1

CONTENTS

Military Aviation2 Fighters: From Boom to Gloom?

Defence22 Small Mosquito Lays Great Birds

Aircraft24 Tu-204 - New Developments of

"Tupolev" PSC

Industry28 Time to Think about Effectiveness.

Interview with Michael Voevodin

34 Looking for Government Support

is Ineffective. Interview with Vladimir

Chertovikov

38 Our Sky Indivisible. Interview with

Vyacheslav Boguslaev

Space Technology44 GlONASS System to Be Reality

50 Effective Support of GLONASS is

Necessary

№ 4. 2009

Director GeneralEvgeny Osipov

Executive Director Alexander Kiryanov

Production EditorVeronika Sipeeva

EditorsAlexander GudkoSvetlana Komagorova

Sales DirectorVladimir Zilinko

Marketing DirectorVadim Isaev

Marketing ManagerDmitry Kuprin

Creative DirectorDmitry Bykovskiy

Photo EditorYuri Trubnikov

Art DirectorAlvina Kirillova

DesignersAlexander CheredaykoBoris BulgakovElena Shishova

Web-projects ManagerMichael Guschin

TranslationIgor ZdarkinVyachelsav SmirnovLjudmila VasiljukTatiana Zubkova

Cover photo: Natalia Mikheeva

Photos and graphics in this issue:Alexey Mikheev, Natalia Mikheeva, Vladimir Karnozov, Yuri Trubnikov, Alexander Velovich, “Tupolev“ PSC, “Motor Sich”, KUMZ, VSMPO-AVISMA, “M2M telematics“, RATEP JSC,

Circulation: 8000

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AIR FLEET, 2009ADDRESSP.O. Box 77, Moscow, 125057, RussiaTel.: + 7 495 626-52-11Fax.: + 7 499 151-61-50E-mail: af@airfleet.ru

Fightersfrom boom to gloom?

Military Aviation

2

Global fighter aircraft market faces some difficulties. There is no doubt about it. Our observer Vladimir Shvariov has studied the impact of the economic downturn on the fighter aircraft market. In his study Vladimir Shvariov compares the market development in the first part of 2009 to 2008 and to the previous 8 years. The author believes half-year results cannot speak for the whole year but this period is enough to arrive at preliminary but well reasoned conclusions.

FIGHTERSFIGHTERSFROM BOOM TO GLOOM?

Military Aviation

A I R F L E E T · 4 · 2 0 0 9 ( 7 8 ) 3

Total value of the identified contracted obligations concluded for export of multi-purpose fighters for the first part of 2009 is estimated at 1.21 billion US dollars. However, it is too early to speak about the contraction of the fighter market and to give forecast. There are reasons why. The economic recession has clashed first with the necessity of upgrading the available fighter fleet in almost twenty nations and then with an arrival of the fifth generation fighter F-35 to the market.

Today, reduction of procurement and putting-offs have only been announced for three programs. Vietnam reduced its orders of SU-30MK2 fighters from 12 to 8 and adjourned the contract talks on procurement of weapons for these fighters.

Sri-Lanka has announced its intention to postpone the program of purchasing 5 MiG-29 fighters in Russia. Moreover, the Sri-Lanka’s decision is more based on political than on economic reasons. The Sri-Lanka’s government planned to conclude an agreement on MiG-29 to enhance the national Air Force abilities before beginning the wide scale combat actions against Liberation Tigers of Tamil Eelam (LTTE) group. However, after the government forces in the Northern part of the country have successfully accomplished the operation and completely destructed all LTTE bases, procurement of the fighters has no longer become the first priority and it may be postponed for some time. Nevertheless, despite the accepted decision to postpone the Russian fighters procurement they should become the primary candidates to replace aircraft Kfir and MiG-27 in the long view, Sri-Lanka AF experts say.

Thailand has called off for a minimum period of two years its decision to purchase the second lot of JAS-39 fighters Gripen. In general, world order backlog for the multi-purpose fighters formed up during 2001–2008 makes 77.737 billion US dollars. During the considered period cost value of the orders kept varying a great deal. The minimum backlog of of 1.829 billion US

dollars was registered in 2004 whereas the local minimum of 3.778 billion US dollars was registered in 2006. For the last two years orders for the exported fighters has grown up considerably. The biggest backlog of $22.769 billion was formed in 2007, which resulted in 29,3% of entire backlog for the exported fighters formed during the considered 8-year period. In 2008 the figure amounted to 20.623 billion US dollars (the second result in respect of the cost). All in all, the number of orders placed during 2007-2008 resulted in 56% of the entire volume of orders made during the whole period of 8 years.

Due to extremely big contracts on the purchase of multi-purpose fighters in 2007–2008 years, this year the market will undoubtedly go down. In 2009 the weakening of the market will probably be considerable, especially taking in

account the world economic downturn. However, the recession in the market of multi-purpose fighters will be short because along with the improvement of the economic situation more than twenty nations will resume the great scale programs related to the fighters purchase. Most likely the sharp growth of the world market will take place in 2011 and considerable orders increase compared to 2009 is already expected in 2010.

There is a number of contacts made in the first half of 2009 that are worth paying attention to.

The USA have concluded two extremely important contracts, which in respect of the future prospects have a key importance for the state, of delivery of pre-production trial prototypes of F-35 fighters of the fifth generation. A $252 million contract of delivery of two fighters F-35 Lightning-2 was awarded the UK.

FIGHTERS

Due to extremely big contracts on the purchase of

multi-purpose fighters in 2007–2008 years, this

year the market will undoubtedly go down.

Military Aviation

4

Another $120 million contract of delivery of 1 fighter F-35 Lightning-2 was made with the Netherlands.

In the beginning of July Israeli Air Force sent an official request to the US Department of Defense to purchase 25 F-35 Lightning-2 aircraft. However, the negotiations held to fix the final price of the aircraft and integration of Israeli produced systems on them will continue.

Initially, the Israeli Ministry of Defense planned to purchase some one hundred F-35 aircraft to replace the biggest part of F-16 fighters" fleet, the delivery of which is planned for 2014 or 2015. However, in the Defense Procurement Draft for 2008-2012, made public in September, 2008, envisages allocations only for the purchase of 25 fighters F-35.

Besides, in the first part of 2009 the USA and South Korea concluded a big contract worth 250 million US dollars to upgrade 35 fighters F-16C/D block-52 Fighting Falcon.

The total cost of the three contracts is $622 million gives the palm to the USA in competition for the results of the first part of 2009.

The second place goes to Russia with its delivery contract of 8 SU-30-MK2V aircraft for Vietnam (estimated at $320 million).

The Netherlands ranks third with $ 270 million delivery contract of 16 fighters F-16A/B from the national Air Force block-15 Fighting Falcon signed with Chili. The aircraft shall be upgraded by Lockheed Martin prior to their supply.

The results of the first part of 2009 are likely to mark a considerable improvement in talks between France and India on a long-expected agreement on the upgrade of 52 Mirage-2000H fighters. By July 2009, the Sides have arrived to the final stage of the negotiations. The cost of the agreement is estimated at 100 billion rupees ($ 2.05 billion).

India and France have been in talks on 51 multi-mission Mirage-2000H fighters upgrade for more than two years. The major obstacle was the price. The French Contractor Companies, Dassault Aviation and Thales insisted on the price of 140 billion rupees necessary for the upgrade whereas the Indian Defense Ministry estimated the program at 100 billion rupees. The contradictions were reportedly cleared off and the French manufacturers accepted the conditions of the Ministry of Defense of India.

From 4 up to 6 first Mirage-2000H aircraft are planned to upgraded in France, the rest are to be upgraded in "HAL" Company. The modernization made for the on-board equipment, engines, structural elements and weapons system will enable to extend the operation of 51 Mirage-2000H aircraft of the Indian Air Force for the period of 20 to 25 years.

Besides, Belgium has reached an agreement with Jordan to deliver 9

Contracts and intentions declared in the first half of the year of 2009 (multi-purpose fighters)Exporter Importer Aaircraft type Orders Year of order Deliveries

Belgium Jordan F-16AM/BM 9 2009 9**

The Netherlands Chili F-16А/В “block-15” “Fighting Falcon”

16 2009 16**

Russia Vietnam Su-30МК2В 8 2009 4**4**

The USA The UK F-35B “Lighning -2” 2 2009 2**

The USA The Netherlands F-35A “Lightning-2” 1 2009 1**

The USA South Korea F-16С/D “block 52” “Fightiung Falcon”

35* 2009 5**15**15**

France India “Mirage-2000H” 51* 2009 12**24**15**

Sweden Thailand JAS-39C/D “Gripen” 6 2009 3**3**

* upgrade is placed in the column “Orders”* estimated contract cost is placed in the column “Value”** estimated supplies are in the column “Deliveries”

Military Aviation

A I R F L E E T · 4 · 2 0 0 9 ( 7 8 ) 5

F-16AM/BM fighters from the national Air Force. The presumed deal is estimated at $83.5 million.

Such a modest result of the first part of 2009 is not quite objective as many countries either have announced or are going to announce international tenders for the purchase of multi-purpose fighters. Besides, some countries have reported their intentions to purchase fighters directly from the country of production.

