..:: India Strategic ::.. Civil Aviation : SuperJet-100: Receives Financial Backing

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Editorial

SuperJet-100
Receives Financial Backing

By Viktor Safonov, Defence Analyst (for RIA Novosti)

Published : June 2007

St. Petersburg has proved a lucky place for Russia's new passenger airliner, the Sukhoi SuperJet-100, or Russian Regional Jet (RRJ), as it was called only a few months ago.

On June 9, at the 11th St. Petersburg International Economic Forum, Sukhoi Civil Aircraft, a subsidiary of the Sukhoi Aviation Holding Company, signed a credit agreement with the European Bank for Reconstruction and Development (EBRD) to the tune of 100 million euros for a 10-year period. The money will go towards completing the new project and launching mass production. On the same day, Boeing and Sukhoi signed a contract extending Boeing's participation in the SuperJet-100 program.

The credit Sukhoi Civil Aircraft will receive from the EBRD is not big, but it is very important for the company because it will be used to pay European equipment suppliers and create a financial reserve for flight tests. These are scheduled for the end of 2007 or the beginning of 2008. Specialists think the entire program will require $920 million in investment. The price of one aircraft is around $25 million, depending on its equipment and modification.

Remarkably, the EBRD is giving the credit at the normal interest rate, without demanding additional guarantees from the Russian government or the company. The bank's management does not doubt that the project will be a success and the loan will be repaid on time.

This confidence is easy to explain. To begin with, the Sukhoi project is financially backed by the Russian government, something absent from other similar projects. The joint Russian-Ukrainian An-148 and the Russian-only Tu-334 are using borrowed money. The SuperJet will receive 36 billion rubles ($1.39 billion) from the treasury, and the odds are that is not the final figure.

Secondly, many Russian and overseas carriers have supported the project. For now, solid orders have been placed for 61 planes. Buyers which have invested in the project include such names as Aeroflot (the overall sum of whose contract is $820 million), Sibir, Russia's Financial Leasing Company, Dubai-based Concord Aviation leasing company, and Air France. Thirdly and most importantly, the project has the backing of Boeing, the world's largest airliner manufacturer. For the Americans the new Russian plane is no rival: Boeing just does not produce relatively small airliners that seat only 100 passengers.

Until recently, Boeing has only acted as a consultant for the Sukhoi project on marketing, design and production. Now the American corporation's contribution will be expanded. Under the agreements signed in St. Petersburg, Boeing will help its Russian partner to provide post-sale servicing and establish a joint personnel training center.

Boeing, too, benefits from the contract. About 40% of load-carrying structures made of durable and lightweight titanium for Boeing's wide body planes are purchased from Russia's VSMPO-Avisma. So Boeing stands to gain if it maintains good relations with Russia and its aircraft building companies.

Last year, when the U.S. State Department imposed sanctions on Sukhoi for supposed cooperation with Iran, it was Boeing executives and lobbyists who took great pains to have the sanctions lifted. And they did.

But perhaps it would be unfair to chalk up the Russian SuperJet's successes only to Russian government support and the agreements with the EBRD and Boeing. The key advantage of the project is that it meets all present and future requirements for comfort, safety, speed and passenger convenience. In addition, Sukhoi's management is pursuing a sound marketing policy for the new aircraft. The SuperJet has competitors not only in countries of the former Soviet Union, but also on the international aviation market. Among them are such firms as Brazil's Embraer and Canada's Bombardier.

To get ahead of its rivals, Sukhoi has secured the services of the world's best known parts suppliers. The SaM146 engine for the Russian airliner is a joint product of Russia's Saturn and France's Snecma (part of the Safran Group).

The engine has already been tested, and at the end of this year will start being delivered to the plant in Komsomolsk-on- Amur, which will carry out the final assembly. Among the other foreign suppliers are Thales (avionics), Liebherr (control systems), Honeywell (auxiliary power plant), Messier Dowty (landing gear), Intertechnique (fuel system), Hamilton Sundstrand (electric power supplies), Air Cruisers (salvage and rescue equipment), and some others.

The SuperJet project thus rests not only on the financial support of its own government and leading international banking organizations, but also on the international division of labor. That is the modern way of manufacturing products and promoting them on the world market.