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Analysis & Opinion
17.06.09 Flying First Class
By Sergei Balashov

Best known for its bombers and fighter jets, Russian aircraft producer Sukhoi has decided to assume a completely new image with its brand new line of commercial aircraft, meant to give Russia a strong presence on the global market. The new Sukhoi Superjet 100 was the main attraction of this year’s Salon du Bourget in Paris, marking the world’s biggest air show with its debut flight. The show routinely features Sukhoi military aircraft, but this time the Russians opted to draw all the attention to their new commercial planes.

Sukhoi plans to dedicate about 40 percent of its production to commercial aircraft, while another 40 percent will be devoted to producing military planes, and the rest to servicing the already sold aircraft. The Superjet is manufactured by Sukhoi Civil Aircraft, a subsidiary of the Sukhoi Company.

Sukhoi struck up a partnership with Boeing a couple of years ago to get the American corporation to assist Sukhoi in its civil aircraft program. Russians believe the Sukhoi Superjet 100 is a big step forward technologically, owing to the cooperation with Boeing.

The technology employed by Russian commercial aircraft producers is mostly outdated. Most of the commercial aircraft manufactured in the Soviet Union and Russia were simply modified versions of much more advanced military planes. The civilian modification of Tu-104 even had fixings for missiles.

But Sukhoi’s new line of commercial aircraft is considered a fresh start for the industry. “I believe we have a bright future,” said Sukhoi CEO Mikhail Pogosyan at the air show in Paris, referring to Sukhoi’s ambitious plans to capture a 20 percent share of the market and expand into Asia, Europe and North America.

In order to achieve this, Sukhoi plans to manufacture 70 planes annually by 2012. Russia currently produces just ten aircraft per year, while the overall global demand for commercial flights is at its lowest, and airlines are struggling to survive, with some of the big names in the industry already having gone bankrupt. But aviation experts believe the Superjet, which belongs to the 75 to 95 seat category, could be competitive, and is already a good fit for commercial airlines amidst the current economic conditions. “If you look at bigger jets like the Boeing 737 and Airbus 320, they have one and a half times the capacity of Sukhoi’s plane. But now they are flying half full. So on the contrary, it is actually a good time for Sukhoi to hit the market with this type of plane,” said Roman Gusarov, the chief editor of

However, it remains unclear whether Russia has the capacity to expand production sevenfold in just a few years. “This means Sukhoi would be producing one plane every five days. The whole aviation industry is barely handling ten per year, so we will see how exactly they plan to change it so fast; we’ll see where they can get sufficient producing capacities and that many trained personnel. This is more of a concern than whether the demand will be enough to absorb that many planes,” said Gusarov.

The demand seems to be there, as Sukhoi has already been able to seal two deals worth over $1.5 billion. Russian Avialeasing agreed to pay $715 million for 24 planes that will most likely go to the Russian airline UTair, while the Hungarian flag-carrier Malev ordered 30 for $1 billion. Pogosyan claimed that altogether Sukhoi has received orders for 150 Sukhoi Superjet 100 planes.

While it seems that there is indeed solid demand, it remains questionable whether Malev’s interest in genuine. The Hungarian airline is controlled by Russian state-owned Vnesheconombank, so the order might have been little more than a part of the PR campaign to promote the Sukhoi jets.

Meanwhile, the Sukhoi holding, which includes Sukhoi Civil Aircraft, has been working just as hard to expand its exports of warplanes. Today, Sukhoi and MiG together account for some 40 percent of Russia’s total arms exports, with orders amounting to $8 billion. The two brands also make up as much as 20 percent of the global military aviation export market. “It is a normal situation for the military industry to also take part in civil production, that’s something that has been common all over the world. But in the case with our country there was a heavy emphasis on military equipment like tanks, ships and jets; then we had civil production which wasn’t exactly competitive,” said Dmitry Vasilyev, the chief editor of the Arms Export magazine.

The Soviet Union’s heavy focus on the military-industrial complex left Russia with a legacy of underdeveloped industries, with the military being just about its only competitive sector. It doesn’t help that military budgets worldwide are likely to be cut, leading to a decrease in arms sales. This would be bad news for producers like Sukhoi, which are now trying to get some insurance. “When a large corporation only produces fighter jets it’s bound to hit the dead end at some point. If you look at Boeing it makes most of its money off its civil liners; they’re more oriented at the market economy rather than state military contracts. Sukhoi is just following the global trend,” said Vasilyev.
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