Since the fighters segment is the most significant among all categories of the aviation equipment, the further analysis of the market development will be made in four major stages, namely: current programs related to the fighters upgrade (2009 and so on); new fighters supply in 2009 and further based on the contracts concluded before January 1, 2009; current and scheduled tenders; an overall balance in respect to the fighters supply for the previous and subsequent 5 years (2004 – 2013).

Year of supplies value (mn US dollars)

Type of an agreement

Remarks Source

2010 83,5 Intention From AF, 2 F-16BM “Forecast International”, 21.01.09

2009 270 Contract From AF, upgraded prior to supply by Lockheed Martin

“Jane’s Defense Weekly”, 15.05.09

20102011

320* Contract Initial order for 12 aircraft is reduced up to 8 aircraft (no weapons), for aircraft are

optional

“Commersant”, 17.05.09

2014 251,9 Contract Pre-production trial prototype US Departnebt of Defense, 02.06.09

2011 119,6 Contract Pre-production trial prototype US Departnebt of Defense, 02.06.09

201120122013

250 Contract DSCA, 26.05.09

201020112012

2050 Contract IANS, 08.02.09

20132014

300* Contract The program accomplishment is postponed for 2 years

“Jane’s Defense Weekly”, 24.02.09

Military Aviation

6

The market of fighters' upgrade as per the contracts at the stage of execution by January 1, 2009 makes $8.5 billion. This amount incorporates the orders which are going to be executed in 2009 and later as well as contracts that were in progress before January 1, 2009 and talks on which will continue during the period under review.

The UK will complete a longstanding program of upgrade of 84 Tornado fighters for the Saudi Arabian Air Force in 2009- 2011 (the program was launched in 2005, the planned budget was $1.847 billion).

Israel will complete a long-term program of upgrade of 46 F-5E Freedom Fighter for the Brazilian Air Force. The program was started in 2005. The total value of the

contract amounts to $230 million. Besides, from 2009 to 2011 Israel is going to upgrade 31 F-5E "Tiger-2" fighter aircraft for the Air Force of Thailand. The sum of the contract is $90 million.

Russia is launching the biggest – in monetary terms – program of upgrading 63 MiG-29 fighters for the Indian Air Force. The total cost of the program for 2010-2014 is estimated at $964 million.

Besides, in 2009 – 2011 Russia will upgrade 19 MiG-29 fighters of the Peruvian Air Force (the sum of the contract is 106 million US dollars).

The upgrade program of MiG-31 interceptors of Kazakhstan Air Force is going on as scheduled. At the same time Russia is involved in some smaller upgrade programs carried out with some countries.

The USA signed $300 million contract for the upgrade of 14 F-16A/B block-15 Fighting Falcon fighters for the Air Force of Pakistan.

On request from Turkey, in 2009 – 2016 a great scale program of upgrading 216 F-16C/D Fighting Falcon fighters for the Air Force of Turkey (the sum of the contract is $635 million) will be performed.

A two-stage upgrade of 64 F/A-18С/D Hornet fighters is carried out on the basis of two contracts with Finland). The total sum of two contracts is $706 million.

On request from the Air Force of Switzerland in the course of 2009 – 2011, 33 F/A-18C/D Hornet fighters will be upgraded for the total sum of $535 million.

Turkey signed contracts on carrying out two programs of modernization. Thus, in 2009 – 2010, for the Air Force of Jordan a four- year program implying the modernization of 17 fighters F-16А/В block-15 Fighting Falcon – the program worth $87 million – will be fulfilled. And for the Air Force of Pakistan in 2009 – 2012 another program estimated at $650 million (the upgrade of 42 F-16А/В block-15 Fighting Falcon fighters) will be implemented.

France has three operating contracts to upgrade fighters. In 2010 – 2012, 51 Mirage-2000H fighters will be upgraded for the Indian Air Force – the value of contract amounts to $2.05 billion (in the middle of 2009 the contract was at the final stage of talks and was almost ready to be signed).

France has received a request from the Air Force of Libya to upgrade 12 Mirage F.1 fighters in 2010 – the contract is estimated at $180 million.

On request from the Air Force of Morocco three-year program of modernization of 27 Mirage F.1CH/EH fighters worth $420 million will be completed in 2009.

FIGHTERS UPGRADE PROGRAMS

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Military Aviation

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The total value of contracts for fighter aircraft deliveries starting from 2009 and later is estimated at $40.5 billion.

EF-2000 Typhoon. In 2009 the final lot of 5 EF-2000 fighters out of 15 ordered aircraft will be delivered to Austria (the contract value is $1.7 billion). The Typhoon modification is delivered to the Austrian Air Force in terms of "tranch-1" of the German Air Force. Later on, the quantity in the composition of the German Air Force will be restored by procurement on the basis of "tranche-2”.

The greatest export program implies the supply of 72 aircraft EF-200 to the Air Force of Saudi Arabia (the contract amounts to $8.86 billion). The deliveries are scheduled for 2009-2014.

JAS-39C/D Gripen. In terms of the contract with Thailand, in 2011-2012 the Air Force of this country will receive 6 aircraft (the deal amounts to $420 million including options). Besides, at the beginning of 2009, the sides agreed to transform the option into an purchase of 6 additional fighters in terms of a fixed contract. The aircraft deliveries are set for 2012 – 2013. (This summer, the supply of the second lot was said to be shifted for a minimum of two years).

Deliveries of JAS-39C/D to the Republic of South Africa in terms of $1.8 billion contract continue. Starting from2009 and up to 2012, 22 aircraft should be delivered out of total order of 26 units. (4 aircraft were supplied in 2008.).

F-16. In 2009-2030, 30 fighters F-16C/D block-52 Fighting Falcon are to be delivered to the Air Force of Greece (the contract amounts to $2 billion). Order placed by the Air Force of Morocco for supply of 24 F-16C/D block-50/52 Fighting Falcon fighters is to be completed in 2009 – 2011 (the contract amounts to $2.4 billion).

In 2009 – 2011, 18 F-16С/D block-52+ Fighting Falcon fighters will be supplied to Pakistan in terms of $498 million contract.

In 2011-2012, 30 F-16C/D block-50 Fighting Falcon fighters are to be delivered to Turkey in terms of $1.78 billion contract.

F-15. In accordance with $ 1 billion contract signed in 2005, 12 F-15T Strike Eagle fighters should be supplied to Air Force of Singapore during 2009 – 2010, and in terms of contract 2007 they will be followed by additional 12 F-15T Strike Eagle fighters.

Order worth $2.4 billion place by the South Korea implies the delivery of 12 F-15K Eagle in 2010-2012.

F/A-18E/F. Today, Australia is the biggest customer of F/A-18E/F fighters. Due to $3.517 billion contract 24 F/A-18E/F Super Hornet fighters are to be supplied to the Air Force of Australia during 2010-2012.

JF-17 Thunder. The only export program of a Chinese fighter is its manufacture under license in Pakistan. The total order amounts to 150 aircraft at the total value of $2.3 billion. In 2009-2014, 133 JF-17 aircraft should be produced. In terms of the said contract China has supplied initial lot of 15 accomplished aircraft (2 aircraft were manufactured under license).

MiG-29К/KUB. In 2009 the contract on the basis of the order placed for 16 aircraft by the Indian Navy (the contract amounts to $700 million) will be completed. In the nearest future an option for supply of 29 fighters MiG-29К/KUB is expected to be transformed into a fixed order.

Su-27SKM. In 2009 – 2010, 3 Su-27SKM aircraft is to be supplied to Indonesia (the order amounts to about $150 million).

Su-30. In compliance with the schedule, the last lot of 10 SU-30MKA out of the total order of 28 aircraft is to be supplied to Algeria in 2009 (the order is estimated at $1.5 billion). Russia anticipates a possibility to sign a contract for additional Su-30MKA.

The program on license agreement for manufacturing 140 Su030MKI fighters launched with India is still going on. In terms of the contract during 2009 – 2013 (most likely this program will be extended up to 2015) 98 aircraft are to be manufactured (42 are already assembled).

In terms of direct supplies based on the contract of 2007 for 40 aircraft, the remaining 34 Su-30MKI aircraft will be delivered to the Indian Air Force in 2009-2010.

NEW FIGHTERS DELIVERIES

Military Aviation

10

RomaniaThe Ministry Of Defense of Romania

considers a possibility to procure 48 multi-purpose fighters (40 combat single-seater and 8 twin-seater combat/training aircraft) in compliance with the NATO standards. The estimated program cost is 4 billion Euros ($6 billion). Depending upon the form and terms of payment, financial conditions the expenses may grow up by 50 % – up to 6 billion Euros.

Tender results are expected in 2009. Supply of the new fighters is to be completed by 2014. However, the world wide economic crisis may have an impact on the time terms and quantity of the aircraft purchased.

