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Decimated bilateral relations between Russia and Ukraine, as well as internal political changes in both countries, have had a negative impact on the aircraft industry, not least the Soviet-turned-Ukrainian Antonov aircraft manufacturer. The plight of the state-controlled industry shows that battles between government officials are often fiercer than those in the business world.
On March 20, Russian aviation authorities suspended Saratov Airlines’ license until April 27 and banned all its An-148 flights until the company corrects all the violations that an emergency inspection found following a recent disaster in which an An-148 operated by Saratov Airlines crashed on the outskirts of Moscow, killing 71 people.
The plane catastrophe highlighted a cluster of deep-seated and painful problems in relations between Russia and Ukraine. The An-148 was a relatively brief joint project from 2004 to 2014 between the two countries, designed by the Antonov Design Bureau in Kiev and license-produced by the Voronezh Aviation Plant. More than half of the aircraft parts were made in Russia, while the engine was Ukrainian. The plane was predominantly sold on the Russian market, but the project was abandoned in 2014 amid the conflict between Russia and Ukraine.
Established in Novosibirsk in 1946 as Research and Design Bureau No. 153, where it produced the classic An-2 corn crop duster, the Antonov aircraft manufacturer moved to Kiev in 1952 and went on to produce dozens more iconic Soviet planes, from the regional An-24 jet that carried 30 percent of all Soviet air passengers to the large cargo planes that it focused on from the 1960s: the An-22 Antei, the An-124 Ruslan—the largest mass-produced aircraft—and the An-225 Mriya, the largest cargo aircraft in the world.
While the production chain snapped in the 1990s after the Soviet collapse, Antonov fared far better than Moscow-based construction bureaus such as Tupolev, Ilyushin, and Yakovlev. At the end of the Soviet era, the bureau had created its own airline equipped with Ruslan and Mriya planes. The airline’s cargo flights generated enough revenue to enable the entire Antonov enterprise to stay afloat.
In 2006, Russia set up the United Aircraft Corporation (UAC), which included practically all of the country’s design bureaus and plants. A scrum for budget funding began immediately inside the corporation. The regional Sukhoi Superjet 100 (SSJ100) succeeded in eliminating its numerous rivals, including the An-148. Plenty of behind-the-scenes squabbles ensued. Aeroflot wanted to acquire 30 An-148s, but was forced to buy the SSJ instead. Government agencies argued that the SSJ had too many foreign components, while the An-148 consisted of 60 percent Russian parts. The FSB, Defense Ministry, and presidential fleets all include the An-148.
In 2015, Antonov became part of the state-run Ukraine Defense Industry Corporation overseen by Ukrainian President Petro Poroshenko. The change of ownership was preceded by exhausting corporate infighting that resulted in the ouster of Antonov’s veteran manager Dmitry Kiva. Since 2015, the company has already had three presidents.
It’s been three years since Antonov produced a serial plane. It has no solid contracts, not even from the Ukrainian government. Antonov’s newest president Alexander Krivokon, who was appointed in 2017, told the Ukrainian liga.net news portal that the company was planning to restore and sell aircraft that have long occupied its plant premises in order to at least pay salaries.
Although Russia and Ukraine have discussed joint aircraft industry projects numerous times, they did so in the context of other problems, such as their gas disputes. The two sides brought more and more resources to the table, trying to get a better deal in the conflict over the raw materials. Antonov was just one of the tools used as a bargaining chip in gas price negotiations. Ultimately, the plane manufacturer found itself on the losing side.
The aircraft industry is global by definition, and as such can’t escape political influence. But if a project has a strong business component, parties seek to neutralize negative political aspects. For instance, contacts between American or European companies and their Russian counterparts have remained intact despite the sanctions against Moscow. Russia continues to provide titanium parts and engineering solutions to global aircraft markets. Whatever politicians might say, business is business.
But if cooperation hinges upon agreements between government officials, and revenues come from state budgets, the construct becomes fragile and unstable. That’s exactly what the relations between Russia and Ukraine are like, and the An-148 is just one example.
Azerbaijan’s Silk Way Airlines has said it will buy ten An-178s after discussing “details of further cooperation.” Saudi Arabia, which ordered the light multipurpose An-132 jet, is not in a rush to sign a contract, either; it has limited itself to a memorandum of understanding. Even Ukraine’s military and security services are unable to help: the country is in such dire financial straits that it can’t afford even a small number of aircraft.
So how does the 10,000-employee-strong enterprise survive? Its main revenue source is still Antonov Airlines. According to Krivokon, Antonov Airlines cargo flights keep the company afloat and pay employees’ salaries and utility bills.
Many airplane manufacturers have turned to China for money in recent years. Airbus, Boeing, and Embraer are taking advantage of high demand by opening aircraft assembly plants there, while Russia plans to build a wide-body long-haul jet with China. Antonov took part in the development of China’s own regional ARJ21 civilian aircraft, calculating wing aerodynamics; conducting load analysis; and testing wing models, accessories, and the plane itself in the air tunnel.
Last year, Antonov’s management met an undisclosed Chinese client at the Paris Air Show to discuss the sale of 50 An-178 planes to China. But it was negotiations between China and Ukraine on the Mriya that attracted the most attention. In August 2016, Antonov and the Airspace Industry Corporation of China (AICC) signed a cooperation agreement on the completion of a second An-225 Mriya aircraft. (The only An-225 that Antonov Airlines owns was grounded last year because of a lack of demand.)
Subsequent public discussions featured a lot of conspiracy theories as to what would happen next, but no new official details emerged. Krivokon says that the parts of the unfinished An-225 are in good condition, and “as long as they can be restored, plans to build the second Mriya will remain relevant. Time will tell whether this will be done in cooperation with the Chinese company or with another partner.”
But so far, time has shown that the worse Russian-Ukrainian relations are, the slimmer the chances of Antonov surviving. The Soviet aircraft industry, which was built to function as a single organism, shattered right after the Soviet collapse. Russian and Ukrainian attempts to assemble something together have been foiled by politics. Breaking old ties for political gain is killing the aircraft industry, and has led to an impasse that doesn’t seem to have a resolution. It seems that as the political battle rages, there is simply no room for airplanes.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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