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Russian airshow kicks off with Superjet deals

08/27/2013 | Reuters

ZHUKOVSKY, Russia (Reuters) - Russia's first civil plane since the fall of the Soviet Union bagged a clutch of deals with mainly domestic buyers on the first day of an airshow near Moscow, as the country battles to revive its aircraft industry amid stiff foreign competition.

Prime Minister Dmitry Medvedev pledged at the event on Tuesday to make Russian aircraft more competitive as part of the Kremlin's drive to sell planes worth $250 billion by 2025.

But analysts think that target will be tough as the flagship Superjet 100 struggles to recover from delays and a fatal crash on a 2012 test flight in Indonesia due to pilot error.

The world's top aircraft makers such as Boeing Co (BA.N), Airbus (EAD.PA) and Bombardier Inc (BBDb.TO), meanwhile, are predicting strong orders from Russia, where ageing fleets need replacing and passenger numbers are rising.

"To promote Superjet-100s abroad we are implementing a set of measures to support exporters," Medvedev said, according to an Interfax report, as he watched a Superjet in flight as one of the opening acts of the four-day MAKS airshow.

Interest on loan and leasing payments are higher in Russia than overseas, making its products less competitive, he added, without giving details on the planned new measures.

Superjet manufacturer Sukhoi signed contracts with leasing firm Ilyushin Finance Co to deliver 20 of the 100-seater aircraft, of which 15 are destined for customers in South-East Asia and the Middle East.

It also signed a delivery contract for six Superjet 100 aircraft with Russia's UTair Aviation (UTAR.MM) and the leasing arm of state development bank VEB.

To push the Sukhoi jet in international markets, where it is likely to compete mostly with Bombardier and Embraer (EMBR3.SA) planes, it struck a deal with the leasing arm of Russian state bank Sberbank (SBER.MM).

But the deals were overshadowed for some attendees of the show by the absence of Russian President Vladimir Putin, who has appeared in the past to talk up the industry's prospects.

Russia is also developing the MS-21, a 150-seater passenger jet built by Irkut which is the country's main attempt to rival planes made by Airbus and Boeing. Irkut on Tuesday signed deals to deliver 52 planes to VEB Leasing and IFC.


The world's top aircraft makers, scenting a major opportunity in replacing ageing Russian air fleets, were also touting their wares, with visitors greeted by a giant Airbus plane on display.

"Three of largest replacement markets in the world are the U.S., Europe and Russia, where many older airplanes need to be phased out and more efficient airplanes brought in," Mike Barnett, managing director, marketing, at Boeing Commercial Airplanes told a news conference on Monday.

Boeing says it expects air carriers in Russia and the former Soviet states to take delivery of 1,170 planes over the next 20 years at a cost of $140 billion.

Airbus, which on Tuesday struck a cooperation deal with Russian industrial and defense conglomerate Rostec, also has buoyant growth forecasts for 2012 through 2031, expecting Russia to take sixth place globally in terms of new passenger aircraft demand, according to its website.

Driving the market is economic growth, which is fueling a rise in the number of people flying within Russia - the world's largest country stretching from Vladivostok in the east to Finland to the west - and to international destinations.

That in turn is increasing demand for larger planes. But the former Soviet Union is a region where foreign manufacturers already dominate, according to figures on Boeing's website, which show around 70 percent of fleets consist of Western-built planes as opposed to less than 2 percent in the mid-1990s.

"It is ... a market place where they have an ageing fleet and a couple of our products fit in the specific niches where the Russian aviation industry isn't focusing," said Rod Sheridan, vice president of sales and asset management at Bombardier Commercial Aircraft.

Bombardier's Sheridan sees a market for airlines flying its 50-seater CRJ200 regional jet to upgrade to its larger Q400, which seats between 70 and 80 and has a list price of around $30 million, versus a market price of about $9 million for a CRJ200.

"You get about 20 extra seats and you get pretty much the same cash operating costs," said Sheridan. "It's the next logical step ... Everyone we've done business with on the CRJ, we've had discussions about the Q400."

(Additional reporting by Solarina Ho in Toronto and Anastasia Lyrchikova in Moscow, with Tim Hepher in Paris; Writing by Megan Davies; Editing by Douglas Busvine and Mark Potter)

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