SAAB (JAS-39 Gripen), Boeing (F/A-18 Super Hornet), Lockheed Martin (F-16 Fighting Falcon), Dassault Aviation (Rafale) and Eurofighter (EF-2000 Typhoon) have sent their responses to the Ministry of Defense of Romania. In accordance with the available data JAS-39 Gripen, EF-2000 Typhoon and F-16 Fighting Falcon are preferable for the purchase.

It is not impossible that the financial problems will bring Gripen to the leading position during the tender as the least expensive aircraft. At the same time

Consortium Eurofighter announced its readiness to deliver the aircraft to the Ministry of Defense of Romania within the allocated budget and to propose a cocurrent off-set program.

Eurofighter is planning to propose a supply of restored and upgraded Typhoons from the second market to the Romanian Air Force if the financial situation makes the Romanian Ministry of Defense purchase a combination of new and second-hand aircraft.

F-16 fighters have also great chances to be a success, mostly because of the deployment of a wide-scale infrastructure for support of American bases situated in the territory of Romania.

NorwayThe Ministry of Defense of Norway in

November of 2008 announced its selection of F-35A Lightning-2 as a winner of the tender for supply of new generation fighters for the National Air Force (the decision was approved by the Government of the State but it is still subject to approval from the Parliament). The program’s preliminary budget is equal to $3.5 billion.

The aircraft inventory of the Air Force of Norway incorporates 57 F-16AM/

BM aircraft, the operational life of which is going to expire in 2015. In 2007, to replace these aircraft the Ministry of Defense of Norway called for a competition. Apart from Lockheed Martin Company, SAAB with Gripen NG and Consortium Eurofighter with EF-2000 Typhoon took part in the competition. In December, 2007, Eurofighter said it was leaving the tender.

Within the framework of F-35 manufacture Norway considers a possibility to produce composite material and other components and software for the aircraft.

Official talks with Lockheed Martin on the contract will begin in the second half of 2009. Deliveries of new aircraft and removal of F-16 from the inventory are expected to be performed by phases. In case if the contract is signed, in compliance with the agreement reached in 2007, the first 8 F-35 aircraft may be delivered in 2015. If the development and deliveries schedules are observed all 48 fighters may be passed over to the Air Force of Norway by the end of 2019.

CroatiaIn February, 2009, due to the economic

crisis the Ministry of Defense of Croatia decided to adjourn a tender for 12 multi-purpose aircraft scheduled for the second half of 2009 for two-five years. The fighters that were planned to be put into service for the Air Force within 2011-2015 should replace the remaining 12 MiG-21 operated by the Croatian Air Force, as their operational life expires between 2011 and 2013.

In compliance with the last assessment performed by the Ministry of Defense of Croatia the procurement program cost is about 5 billion Croatian kunas ($844 million). The project has been estimated at 2.64 billion Croatian kunas before. In the long view the number of the procured aircraft may increase up to 16 or 18 units (12 – 14 single-seater and 4 two-seater aircraft).

TENDERS DECLARED AND SCHEDULED

Military Aviation

12

Lockheed Martin (F-16 block-52 Fighting Falcon), SAAB (JAS-39C/D Gripen), Dassault (Rafale), Eurofighter (EF-2000 Typhoon) and RSK MiG (MiG-35) have intentions to participate in the competition.

Procurement of restored aircraft F-16, Gripen, Mirage-2000-5 and MiG-29M from the Air Forces of various countries is among alternative options.

According to the Croatian Legislation, contracts for weapons supply envisages an offset program performed with the volume not less 100 % of the contract cost.

JapanAt the end of 2008 the Japan Defense

Agency re-postponed the date of tender for deliveries of fighters for the Air Force of the National Self Defense Forces in accordance with program F-X. The final decision on participants must be taken in 2009. The primary cause of such an adjournment is the persistent intention of the Defense Agency to include F-22 Raptor fighter as a participant of the tender. Their export is forbidden by the American Legislation.

Earlier, the Japan Defense Agency had some grounds to expect the permission from the US Administration to procure F-22 Raptor fighter. However, the statement made by US Secretary of Defense Robert Geitz (after Barack Obama came to power as new President) on the termination of this aircraft productions ruined hopes of Japan to receive F-22 as a new generation fighter (nevertheless, this issue is not closed, yet). Under these conditions F-35B Lightning-2 becomes the primary pretender to win in the scheduled competition.

The total value program for supply of new fighters (up to 100 units) is estimated at 1 trillion yens ($8.5 billion US).

Eurofighter (EF-2000 Typhoon), Dassault Aviation (Rafale) and Boeing, which offered aircraft F-15FX and F/A-18E/F Super Hornet, are considered among the other potential winners. But it is doubtful that Japan will select a "not-American" aircraft apprehending to spoil relations with Washington. The only real alternative for F-35B may be an upgraded version of F-15SE "Silent Eagle" fighter (the aircraft construction includes technologies applied in the fifth-generation aircraft) proposed by Boeing not long ago.

Nevertheless, the chances of F-35 are considerably greater. Moreover, Lockheed Martin expressed it readiness to consider a possibility for manufacture of F-35 under license in Japan, which is one of the conditions of the competition. But supplies of F-35 for the foreign customers may start not earlier than in 2012, and Japan will be able to get these fighters only in 2016.

As a temporary measure to maintain combat readiness of the Air Force, in December, 2008, the Japan Defense Agency decided to upgrade, in general, 48 F-15 fighters. In 2009, the Government allocated 89.2 billion yens ($988.3 million) for the upgrade of 22 F-15 and for purchase of onboard radars for 38 F-15.

The Japanese Administration has also taken a decision that Mitsubishi company will work out a demonstrator of technologies of a new national fighter ATD-X. All in all, till 2015, the Japan Defense Agency plans to allocate 39.4 billion yens ($441.5 million) for the program. The first flight tests of the new aircraft are scheduled for 2014.

Today, the Air Force of Japan is equipped with about 150 F-15 "Eagle" aircraft, about 90 F-4EJ fighters, needed to be replaced, as well as outdated F-1 and F-2. F-4EJ is expected to be removed from inventory in 2012 or 2013.

BrazilAt the end of 2007 the Air Force of

Brazil decided to resume execution of the program for the purchase of fighters (the program was named FX-2). The Brazilian Ministry of Defense intends to purchase 36 fighters (supply in 2014 – 2016) at the first stage. The estimated cost is $2.2 billion (by 2020 the total number of fighters purchased by Brazil may grow up to 120 units). To win in the competition the supplying company should transfer the aircraft manufacturing technology to the Brazilian industry.

Within the program F-X2 framework the Brazilian Air Force sent information request to Lockheed Martin, Boeing, Eurofighter, SAAB, Dassault Aviation and ANK Sukhoi in June 2008.

On October 1, 2008, after the assessment performed, the Management Commission of F-X2 project announced the participants in the final stage of the competition. Among them are the following: Boeing (F/A-18E/F Super Hornet) – Brazil is offered the most update version of F/A-18E/F block-2, – SAAB (Gripen) and Dassault (Rafale). Su-35 fighters of Sukhoi, EF-2000 of Eurofighter and F-16 of Lockheed Martin were excluded from the list of pretenders.

Total value of contracts for fighter aircraft

deliveries starting from 2009 and later is

estimated at $40.5 billion.

Military Aviation

14

All three runner-ups passed their final proposals to Brazil in February of 2009. In April, 2009, the Air Force of Brazil announced the beginning of flight tests and assessment of technical properties. The winner is expected to be named in summer, 2009 whereas the contract is to be signed in October.

Despite the announcement made by the Brazilian Air Force the general situation around this program is still completely unclear. In particular, in February, 2009, during a visit to Brazil on behalf of Sukhoi company, the delegation of Rosoboronexport offered the Ministry of Defense of Brazil to present Su-35 aircraft for reassessment .

On the basis of the available information, Brazilian Minister of Defense Nelson Jobim accepted the proposal and informed the Air Force would perform the tests. On behalf of

Eurofighter a similar proposition was made by Italy in terms of EF-2000 aircraft.

The Minister’s statement put the Brazilian Air Force which was not aware of the changes in the tender’s procedures, in an awkward situation. If all initial participants come back to the tender (obviously, if Alenia Aeronautica and Rosoboronexport are permitted to present their proposals, the same will be done by Lockheed Martin) the final decision on the purchase will be put-off.

At the same time due to the world economic crisis the Brazilian Ministry of Finance proposed to freeze up to 50 % of investment part of the state defense budget. Besides, in 2010 president election will take place in Brazil and if the procurement procedures are extended till that time, the new Administration may require more time to arrive to any decision.

DenmarkThe Ministry of Defense of Denmark is

engaged in a tender to replace available 48 F-16 Fighting Falcon fighter of the Air Force. Approximately equal chances belong to F-35 Lightning-2 and JAS-39 Gripen. In March of 2008 Boeing reported its intention to present F/A-18E/F Super Hornet for the tender. It is remarkable, that today Boeing performs a very aggressive promoting program and plans to win the tender with F/A-18E/F Super Hornet (Demark is offered F/A-18E/F block-2 version, which is supplied to the US Navy today). Earlier, EF-2000 Typhoon took part in the competition but in December, 2007, Eurofighter reported to leave the competition.

