Alexandra Gritskova, Pyotr Netreba, Alexei Yekimovsky
Russia to green-light aircraft imports?
Yesterday, Prime Minister Vladimir Putin held a meeting on the civil aircraft industry. As Kommersant had predicted the day before, the participants discussed the possibility of abolishing aircraft import duties. Although the Prime Minister did not support the initiative directly, he warned the aircraft manufacturers that this could be done if enterprises continued with low output.
Experts and participants in the meeting say, however, that the yesterday's outcome was rather favourable for the Russian aircraft industry.
Yesterday, Mr Putin visited Aviastar-SP aircraft factory in Ulyanovsk and held a meeting on the domestic aircraft industry (see Kommersant, September 9 issue). Mr Putin was accompanied by Deputy Prime Minister Sergei Ivanov and Minister of Economic Development Elvira Nabiullina. Aircraft manufacturers were represented by United Aircraft Corporation (UAC) president Alexei Fyodorov and Sukhoi aircraft-manufacturing holding CEO Mikhail Pogosyan, with Aeroflot CEO Valery Okulov as the only representative of the country's airline carriers.
Abolition of the 20% import duties for all foreign-made civil aircraft was expected to be discussed. Currently, planes with a capacity below 19 seats and over 300 are exempt from import duties. Yesterday, Elvira Nabiullina said that starting January 1, 2009, planes with a capacity of up to 50 seats will be exempt from import duties.
While awaiting Mr Putin's arrival, Aeroflot's CEO talked to Ms Nabiullina about the possibility of a reduction in import tariffs for Bombardier or Embraer aircraft, which Aeroflot wants to lease until deliveries of the 95-seat SSJ begin. Ms Nabiullina, however, slammed the plan. After the meeting, she told Kommersant reporters that she is against complete abolition of duties.
Nevertheless, Mr Putin opened his speech with this issue, saying that reduction or abolition of duties is possible, though needs additional elaboration. "I know that we are behind schedule in production of some models, I know the needs of our airline carriers, and therefore I am leaving this possibility open, if Russian aircraft manufacturers act too slowly," Mr Putin said, pointing out that "it's a very important decision" that needs further consideration.
A source who attended the meeting told Kommersant that Boris Korol, Deputy Minister of Transport, tried to resume the discussion of the issue but was stopped by Mr Putin, saying that he had already clarified his position.
According to the Prime Minister, import duties for aircraft component parts are more likely to be abolished. Mr Putin admitted that "UAC plans are hindered by a shortage of engines", which means that he supports the opinion of Alexei Fyodorov, who mentioned in his report that "Russian vendors are unable to compete with foreign manufacturers", given that the price of a PS-90 engine by Perm Motor plant is $5 million, compared to that of a foreign equivalent, priced at $2.5 million. The Prime Minister promised to consider the possibility of duties abolition for aircraft component parts, which could "encourage domestic manufacturers at least to struggle".
Mr Fyodorov, as Kommersant had expected, applied for financial aid for aircraft factories. According to the UAC CEO, "major enterprises will operate in the red until 2011 or 2012, when mass production will be mastered".
A meeting participant told Kommersant that "80% of Mr Fyodorov's suggestions got a positive response from the Prime Minister".
Denis Manturov, Deputy Minister of Industry and Trade, told Kommersant reporters after the meeting that 2 billion roubles will be allocated annually for loan subsidies, with corresponding amendments made to the budget.
Experts did not expect Prime Minister Putin to announce the abolition of import duties for aircraft at yesterday's meeting.
FinExpertiza company CEO Agvan Mikaelyan thinks that aircraft manufacturers were victorious at the meeting, adding that the parties could strike a compromise by introducing a quota arrangement for buying Russian and Western-made aircraft, or exempt aircraft importers from duties for a certain period. Without these measures, Russian airline carriers will remain non-competitive for several more years, forcing passengers to pay for companies' growing expenses.