Alexander Rubtsov: «CSeries joins MS-21»

			Sergey Belov: «How many of your jets are flying?», I am saying: «All of them»! Sergey Korotkov: We have successfully performed the demonstration, India has taken the decision o... Rashid Mursekaev: On А321 we plan to start its operation in September. Valery Gabriel: The cost of feed airline creation will be about $40-50 million.		Feedback Advertise RSS feed


Homepage »Industry » Interview «CSeries joins MS-21» Friday March 29, 2013 17:23 MSK / Vladimir Karnozov A representative Russian delegation headed by the Minister of Industry and Trade, Denis Manturov, President of United Aircraft Corporation (UAC), Mikhail Pogosyan, and the President of Irkut Corporation, Oleg Demchenko, visited Canada in early February. The visit resulted in signing a contract between Ilyushin Finance & Co (IFC) leasing company and Bombardier on delivery of CSeries 300 aircraft. Alexander Rubtsov Ilyushin Finance & Co General Director - Alexander Ivanovich, why have you chosen this aircraft? - Actually this is a broad and interesting theme. And answering your question I would say: this aircraft was chosen for a number of reasons. The first one is advanced technologies used in the network of development of CSeries Family. This aircraft sets new standards at the global market (Canadians call it the “game-changer”). The extensive use of advanced technologies results in reducing operational costs, first of all due to fuel savings. The fuel burn will be significantly lower as compared to the existing aircraft due to advanced design of the airframe, state-of-the-art engines, next-generation avionics and the latest structural materials. We are confident that this aircraft will be a serious player at the global market. The second reason: CSeries has a high level of commonality with MS-21 in terms of suppliers (including engines, landing gear, avionics, electric system, auxiliary power unit, etc.). According to our assessment, about 65% of the suppliers are common for CSeries and MS-21 programs. Of course the delivered components differ, but it was important for us anyway. Speaking of the order for 32 CS300, it is important to note that we have also signed an agreement on delivery of 28 MS-21 jets and now we are getting approvals. After that, this matter together with the possible purchase of another 22 aircraft of the type will be considered by the meeting of shareholders. Thus IFC plans to place an order for 50 MS-21 aircraft. It is evident that MS-21 project has only one problem – there is no small aircraft seating about 130 passengers. While Bombardier offers such jets! Our partner airlines said that they need an aircraft family and asked us to draft proposals in accordance with their requirements. Nowadays many carriers operate three models of single-aisle aircraft with a capacity of 130, 150 and 180 seats. MS-21-300 developed by Irkut Corporation will have 180 seats and MS-21-200 – 150 seats. It is also planned to develop MS-21-400 aircraft seating 200 passengers. Bombardier offers the jet, which “joins” MS-21 as a “junior” member of the aircraft family. That is how it will be marketed. There is one more critical point. During negotiations with Bombardier we have reached a preliminary agreement on cooperation in the area of MS-21 aircraft maintenance (this fact was not mentioned by mass media). A contract between IFC and Irkut Corporation, which should be signed soon, assumes export of the aircraft under conditions of operational leasing. We need to reach the agreement with Bombardier for using its after-sales service network for servicing out jets. And such document in the form of agreement of intent was signed during visit of Denis Manturov to Canada. It is said in the document that we will be developing cooperation in this area. *- Does Irkut Corporation take part in the after-sales servicing agreement?* - For now Irkut is just a potential participant. First of all this refers to aircraft purchased by IFC. But we hope that following the results of Denis Manturov’s visit more agreements will be reached. We are working on it. Another important result of the minister’s visit to Canada is the start of negotiations between Irkut, UAC and Bombardier on different aspects of cooperation, including after-sales support. Cooperation with Bombardier is far more important for us than just purchase of 32 jets. It is connected with promotion of more expensive aircraft – 50 MS-21s. - As a matter of clarification, you say that Manturov and IFC are helping Irkut and UAC to develop cooperation with Bombardier. But we know that the Canadian airframer is working with Chinese COMAC, which is developing С*919 aircraft with the same capacity as MS-21. Is UAC opposed to cooperation with Bombardier?* - President of UAC, Mikhail Pogosyan, and President of Irkut Corporation, Oleg Demchenko, were members of the Russian delegation. They have attended the signing of the documents and inspected carefully everything demonstrated by the Canadian party... *- Besides headquarters, were you allowed to visit other facilities?