The Ministry of Defense of Denmark will have to carry out a detailed assessment and by the middle of 2009 to present its suggestions on the aircraft purchase to the

Total value of the identified contracted obligations concluded for export

of multi-purpose fighters for the first part of 2009 is estimated at

1.21 billion US dollars.

Military Aviation

16

Danish Parliament. Although the information request envisages deliveries of 48 fighters, the quantity may either be reduced or increased. The aircraft is expected to be supplied in 2016-2020.

Despite the fact that Denmark participates in F-35 "Lightning-2" design program the delay of its implementation raises chances for the other pretenders. Nevertheless, it is necessary to take into account that although participation in development and demonstration of the F-35 aircraft is not mandatory for the aircraft purchase, the share of Denmark as the third level partner at the stage amounts to $125 million.

SwitzerlandThe Ministry of Defense of Switzerland

has put-off the tender summation held for the purchase of fighters aimed at replacing F-5E Tiger. The final decision will be taken only after the Nation Security Maintenance Strategy is considered in December of

2009. It means that the winner will be named in 2010 (before it was July of 2009).

Selection of a new generation aircraft in two stages for the Air Force of Switzerland started in January, 2008 when the Swiss Agency for Defense Procurements Armasuisse sent requests to four producing companies. Only aircraft in service were allowed to participate in the tender.

The following companies gained invitations: Dassault Aviation (Rafale), Gripen International (JAS-39 Gripen), EADS (EF-2000 Typhoon) and Boeing (F/A-18E/F Super Hornet). At the end of April, 2008, Boeing officially announced its refusal to participate in the competition. The remaining pretenders sent their propositions by summer of 2008.

It ought to be noted that to make its proposal more attractive, in April of 2009 SAAB proposed Switzerland a counterpurchase of 50 RS-21 by Pilatus at the estimated cost of $870 million.

Before the end of 2008 the Ministry of Defense, Air Force of Switzerland and Armasuisse assessed the received proposals and performed aircraft ground and flight tests.

In January, 2009, Armasuisse sent a renewed request for deliveries of 22 aircraft to the tender participants – the total cost of the deliveries should not exceed 2.2 billion Swiss francs ($2 billion).

Due to the earlier approved schedule the assessment should have been completed till the end of this May. The proposal to choose the winner should have been sent to the Minister of Defense of Switzerland in July, 2009. After that the selection was to be approved by the Federal Council and the Parliament of Switzerland. The program was expected be approved by the Parliament in 2010 and then the contract should have been signed with the winner. Now all these procedures are put off for 6-12 month

Deliveries of the fighters and their acceptance for the AF inventory are to be completed till the end of 2012 (but taking into account the delay in the winner selection, deliveries are likely to be put off to 2013).

FinlandBy the end of the current decade the

Ministry of Defense of Finland plans to call for multi-purpose fighters competition. Today, the Ministry of Defense develops the list of requirements for the next generation aircraft. In this context there are two options under consideration: either procurement of a new aircraft or upgrade of F-18C/D (64 units) which are in service. The decision is expected to be taken after 2011.

Today the Air Force of Finland initiated the second stage of the upgrade program for F/A-18C/D Hornet. The cost of the equipment which is to be purchased within the framework of the stage is estimated at 1.3 billion Euros.

In accordance with the plans the upgrade of F/A-18C/D Hornet aircraft in the course of the second stage will be completed by 2015. The upgraded aircraft will come in service by 2020 – 2025.

Denmark participates in F-35 "Lightning-2"

program but its delays raise chances

for the other pretenders.

Military Aviation

18

South KoreaIn April, 2008, the Ministry of Defense of

South Korea reported its decision to procure a lot of F-15K fighters within the framework of the second stage of program F-X. The aircraft are aimed at replacing outdated F-4 and F-5, which are still in service today.

Contract envisages deliveries of 21 new fighters including one additional aircraft to replace F-15K crashed in June, 2006. $4.2 billion contract for supply of the first 40 units of F-15K was signed by South Korea and Boeing in 2002. The first part of the project was named FX1. The first two fighters F-15K entered service in the Air Force of South Korea in October, 2005. By the end of December, 2007, 30 aircraft were delivered including 12 units in 2007. Supply of the remaining 10 fighters was completed in 2008.

Initially, within the second stage of the contract the Air Force planned to purchase 20 fighters F-15, which were to be supplied during 2010-2012. The total cost of the agreement amounted to 2.3 trillion wons ($2.3 billion). By adding some changes to the offset program carried by Boeing additional aircraft will be supplied.

Third phase of F-X program expected to begin in 2011 envisages the purchase of the fifth generation fighters. In March,

2009, the Ministry of Defense of South Korea started to study aircraft tactical and technical properties within the framework of the third stage of F-X program.

F-35 Lightning is considered as the primary candidate. According to Lockheed Martin representatives deliveries of F-35A fighters to South Korea may start in 2014, providing that the contract is signed before 2010.

The Ministry of Defense of South Korea is considering a possibility to purchase F35B, fighters of the fifth generation, with reduced take-off and vertical landing ability to be deployed on a landing/helicopter dock ship of Docto-class along with purchasing F-35A aircraft with normal take off and landing ability for the Air Force. Decision to equip the dock within the Docto project with F-35B will increase chances of Lockheed Martin to win the tender.

Options under consideration by the Ministry of Defense of South Korea include upgraded F-15SE aircraft of Boeing and F-16 of Lockheed Martin, EF-2000 Typhoon

of Eurofighter and Rafale of Dassault. The list of pretenders for procurement includes F-22 "Raptor" but the American Legislation and the high cost of the aircraft will likely prevent Seoul from purchasing the fighter.

The Ministry of Defense of South Korea is expected to name the winner for aircraft supply within the third stage of F-X program in 2011. At this stage 60 aircraft will be purchased. The cost of the fighters procured within the framework of F-X program will be not less than 4.5 billion US dollars. They are scheduled to be supplied for the Air Force of the country during 2014-2019.

The NetherlandsThe Netherlands. The Government of The

Netherlands is considering to adjourn its decision to procure F-35 Lightning-2 fighters till the next elections due in 2011, despite that

in December, 2008, the Ministry of Defense of The Netherlands stated that F-35 fully meets the requirements determined by the Air Force for replacement of operating F-16.

The Ministry of Defense made such a decision by comparing the information provided by the potential candidates. F-35 Lightning-2, upgraded version of F-16 block 60 of Lockheed Martin and JAS-39 Gripen-NG were considered as possible pretenders for the aircraft of the new generation deliveries.

The aircraft valuation was carried out in terms of the agreement between the Ministry of Defense and The Parliament of The Netherlands on approval of the State financial support and participation in the stage of the initial operational tests and the fighter's valuation (IOT&E), which was designed within the framework of F-35 program. The Dutch Ministry of Defense agreed to perform a full scope comparative assessment of all alternative options to enable the Parliament to arrive to the final conclusion on the possible

If Alenia Aeronautica and Rosoboronexport are

permitted to present their proposals, the same

will be done by Lockheed Martin.

Hosted by

ILA Berlin Air Show

June 8 – 13 , 2010 Berlin-Schoenefeld Airportwww.ila-berlin.com

The focalpoint of aerospace

Military Aviation

20

participation in this stage envisaging the purchase of two prototypes.

The dispute about the purchase of F-35 have become more aggressive recently. The opinions on the issue have divided. The Ministry of Defense of The Netherlands planned to allocate 6.2 billion Euros for the purchase of F-35. But due to the fact that at this time Lockheed Martin is unable to announce the final cost of the production aircraft the number of fighters which may be purchased with this amount is still unclear. Formally, The Netherlands planned to purchase 85 F-35 fighters but in 2011 the government may approve the procurement only of the first lot of 55 aircraft.

Since joining F-35 program in 2002, the Netherlands, as the second-level partner assigned more than 1 billion Euros for the project development, (initially the expenses

were estimated at $800 million).If the Dutch Parliament approves the

procurement of the prototype the Dutch pilots will be able to participate in initial operational tests and IOT&E assessment of F-35 fighters starting from 2013.

Despite the "political debates" two F-35 prototypes are likely to be purchased. The first aircraft is expected to be purchased in 2009 and the second one – in 2010.

Two production F-35 aircraft are expected to join the Air Force in 2014. But to have the fighters delivered by the date the Government of The Netherlands should place the order in 2011 and sign official contracts not later than in 2012.

LibyaLibya plans to buy from 18 up to 24 new

fighters. Russia and France are the major competitors.

Russia considers a possibility to deliver 12 multi-purpose fighters Su-35.

For its part Dassault Aviation is preparing a proposal to supply 14 multi-purpose fighters Rafale to Libya. Today, the final decision about procurement of aircraft is not taken and the estimated date of the final negotiations is not determined. Paris and Tripoli are still engaged with the negotiations and information exchange. Fully functional multi-mission F3 fighters – similar to those used by the Air Force of France – are expected to be supplied to Tripoli.

TaiwanTaiwan. In 2008 the USA delayed

the program to supply 66 F-16C/D block-50/52 fighters to Taiwan worth $4.9 billion to avoid deteriorations in relations with China (in 2007 Taiwan Parliament voted for assignment of funds to procure these fighters).

