loans. Using this money the company began having two IL-96-300 airliners built for Krasnoyarsk Air Lines, one of which is already assembled, and the second is scheduled for delivery in August of this year.

Finansovaya received from the federal budget $52.5 million and borrowed $47 million. With this money the company is having four Tu-214 airliners, three Tu-204-100s, four An-140s, and three An-38s built.

This year's budget does not provide at all for aircraft leasing and subsidies to fund part of the interest rate in purchases of Russian aircraft, the source said.

For 2005 the leasing companies ask for something like $100 million to be penciled in the federal budget to ensure the production of at least three to four aircraft at the largest Russian aircraft plants.

A source in the cabinet of ministers told RIA Novosti that the government is planning to merge these two big leasing companies in the future.

The source said that these companies have very low capitalisation at present - around $100-200 million. In the view of government experts, the capitalisation of one leasing company should be of the order of $1.5 billion.

The source said that some foreign leasing companies, among them those in Germany and the US, are showing an interest in Russian aircraft leasing. But they can participate in the Russian leasing company only if its capitalisation exceeds $1 billion, the cabinet source said.

The merger prospects of the two biggest aircraft leasing companies are linked by the source directly with the prospects of a single national aircraft building firm. "We now have a complete understanding of the fact that the idea of creating a single aircraft building company is a correct one," he said.

The delay with the adoption of this decision is technical in nature. "That this is a correct path is not doubted," he emphasised. There are only some questions connected with the stages of the plan implementation, including at which stage and to what extent the state should participate in creating this company, the government source added.

According to him, materials for setting up a single aircraft building company are at present being studied by Prime Minister Mikhail Fradkov.