* - We have visited assembly plant located in Mirabel. The assembly of the first CSeries flight test vehicle (FTV1) is being completed. The airframe has been assembled; the engines and landing gear have been installed. The major airfoils and control vanes have been assembled. The assembly of the second CSeries flight test vehicle (FTV2) is also making solid progress. The representatives of Bombardier assured that the flight testing will be started over the “next few weeks”. We have also visited Customer Support Center in Mirabel. It makes a good showing: 600 employees are working there twenty-four-hour supporting the fleet of CRJ aircraft. The airframer’s second Customer Support Center is located in Toronto. Bombardier has over 70 authorized service centers all over the world. *- Why did IFC sign the agreement on delivery of CS300 turning its back on CS100 aircraft?* - We are not interested in purchasing CS100 jets at the moment. MS-21 aircraft should be the basis of our business and the smallest member of MS-21 family can seat up to 150 passengers. Logically, CS300 is more interesting for us because it can seat up to 130 passengers (single-class layout with a seat pitch of 32 inches), and complements MS-21 Family. Secondly, we plan to purchase 20 Sukhoi Superjet 100 aircraft; we are elaborating the corresponding contract. CS100 and Superjet are close and we are not going to purchase close competitors. *- Will your CSeries jets have as-built configuration?* - At present we are considering as-built configuration and later we will work with airlines and optimize the cabin in accordance with their preferences. - During implementation of the project the specification for CS100 and CS300 was adjusted. The fuselage diameter was increased to 3,7 meters. For example, Boeing 737 has a fuselage diameter of 3,67 meters, Tu-154 and Tu-204 - 3,8 meters. It turns out that not only five but also six seats in a row may be installed in CSeries. Are you interested in such high-density layout, taking into account the carriers performing flights on relatively short routes? - We plan to use the layout with five seats in a row (as-built configuration) at first since CS300 will be certified in this configuration. And then we will ask our customers. And your remark confirms the possibility of further development of the jet. *- Does new engine from PurePower* family by Pratt&Whitney cause concerns? It has an unusual configuration with a reduction gearbox between the fan and LP turbine. Airbus A320neo is the twin-engine aircraft, but most of the customers select LEAP engines by CFMI instead of PurePower. - The base model of Pratt & Whitney PW1500G engine has been certified recently. If we look at the figures, we may see that aircraft powered by geared turbofan demonstrate lower fuel burn than the ones powered by LEAP-X. It is important that significant decrease of fuel burn of LEAP-X engines (as compared to the previous generation of engines) was achieved mostly due to increase of turbine-inlet temperature, which may potentially decrease the reliability and service life of the engine. On the other hand, geared turbofan has a great potential. Pratt&Whitney plans to upgrade its engine in five years in order to provide further reduction of fuel burn. Taking into account that its core has a great temperature margin (the major decrease of fuel burn was achieved by means of increasing the fan efficiency), the engine’s potential is high. Talking about the choice I must admit that PurePower engines have been selected by five famous airframers – Irkut, Bombardier, Airbus, Embraer and Mitsubishi, i.e. most of the airframers, which need an engine of this class. I think it is incorrect to say that they are all mistaken. As far as I know, prior to selection of the engine, the specialists of these companies have performed thorough analysis, monitored the test results, and studied documentation. - Canadian airframer acknowledges the delay of flight test program, but assures that this delay will only affect the schedule of CS100 program, while the schedule for CS300 will remain the same. Did this fact make an impact on your decision regarding CS100? - No. By that time we have already made the decision to abandon CS100, because the larger aircraft demonstrates the efficiency of new aircraft family better. - It is stated in the press-release that the deliveries are scheduled for the period from 2015 to 2018. It turns out that IFC received early slots, because the first CS300 will be delivered to the customer in 2014. - Unless memory deceives me, the number of our first jet is 27 or 28. So we are not the first company in line for CSeries. *- It is known that the deliveries of Airbus A320neo will be started in 2015, Boeing 737MAX – in 2017. Was such an early start of deliveries of next-generation Bombardier aircraft demanded by IFC?* - Well, we wanted to be among the first operators, but not the first one. Actually, that’s the way it is. Lufthansa, Korean Air and some other customers will take delivery of CSeries aircraft earlier than IFC. We hope that all the possible “teething problems” will be solved in a year or two and we will take delivery of the “trouble-free” jets. The great amount of testing carried out by the specialists of Bombardier offers hope that there will be no obvious errors in the jet’s design. *- Did the President of Bombardier* *Inc., Pierre Beaudoin, attend the signing ceremony? Did the members of Russian delegation have a chance to talk to him?