For its part, Taiwan keeps reporting its readiness to purchase F-16C/D fighters in

the USA and to restore the funds meant for their procurement as soon as Washington permits to sell them. Finally the supply is likely to be accomplished.

In 1992 Taiwan purchased 150 F-16 aircraft in A/B version in the USA and its intention is to procure additional quantity of F-16C/D to upgrade its Air Force.

Taiwan has also expressed its interest to procure fighters F-35B over the long term.

Today, the Air Force of Taiwan is equipped with about 136 fighters F-16 in A/B version, 89 F-5E/F-5F Tiger-2, 10 Mirage-2000-5D fighters and 47 Mirage-2000-5E fighters. Besides, Taiwan has 130 fighters of its own manufacture which is F-CK-1/IDF.

Translation: Vyacheslav Smirnov

For full version please visit out website www.airfleet.ru

Russia to launch the biggest – in monetary terms – program of upgrading

63 MiG-29 fighters for the Indian Air Force. The total cost of the program for

2010-2014 is estimated at $964 million.

22

Defence

The Komar (Mosquito) stand-alone self-defence module (SSM) for the Igla-type man-portable air defence systems (MAN-PADS) is currently the most lightweight tur-ret mount, which is important when installa-tion on mobile chassis is required. One of the multiple advantages it offers is high dy-namic characteristics. Komar was designed and produced by RATEP JSC.

It was only after 23 December 2008, when the Russian Ministry of Defence (MoD) approved the performance char-acteristics and the export variant of the weapon, that Komar was okayed for public demonstration.

Demand for mobile, or transportable, short-range air defence systems, whose design incorporates various MANPADS systems and aerial target electro-optical detection and guidance means, can be ex-plained by the desire to ensure protection of multiple civilian and military installations from air threats and provide support for combat units in the offensive, defensive, as-sault (counter-terrorist) operations including in places that are hard to reach.

SSM export variants include Gibka and Komar. Traditionally, these systems were designed for installation on small-displace-ment surface ships.

Komar was designed to exercise guid-ance and remotely-operated launch of the Igla-type missiles from a rotating mount installed on the deck. It was to protect sur-face ships from anti-ship missiles, planes and helicopters at short ranges, as well as to cover small-sized sensitive coastal mili-tary and industrial installations. The system can operate in electronic countermeasures environment and under enemy fire, against the background of natural noise or jam-ming.

The module consists of three main parts: a remotely-operated launcher, a control

panel, and a power supply and drive con-trol unit.

The remotely-operated launcher consists of a swing device, a hardware kit with launch modules, and a TV camera. It is designed to

■ guide the TV camera and the hard-ware together with the launch modules to-wards the target from the control panel;

■ feed situation reports and target data to the control panel.

The swing device is designed to house the TV camera and the hardware kit with launch modules, and to provide vertical and horizontal targeting.

The hardware kit with launch modules is designed to remotely launch the Igla-type missiles whether in a single-shot, serial or salvo launch modes. The kit with launch modules consists of two versatile launch modules. Each module holds two Igla-type MANPADS.

The TV camera facilitates visual detection and acquisition of a target.

The control panel is designed to ■ receive target designation and target

data from ship-borne information systems; ■ process and display target data; ■ additionally search and acquire targets;

SMALL MOSQUITO LAYS GREAT BIRDS

23A I R F L E E T · 4 · 2 0 0 9 ( 7 8 )

Defence

A I R F L E E T 2 0 0 9 ( 8 )

■ feed target designation to remotely-operated launchers and receive status reports from them;

■ select launch modes; ■ automatically register the turret mount

operation;■ assess launch results; ■ provide training for crews; ■ interface with external systems. The power supply and drive control unit

supplies direct and alternating current of various voltages to the turret mount and ensures operation of the drives.

The system system has two combat control modes - the centralized (with automatic or semi-automatic guidance of the Igla-type mis-siles to the target) and the stand-alone ones.

The automatic or semi-automatic guid-ance is assisted by the external surveillance radar, while the self-contained guidance and tracking is achieved by means of a hi-definition low-level TV camera. Guidance is of parallel closure type.

Komar can be used against one target at a time. The missiles are equipped with the optic (passive) seeker featuring an artificial thermal noise selector. Missiles with the cruise and boost engines are launcher from the ship-borne remotely-operated turret mount.

The Igla homing missile is delivered in a launch tube and requires neither inspec-tions nor adjustments during the whole term of service. The efficient warhead and high g-load capability allow for destruction of aerial targets, as well as moving and soft-skinned surface and coastal targets.

Komar has successfully passed official tri-

als and is being delivered to the Navy with the state order for defence guaranteeing its deliveries in the future.

Given the growing demand for cost-efficient short-range mobile air defence systems on the part of foreign customers, Komar was adapted for installation on both wheeled and tracked vehicles.

All of the three components of the system saw changes. The electro-optical system was the first to be modernized. To give the system a 24-hour capability, the remotely-operated launcher was re-designed so that the TV camera was replaced by a device incorporating a thermal imaging camera, a low-level TV camera and a laser range-finder. In one of the modifications the launcher is installed on a lifting platform.

The control panel was also re-designed and placed in front of the operator inside the mobile carrier’s cabin next to the driver’s seat.

Komar receives target designation data from the small-size surveillance radar in-stalled on the same carrier vehicle.

The control system for ground-based modifications is a multi-channel one, the number of channels depending on the number of missiles ready for launch. Power is from a gas-generator.

Komar can be installed on any vehicle required by the customer and interfaced with the customer’s command transfer equipment.

Basic characteristics Characteristics Value

Engagement area, m rangealtitude

500 to 5,500 (6,000 *) 5 to 3,500

Maximum target speed, m/sec 400

Number of launch ready missiles up to 8

Launch modes Single-shot Serial launch Salvo

Combat control modes Centralized Stand-alone

Reaction time (minimum detection-to-launch time), sec

8

Target detection (tracking) range, at meteorological optical range of 20 km, km

anti-ship missile plane (helicopter)

at least 720

Deployment time, min max. 3

Weight, kg 400

Note: *if Igla-S missile is used

24

TU-204CM is a deep modernization of TU-204 a/c , passenger aircraft with two-member crew

provided with PS-90A2 main engine. Basic concept of TU-204CM a/c

25

TU-204 –NEW DEVELOPMENTS OF “TUPOLEV” PSC

Aircraft

A I R F L E E T · 4 · 2 0 0 9 ( 7 8 )

26

TU-204CM is a deep modernization of TU-204 a/c , passenger aircraft with two-member crew provided with PS-90A2 main engine. Basic concept of TU-204CM a/c:

■ Continuation of TU-204/214 family development;

■ Compliance with Russian and Inter-national flight safety requirement including the ICAO and Eurocontrol requirements introduced anew.

■ Creation of a prototype competitive with foreign airplanes before appearance of new generation Russian mid-range airplane;

■ Arrangement of state – of –the – art after-sale support structure regarding con-tinued airworthiness;

■ Meeting ETOPS-120 requirements;■ Extension of expected operating con-

ditions in 2011.TU-204CM building Program will pro-

vide as follows:■ Filling Russian air transport market

with native airplanes and maintaining and development of national air transport infrastructure;

■ Minimization of cost and time period of the airplane mastering in serial produc-tion due to commonality with certified TU-204-100 and TU-204-300 airplanes and their versions;

■ Manufacturing and certification of new systems and components to be intro-

duced and used in prospective mid-range airplane of new generation;

■ Forming after-sale support structure basing on advanced technologies using foreign experience;

■ Decrease of direct operating cost of the airplane in service by more than 10-15% in comparison with TU-204-100 and TU-204-300 airplanes being currently in operation.

In comparison with baseline TU-204/214 family TU-204-CMs are subject to following changes:

■ Installation of upgraded turbojet PS-90A2 with reduced life cycle cost and extended TBO and assigned service life of main parts and components (for cool part – up to 20000 cyclers and for hot part – 10000 cycles);

■ Installation of a new TA-18-200 APU with increased in-flight start and operation altitude;

■ Introduction of a new equipment to ful-fill functions according to current and future ICAO and Eurocontrol requirements;

■ Introduction of an upgraded landing gear which design will provide service life corresponding to service life of the airframe;

■ Improvement of passenger cabin interior;

■ Development and installation of gen-eral aircraft components control system

and maintenance and troubleshooting system;

■ Development and introduction of two-member cockpit;

■ Modification of electric power sup-ply, control, fuel and hydraulic systems; introduction of digital ACS and electrical actuators in wing high-lift system.

State-of-the-art and effective after-sale support of TU-204CMs is provided due to following activities:

■ Creation of electronic interac-tive documentation in accordance with AS1000D;

■ Efficient planning of scheduled mainte-nance work;

■ Formation of baseline spare parts storage facilities; introduction of C Cat-egory complex aircraft simulators;

■ Extension of MMEL.

WBSMA projectWBSMA-Wide Body Short and Mid

Range Airplane is conceptually developed under the Contract with Unified Aircraft Corporation.