* - Mike Arcamon signed the documents on the part of Bombardier, but we met Pierre Beaudoin at supper. He was accompanied by Guy Hachey, Rod Sheridan and other key players of Bombardier team. Mr. Beaudoin was pressed for time because the supper was held on the eve of annual meeting of shareholders. *- About the deal. It was reported that you were granted a significant discount...* - We promised not to unveil the exact value, but the discount was really good. *- Where do you get the financing from?* - We have a commitment with Business Development Bank of Canada; it provides 85% of the contract’s value. The rest 15% are derived from the company’s own funds and funds provided by investors. *- There were also reports about four years warranty. What is this warranty for and how did you manage to get it?* - I will not comment the commercial details of the deal. But I must admit they are rather attractive. That was the reason for increasing our order from 10 to 32 aircraft. IFC has really been granted a good discount and favorable terms in the area of warranty. The warranty covers aircraft performance, dispatch reliability, operating expenses – in other words, everything needed for working with the airlines. By the way, we have been granted the similar discount and warranty in the network of contract on delivery of MS-21 aircraft. It stands to mention that we were the first customer to transfer the deposit for MS-21 jets. This is our answer to the accusations that we have been established to support Russian-produced aircraft … In this regard I must admit the IFC has not received any funds intended for supporting the sales of Russian-made aircraft from the federal budget since 2007. All the funds are channeled to UAC. That is why when someone starts criticizing us saying that we are destroying plants in Ulyanovsk and Voronezh, we have to show the documents containing statistics. The documents show the annual amount of money channeled to the enterprises, the number of manufactured aircraft and the number of aircraft purchased by IFC. The decision-making bodies of aviation plants do not comprise the members of IFC – now it’s UAC’s responsibility. Consequently UAC receives funds intended for development of production of civil aircraft in Voronezh, Ulyanovsk and other cities. It is strange to hear criticism towards IFC in this situation. *- How were the funds intended for development of aircraft leasing system used?* - They were channeled to the aviation plants. *- Let me ask you about the Cuban deal: is it connected with the Canadian contract?* - No, these deals are not connected. *- The deals just coincided in time?* - Yes, they did. We arrived from Canada and went to the meeting of intergovernmental commission at once. *-According to the agreement the Cuban customer wants to purchase aircraft of different types (from 2 to 4 aircraft of each type). What can you say about such “diversity”?* - Our Cuban customers purchase as much aircraft as they need. At present we are discussing the next deal – the customer sent us documents on the option for three more An-158 aircraft. The deliveries of these jets will be started soon in accordance with the signed contract. The first vehicle will be delivered to the customer in March, the second and third ones – in summer. And after that in late 2013 – early 2014 we may deliver another three jets in the network of the option. *- What can you say about Il-96 and Tu-204SM?* - I can say that a framework agreement including three Il-96-400 and two Tu-204Sm has been signed. Thus the parties have defined the outline of the future project. Besides the aircraft, this agreement covers creation of on-site stock of parts and delivery of a number of simulators. As a matter of fact this agreement confirms that Cuba is interested in purchasing Russian-produced aircraft. We will have to clarify the commercial terms of the sale. The more so because the Government decree on supporting the production of hi-tech export and procedure for provision of export credits and guarantees was signed on the eve of Dmitry Medvedev’s visit to Cuba. In fact, the export of Russian-produced aircraft to Cuba is developing thanks to this government decree. *- Will all the aircraft specified in the agreement (Il-96-400 and Tu-204SM) be new-built ones or some of them will be second-hand ones?* - I don’t rule out the possibility that we will have to work with previously operated aircraft. We have a lot of work ahead of us. *- Why do you consider the stretched version of Il-96? Is it the customer’s wish or the offer of the Russian party?* - The stretched jet has better economics if we compare the fuel burn per seat-kilometer. Il-96-400 can seat more passengers – 340 instead of 262, while its fuel flow rate is slightly higher as compared to Il-96-300: 8 tons and 7.5 tons respectively. *- After the memorable accident with the participation of Red Wings’ aircraft many Tu-204/214 jets have been grounded. Does it hurt IFC?* - Vladivostok-Avia continues to operate Tu-204-300s. Transaero grounded the jets but continues to pay. Situation with Red Wings is more complicated – both the carrier and its jets are idle. We are waiting for a decision: whether its Air Operator Certificate will be restored or cancelled. Proceeding from the decision of aviation authorities we will plan our further steps. Anyway we are negotiating with several potential operators. If the Air Operator Certificate of Red Wings will be cancelled, then the jets will be confiscated and delivered to another carrier. *- Will IFC continue working on Tu-204 project?* - Of course. We have a large Tu-204 fleet. *- What can you say about the implementation of the agreement with Transaero on cargo Tu-204 aircraft?* The contract was signed. Unfortunately, the acceptance was ceased because of the accident. We are waiting for the bulletins to be issued and then the enterprises will upgrade the aircraft. The jets are ready. We hope to solve all the problems soon in cooperation with our aviation authorities and continue the acceptance procedure. *- Does this large deal with Canada mean that IFC will not consider the possibility of purchasing Airbus or Boeing aircraft?* - We have some offers from Airbus and Boeing but we have some priorities. I remind you that we have been considering the deal with Bombardier in the context of selling the MS-21 aircraft. Our company has not been receiving any funds from the federal budget intended for supporting national airframers since 2007. At present we are owned by UAC to a considerable extent. We consider it our duty to purchase Russian-produced aircraft. The top-priority deals for us, besides An-148/158 and other aircraft, are contracts on delivery of 50 MS-21s and 20 SSJ100s. We have a significant number of commitments for Russian-produced aircraft. That is why we will only purchase foreign aircraft, whose capacity differs from the capacity offered by indigenous jets. Possibly we will return to the segment of small jets if we find a suitable type. At present our top-priority products are - An-148/158, Superjet, MS-21 and CSeries. - As of today, IFC has purchased and delivered to the customers 48 advanced indigenous aircraft. Taking into account recently placed and soon-to-be-finalized orders along with future procurement, how many aircraft will IFC have in its fleet by 2020-2030? - At present we have agreements on delivery of over 100 new-built jets (50 MS-21s, 20 Superjets and 32 CS300s). In addition we will acquire about 20 An-148s. Thus IFC plans to take delivery of over 120 new-built aircraft with a total value of about $4 billion. *- It is rare to see such a fast-growing leasing company...* - You are right. But now we have to find customers for all the purchased aircraft. So we are not willing to sign any new orders yet, because we already have a lot of work. *- As for the deal with Bombardier, the sources of funds have already been defined. And what sources will provide funds for the other deals?* - We are going to sell some of our aircraft. The released capital will be used for financing the contract on delivery of MS-21. Possibly IFC will be attracting third party investors from the direct investment funds and private investors for financing the specific aircraft types. Many investors say that they would like to see a “mix” of aircraft types, not only Russian, but also foreign aircraft. That is why we are expanding our fleet in accordance with the demands of our investors. When your fleet comprises only Russian-produced aircraft it is harder to attract third party investors, especially the ones from foreign countries. Having a “mixed” fleet comprising different aircraft types makes it easier to find investors. *- In other words, the share of foreign capital in your company will increase?* - We will be attracting investors in order to purchase the specific aircraft with participation of both IFC and foreign companies. *- What is the status of contract with Irkut Corporation? Is IFC a demanding customer in relation to the national airframers?* - The contract on delivery of MS-21 aircraft is almost finalized. We were negotiating for a long time and finally we have been able to reach an agreement. The contract assumes some discounts. We plan to lease these jets under conditions of operational leasing. We are the first lessor in Russia to offer such service. I think it would be an attractive offer for our potential operators: IFC will be specializing on operational leasing instead of financial one. *- The testing of MS-21 wing continues and a fuselage section was delivered to Zhukovsky...Have any of your proposals been implemented during development of the jet?* - We have been participating in the concept definition study right from the start. In particular, we have performed a market study and formed our proposals in the area of aircraft concept and its economics... In particular, our proposals were related to the fuselage diameter. We suggested increasing the fuselage diameter by 10 cm in order to make the cabin more comfortable. This and other proposals were accepted by the designers and implemented in the network of MS-21 project. In fact, MS-21 has the largest fuselage diameter among all the existing single-aisle aircraft: 4,06 m (Airbus A320 - 3,95 m, Boeing 737 – 3.67m). We hope that this advantage along with great aircraft performance will attract a lot of Russian and foreign customers.