Wide Body Short and Mid Range Airplane (WBSMA) is designed to carry passengers on domestic and international routes and is directed towards meet-ing current and future market demands. The airliner is supposed to replace A300/310 and Il-86 fleets. According

27

to preliminary market investigation Inter-national air transportation market within next 10-15 years will demand about 500 wide body short range airplanes, 100-120 off them will be demanded on CIS market.

WBSMA baseline airplane will be able to carry up to 310 passengers in single-class cabin with baggage and cargo up to 32 tons in total for the distance up to 3500 km. The WBSMA family will be repre-sented by optimized airplanes designed for 250 and 310 passengers and by cargo version as well (WBSMA-300, WB-SMA-210 and WBSMA Cargo).

Wide body will provide the airliner with comfortable two aisle cabin. Large cross section of the fuselage makes it possible to arrange interior elements at a long distance from a passenger’s head. Passenger cabin is manufactured by use of the most advanced technologies in view of potential requirements to flight safety, comfort level and additional means of passengers ser-vicing. High comfort level is achieved by use of digital ACS, wide range of in-flight entertainment and servicing means includ-ing Internet, mobile communication etc. To cut down time and cost of landing, pas-sengers disembarkation and hand luggage

handling the original approach is offered - to use built-in air stairs.

The WBSMA project is developed on the basis of technical approaches which can guarantee the airliner competitiveness within its class on domestic and internation-al routes. In comparison with the airplanes being currently in operation the WBSMA has following advantages:

■ High comfort level of passenger cabin arranged for 300 seats;

■ Simple operation from regional airfields;

■ Specific Fuel Consumption corre-sponds to international standards – 17,0 g/pas km;

■ Direct Operating Cost level is compa-rable with that of regional airplanes;

■ State-of -the –art avionics and main aircraft equipment is used which allows two-pilot crew and leads to compliance with the most severe flight safety criteria;

■ Advanced complex of after-sale sup-port;

■ Meeting future international require-ments to noise and emission level .

Fuel consumption per one passenger in combination with arrangement of state-of-the-art structure of after-sale support will allow airlines to reduce operational

cost of the WBSMA being under develop-ment by 15% in comparison with similar foreign airplanes. Prime cost of this airliner manufacturing is planned to be at the level of currently operated Russian airliners at probable cost reduction by 20%. Estimated prime cost of WBSMA passenger-kilome-ter and flight hour is averagely 25-30% lower than that of currently existed wide body airplanes.

Modified turbojet PS-90A2 engines certified to AP-33 are supposed to be used in the power plant. A number of technical approaches used in this modified engine will give a high economic and weight efficiency. Integration of PS-90A2 in to WBSMA will provide low noise and CO2 emission level/

The WBSMA will meet all Airworthiness Requirements, International Environmental and ICAO requirements.

The WBSMA will use a new generation airborne electronic equipment based on integrated modular avionics with open architecture.

Putting the WBSMA in to operation airlines will get a reliable, comfortable and economically efficient airliner and state-of-the-art package of after -sale support services all over the world.

Aircraft

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Industry

28

Participation in international exhibitions is our policy and practice which we follow regardless of the crisis. This is the opinion held by Michael Voevodin — President of VSMPO-AVISMA titanium corporation.

How the corporation manages to sustain leadership during the crisis period is told by Michael Voevodin in the interview given to our magazine; the interview, by the way, took place between the two exhibitions — Le Bourget and MAKS.

■ Question: Your delegation has recently come back from the Paris air show — Le Bourget. Could you please tell, what you presented at the exhibition?

■ Answer: At the exhibition we presented our products: all kinds of titanium items, beginning with titanium sponge and finishing with machined forgings.

Generally speaking, the range of our products is very wide. As to titanium alloys these are ingots, slabs, billets, forgings, plates, sheets, coils, strips, bars, tubes, shapes; as to aluminum

alloys — ingots, shapes, tubes, plates; as to alloyed steels and heat-resistant nickel-based alloys — die forgings, forgings, shapes; and, also, as to titanium and steels — heat-exchange equipment for power engineering and chemical applications.

We are the only titanium manufacturer in the world having full production cycle. This is our basic advantage. Besides, we have a very strong, historically created, scientific basis. It is not only that we produce titanium, but also develop new alloys, new technologies... Thus, we have developed alloys for Boeing 787 plane, and are developing one for Airbus А350.

But for us an exhibition is not a platform as such where we can sell something new. It’s more likely an opportunity to meet

our basic customers, business colleagues, exchange information and carry on intensive negotiations with customers. We have rather a big team at the exhibition — around 20 people, including Russian employees and representatives of all our foreign affiliate companies. And of course, it’s much more efficient to gather everybody in the same place and meet all the customers than travel around the whole world in separate teams.

■ Q: Did you manage to meet everybody planned at Le Bourget?

■ A: Absolutely. There were about 15-20 meetings with different companies per day. With some customers we had two-three meetings during the week. To be quite honest, this is my first exhibition. And I never thought it to be that effective,

that correct and that hard. The day started at 9 a.m. and finished, in average, at 10-11 p.m., after that we had team session discussing the next day program. This is really hard but very efficient.

We signed two contracts: one with the Eurocopter Company — till 2020 (according to which we’ll supply titanium billets for helicopter parts), and the other one for 5 years with EADS Astrium, a manufacturer of space hardware systems. For this company we will produce titanium forgings which are used in telecommunication satellites constructions.

■ Q: The share of titanium parts in modern planes is constantly increasing, as well as the requirements to titanium processing and product quality. How do you think you have managed to meet the

TIME TO THINK ABOUT EFFECTIVENESS

29

Industry

29A I R F L E E T · 4 · 2 0 0 9 ( 7 8 )

requirements of such customers as Boeing and EADS for so many years?

■ A: I wish I could say that there are no competitors and the market is limited, but it would not be true. The fact is that daily thorough work initiated by Professor Vladislav Tetyukhin as early as in 1992 and due to which the company reached international level, is going on. We keep on developing technologies, production.

In 2007, investment program till 2012 was approved, which included production investments about one billion dollars, by now 635 millions have been invested. These investments are aimed, firstly, at increasing titanium production, and, secondly, at shifting production line from simple conversion (ingots and slabs) to manufacture of value added products, such as machined forgings.

According to this business plan we planned to increase tonnage by 1.5 times and double the revenue. Naturally, at the end of 2008 we reconsidered this program. First of all not because there is no money, but because our basic customers called their demand off, or, as it’s commonly said, "pushed it out". Now we are to increase these capacities not by 2012 but by 2015. This is actually good as there is time to think everything over.

■ Q: Traditionally your corporation has and is giving priority to foreign markets, that is Europe, the USA and the countries of Near and Middle East, markets of South-Eastern Asia countries. How would you estimate the per cent ratio of products supplied to these markets?

■ A: Today, the share of products supplied to foreign countries is distributed as follows: the USA has 43,6%, Europe — 36,4%, Great Britain — 5%, China and India — 3%, South-Eastern Asia — 5%, and South America — 2%.

Unfortunately, as you can see, today, the share of supplies to Asia is considerably less. This is connected with the historically shaped specific character of the corporation. 70-80% of overall output — the products of aerospace application. Whereas there is no such demand in Asia.

A few years ago, jointly with a large titanium manufacturer, Allegheny Technologies Incorporated (ATI), we created a company, called UNITI, for manufacture and sale of industrial application products. This is what foreign industrial market is entered through. 50% of the company belongs to Allegheny and 50% — to us. This is where such subdivision of markets originates from. But now we are trying to enter markets of China and India already with own aerospace applications, because they need it as well as we do.

■ Q: And how did the financial crisis influence your products supply to foreign and Russian customers?

■ A: As to foreign customers. I would like to quote a phrase said by Thomas Enders -Airbus President & CEO — at the meeting with basic suppliers. He said that Airbus and its suppliers represent the same convoy. (“It is difficult if suppliers make their own forecasts when everyone is tense and nervous. It is very important to stay in the same convoy and to build

confidence with suppliers ... in the [economic] crisis.” — editor’s note.)

I absolutely agree with him. The crisis for the most part influences not us and plane manufacturers. The crisis hits consumers, who purchase less planes. Manufacturers produce less, and we supply less titanium. But this decrease is not crucial for us.

Inside the country the crisis mostly affected payment discipline of our Russian customers — plane manufacturers, defense industry — than supplies. At the beginning of the year we had significant accounts receivable which have decreased by 2.5 times by now. Of course, it’s not absolute decrease. But we cannot and don’t want to behave excessively harsh with Russian consumers because it’s necessary to support each other under such circumstances. We understand that all of them are doing great national work, and that is why we don't use draconic methods in reducing accounts due.

■ Q: How do you estimate for yourself the perspective of Russian economy development and, in particular, native aviation industry?

We are the only titanium manufacturer

in the world having full production cycle.

30

Industry

30

■ A: We’ve held several meetings with Oboronprom United Industrial Corporation, and a very positive forecast was indicated for the coming 5-7 years, including Аn-148 and SSJ projects in which we participate. I hope that in the coming 3-5 years Russian aviation industry will reach at least medium output level and manufacture about 50 planes per year.

In 2007-2008, the company's people and equipment were loaded to the maximum. Now some slow-down gives us a chance to invest money in a more correct way, to perform those repair works that we have put aside for a long time. I tell my colleagues: the crisis is good as it gives us a chance to think over production efficiency. Two years ago nobody thought about efficiency. We mostly cared about how to sustain volumes, meet delivery targets and supply products in time — at that period it was more important than some production details that could increase company’s revenue. Now it is visa versa, we have an opportunity to improve production processes. So, all in all, I’m glad that the crisis is there. Of course I wish it didn’t last too long.

■ Q: Today, many people speak about possibilities to improve cooperation between Russia and the USA. One of the directions in this cooperation can be called your joint venture with the Boeing Company — Ural Boeing Manufacturing — established in Verkhnaya Salda. Please, speak about it in a more detailed way.

■ A: Grand opening ceremony was held July the 7th. It took us three years to reach that day. Everything went on according to the plan. Joint venture will be involved in machining of VSMPO produced titanium forgings for new Boeing 787 Dreamliner. As the Boeing Company believes, after we have commissioned all the machines, there will be no facilities in the world which are more advanced. Maybe, some machines can be installed somewhere, but the same facilities as we have are not likely to be anywhere in the world.

■ Q: R&D financing is traditionally one of your strategic trends. Could you please tell, how you manage to finance research and development in the financial crisis conditions?

■ A: We go on working in the same regime. R&D is an issue of priority from the expenses point of view. We have never reduced R&D expenses and will never do. Because this is one of our basic competitive advantages and our future is in that.

Speaking about our projects in this sphere, this is, first of all, continuation of work on high-strength titanium alloy for А-350 aircraft. There are ideas for new titanium alloys compositions, in particular, alternate to 6Al-4V alloy, but with improved processibility. Besides, we are expanding activities in development of ultra fine-grained sheet in various gauges and alloys. We proceed with other work as well.

The crisis is good as it gives us a chance

to think over production efficiency.

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Industry

32

Boeing and VSMPO-AVISMA Opened Joint-Venture Manufacturing Facility in Russia

THE PREMIER MARITIME & AEROSPACE EXHIBITIONThe leading maritime and aerospace show in the region just got better!

The Langkawi International Maritime and Aerospace Exhibition is now held at a single venue,the Mahsuri International Exhibition Centre. Taking you straight to the heart of Asia-Pacific'sdefense and civil growth markets. Network with over 250 delegations embodying key defence andcivil decision makers and end users.

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Royal Malaysian Customs Department of Civil Aviation Malaysia Airports Berhad Fire and Rescue Department, Malaysia Department of Fisheries Malaysia Malaysian Defence Industry Council Maritime Institute of Malaysia

S U P P O R T E D B Y :

Government of Malaysia Ministry of Defence Malaysian Armed Forces Royal Malaysian Navy Royal Malaysian Air Force Royal Malaysian Police Malaysia Maritime Enforcement Agency

34

Industry

This is the viewpoint of Vladimir Chertovikov, First Vice-President of "Management Company “Aluminium Products”". The company exists de jure for just two years. Merger of "SUAL-Holding" group and amalgamated company ОК "RUSAL" served as impetus for its foundation. In was in 2007 that “Aluminium Products” company was created for management of assets, which were not incorporated by casual principle in transaction with "RUSAL". However, de facto company’s new history goes back to the beginning of re-equipment of one of the oldest enterprises, namely, Kamensk-Uralskiy Metallurgical Works, being part of the Ministry of Aircraft Production. First Vice-President told us in company’s Moscow office about the pioneering days of the plant and prospects of its development in crisis period.

■ Question: Mr. Chertovikov, what other enterprises, in addition to Kamensk-Uralskiy Metallurgical Works, are under the management of "Aluminium Products" company?

■ Answer: Besides the Kamensk-Uralskiy Metallurgical Works (KUMZ) we

have two cookware production plants, namely, "Demidovskiy" and "Skovo" plants. "Demidovskiy" plant is located on the KUMZ site in Kamensk, and "Skovo" plant was built two years ago in outer wood in Stupinskiy district of Moscow Region.

Cookware production on the KUMZ site was considered to be consumer goods industry, where investments and efforts were lacking… In the crisis years we had to do something with it: either to shut down or restore the branch. It was decided not to shut it down but rather to create a separate cookware producing plant under

reasonable management. When the plant was revived we opened the "Skovo" plant. Production volume has grown so much that we are now having approximately 27 percent share of Russian aluminium cookware market.

■ Q: And what are the shares of KUMZ products in different branches?

■ A: If we consider the products in market shares, general technical trade makes up approximately 63 percent, consumer goods – 15 percent (though part of them are included in the above mentioned 63 percent), aviation – 12 percent and defense industry about 12 percent.

Besides, 63 percent include the products for transportation sector, power industry, nuclear power industry and other branches.

■ Q: It turns out that aviation makes up just 12 percent...

■ A: Previously defense industry, space and aviation were the leading branches… While now state-guaranteed orders went down, Russian aviation is still in a rather depressed state, similar situation is witnessed in defense and in aerospace industry. All that influences the share of deliveries, which has also shrunk. In addition to that, overall production volumes at the plant went down. In 1980s record

LOOKING FOR GOVERNMENT SUPPORT IS INEFFECTIVE

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production volumes reached from 200 to 230 thousand tons per year, while in 1998 they went down to 26–27 thousand tons. That is almost 10 times less! The plant was in bankruptcy state. Despite the availability of trained experts, it lacked a well defined development strategy and intent to conduct rehabilitation and reorganization of production. Therefore, when private investors appeared, first of all the issue was raised about who we were and what were our mission and strategic objectives. Precisely at that time it was decided that KUMZ should become a high-tech enterprise. All the other directions and so-called options have been developed in order to increase production volumes, reduce standing expenses and ensure vital activity of the entire complex. Our specialists have developed a number of programs, within the framework of which market assessment was conducted, expenses were calculated, profitability and pay-back period of each project was determined. It is true that there were some non-alternative projects, which had to be implemented by all means, so to say. One of such programs, the first and largest with the expenses running into 7 million dollars consisted in modernization of hot-rolling mill, which included replacement of primary drive, rolling mill engine, power conversion system, control system, etc.

■ Q: You said that there were several programs within the framework of plant development. What else have been done?

■ A: When Vladimir Ilyitch Skornyakov, Vice-President of "SUAL-Holding" and now President of "Management Company "Aluminium Products" became at the head of the enterprises of high-level processing of aluminium, the development programs

reached logical maturity and received shareholders" support. Hot-rolling mill has been reconstructed and now we are seriously engaged in foundry production refurbishment. As usual we had to begin at the beginning. Melting and casting aggregates at the plant were consuming huge volumes of gas. In addition to that, refractory materials contained silicon, and when silicon oxide enters into a reaction with melted aluminium, aluminiun becomes oxidized, silicon passes into hot melt and we are losing alumilium. Each furnace production campaign consumed about 60 tons of aluminium. It was impossible to accept such losses. We had to install new equipment for melt purification as well. Since we intended to supply produce to the leading aviation companies, we had to meet rather strict requirements starting with production certification, quality management system, production assimilation as per the western standards. We have launched this program: since we decided to become a hi-tech plant, we had to act. After the foundry we have again refurbished the hot-rolling mill. New coiler with wrapper and ingot heating furnace have been installed. Last year we installed hydraulic screw-down mechanisms and new control systems. Broadly speaking, it’s an endless song, since production development should outpace customer requirements.

■ Q: Probably, "Chkalovskiy" plant has become one of such projects, which is outpacing customer requirements? Please tell us about it in more detail.

■ A: Three years ago we signed a contract with Airbus company, which was preceded by memorandum of understanding. Under the memorandum new production project has been worked out, accepted by shareholders and financing has been set up. Two and a half years later new production facility was built, namely, "Chkalovskiy" plant was put into operation, where thermomechanical treatment of sheets and slabs for aviation industry was conducted. Investments amounted to 86 million dollars. The plant was commissioned on December 12, 2007 and as early as in 2008 its production reached almost 20 thousand tons. It means, firstly, that we have calculated everything properly and, secondly, we have managed to attract the market and customers and as early as in the first year of production have reached the volumes close to rated capacity. Nowadays it is the most modern facility in the world. "Chkalovskiy" plant is equipped with all the necessary machinery: heat treatment facility, powerful stretching machine, ultrasonic machine, which is controlling slabs in automatic mode, machine for checking electric conductivity in the entire area of slab, high-precision cutting

Business should be accountable. However,

investment, innovative projects, large scale

national projects, defense industry and social

measures are an exemption.

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machine and other necessary equipment. At present this plant has become a workshop of KUMZ, and new projects are in the pipeline.

■ Q: And what is the aggregate investment in the program of KUMZ modernization?

■ A: In general we are rather economical: we are using the investments very carefully after long consideration. Calculations show that approximately 22 million dollars were spent on hot-rolling mill, about 35 million dollars on foundry, in which by the way construction of one more large up-to-date melting and casting aggregate is being completed. Altogether 86 million dollars were invested in "Chkalovskiy" plant, approximately 1.5 million for refurbishment of central laboratory, and 8 million dollars more were spent on extrusions and forgings. This all applies to the period beginning from 1998.

■ Q: Which is to say, altogether approximately 150 million dollars?

■ A: A bit more. But ultimately the result is evident. The plant is operating and developing even in the crisis period. We stay afloat and feel sure of success. Thanks to all the programs in 2007 we have managed to raise production up to 115 thousand tons, and in 2008 (taking into account the crisis) up to 105–107 thousand tons. However, this year production volume will surely be lower.

■ Q: How many people are working at the enterprise?

■ A: At present about 4,500 people are working at our enterprise. And we should say that our team is very young. Mean age of the management team at KUMZ is 37. Mean age of those working in the shops is 46. Due to the fact that we have offered reasonable retirement compensation payments to the plant workers, the process of

personnel "juvenation" has been conducted rather quickly and smoothly.

■ Q: Has the state assisted you in any way with technical retooling?

■ A: No. I consider that asking the state for money for commercial projects is ineffective. One can spend all the energy in order to obtain financing instead of getting involved in production development. Ultimately one will get only part of the necessary amount, but two or three years will be spent on vain hopes. I consider that it is ineffective and harmful both for the state and for business. Business should be accountable. However, investment, innovative projects, large scale national projects, defense industry and social measures are an exemption.

■ Q: How has the crisis affected supply of your products abroad?

■ A: We have contracts with practically all world leading aircraft manufacturing companies. But the trouble is that the crisis has considerably thwarted the branch progress and the concepts of air carriage have changed. Bombardier company had to launch a new series С, but the program has been at first suspended and then resumed. Airbus and Boeing business is also known. Some complications are present everywhere. That is why we are once again considering new directions including shipbuilding and construction industry in order to strengthen our positions on these markets and continue our development. It’s a pity that aluminium high-sided wagon, which has been developed by us jointly with Russian Railways at VASO, which weighs 8 tons less than steel one, has not been yet launched on railways. Closed-loop testing in Scherbinka is going on for more than two years.

■ Q: Are you considering the possibilities of your presence in Chinese markets?

■ A: In general, China is a self-sufficient state. We are exporting not so big volumes of our products to China, but we are trying to expand our presence in this market. We have opened office in Hong-Kong and we should say that supplies there are developing exponentially. Comparison of dynamics of supplies to the markets of Europe, USA and China shows that it is falling here and is growing there.

We stay afloat and feel sure of success. Thanks to all the programs in 2007 we have managed to raise production up to 115 thousand tons, and in 2008 (taking into account the crisis) up to 105–107 thousand tons.

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■ Q: What are the shares of your products supply to regions?

■ A: We are exporting from 50 to 55 percent of our products abroad. And among foreign states the first place is occupied by Europe, second by USA and third by South-East Asia. There are also supplies to Africa, Indonesia, Israel and other regions.

■ Q: And what are the prospects of Russian domestic market? This spring "Management Company "Aluminium Products" signed a long-term agreement "On Cooperation" with the United Aircraft Corporation (ОАК). What does this agreement mean for you?

■ A: Firstly, we would like to become one of the major suppliers of aluminium for our United Aircraft Corporation, though it looks like we already are. But nonetheless… When a new aircraft is designed, designers are using the existing GOST standards and technical specifications. Here is one example. The widest sheet in Russian standards is sized 2 m, while the design may

require 2.6 m. However, nobody is planning the use of such sheets, that is why nobody is producing them here.

And it is necessary to act in a different way: decide what materials are needed for design and approach the All-Russian Institute of Aviation Materials (VIAM), metal-makers and those engaged in avionics and engine manufacturing and put forward our demands. But everything remains as before here.

Thus, we approached the United Aircraft Corporation and asked what products would be required for future designs, in so doing we noted: "Don’t take into account what is available at present". For some reason this question puzzled many people. It turns out that some people don’t understand what can be used in new design, which can make it the best in its class, while others are not developing it since they don’t see the demand or protect themselves from the risk of introducing something new. In this way, in my understanding, the agreement should allow us to reach a new level of relations

and production development. We are ready for that.

Take for instance a plate, which is used for fabrication of a certain element of aircraft fuselage: its metal recovery ranges from 15 to 45 percent at best. All the rest of it is cutting chip and waste at aircraft manufacturing plants. We are looking for money. Here is the money! It is only required to install the appropriate equipment at metallurgical plant, which will not mix chips of various alloys, but will rather remelt everything separately and will return this metal back to the same article. In this case the prime cost and price of the article will be decreased, and thus the prime cost of the frame will go down respectively. There are a lot of such examples and new projects. The first steps have already been traced, and it only remains to move faster.

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3838

During a press-tour held in Zaporozhe our correspondent spoke with the head of

"Motor Sich" JSC Vyacheslav Boguslaev.■ Question: For several years the

Ukrainian and Russian governments continuously suggested integrating "Motor Sich" company into created state holding companies. You didn’t hurry up with making a choice. And now we got to know that you personally addressed the Russian party with an offer to establish a management company. What kind of idea is that? Could you please tell what for you need such a company?

■ Answer: Together with Fedor Muravchenko (chief designer of "Progress" design bureau — editor) we sent a letter to Andrey Reus, general director of Oboronprom with an offer of our engine manufacturers integration program. I suggested that we should found a Russian-Ukrainian management company, which will presumably be joined by the consolidated engine-building corporation (ODK) and "Ivchenko" corporation (consists of "Progress" design bureau and

"Motor Sich" JSC).We believe that such a management

company will include three people from

each party. Functionally, it will solve three issues: technical (which plane engines are to be built and at which priority), marketing (we should carry out market research) and price policy (we shouldn’t increase prices, taxes and interest inside the company but visa versa, should create cheap product).

Besides, management company could take control of all programs realization and follow financial assets expenditure, which is significant in financial resources deficiency for joint projects realization.

■ Q: And how did this very idea of such a company establishment occur to you?

■ A: A Russian delegation came to Kiev to take part in meeting devoted to aircraft construction problems discussion, including the issues of An-124-100 and An-70 planes production projects recovery. And during the discussion the question arose — who will sell? I was merely astonished by such an approach to our common business. Nothing has been done yet, exact cooperation line-up, responsibility segments, companies’ technical and technological facilities haven’t been determined, and the "main" issue is brought to the limelight: who will sell the planes? That was the reason I suggested that we should create a

management company, similar to Airbus in Europe which will unite a number of aircraft constructing companies and ANTK n.a. Antonov together with the Kiev plant "Aviant".

I believe, the issue of management company establishment will be seriously and considerably treated together with UAC and ANTK n.a. Antonov at MAKS in Zhukovsky. Basically, both Russian and Ukrainian companies are ready for such a management company to be established. We do not see any other way to sustain progressive advance in integration.

■ Q: As far as I know, the Russian party has claimed that they are ready

OUR SKY INDIVISIBLE

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39A I R F L E E T · 4 · 2 0 0 9 ( 7 8 ) 39

to start negotiating with you about cooperation within the frames of joint corporation. And what do you think about the possibility of union with ODK?

■ A: I am frequently asked: when will "Motor Sich" JSC fi nally be together with ODK? I have always said, before speaking about any forms of integration, the conditions for such integration must be analyzed, it should be clearly understood, what the ODK is. Now routine work is being done as far as the branch companies assets joining is concerned.

In general, establishment process is progressing from both parties. At the same time, Russian aircraft engine construction companies are about two

years ahead of the Ukrainian companies here: they are already reincorporated as joint-stock companies. And there are no joint stock companies in the Ukraine but for "Motor Sich" JSC yet.

■ Q: At what conditions do you intend to integrate? I know that you are not satisfi ed with offers received from Russian party. You have said that your stocks are at the stock exchange

and everybody interested could purchase them.

■ A: But what is another way? We can remain within the frames of management company as the fi rst step to complete and mutually profi table integration. This gives us the right and opportunity to work both at domestic and international markets. But if ODK is interested in purchasing our stocks or

"I responsibly state Motor Sich JSC has always

viewed and will view cooperation as joint

work of participants having equal rights in

specific projects."

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40

offering theirs or exchange in any other way, we will consider all the offers. There are a lot of forms of cooperation.

■ Q: So what is offered to you in particular?

■ A: Substantially, aimed at sustaining and developing cooperation in perspective trends — nothing. All the discussions fi nish with the same question about my view on the integration into ODK. I answer: "I view it positively".

■ Q: Is that all?■ A: That is all. To all the questions

about how and when I answer: purchase stocks, purchase real estate, purchase state part of propriety in Ukrainian companies. In any case something must be bought in a civilized way. You are welcome to purchase ANTK n.a. Antonov, "Progress" design bureau or "Motor Sich" JSC. 11% of "Motor Sich"

stocks are placed at the stock exchange. If somebody really wants to buy us, they can freely come to the stock market ad purchase these 11%. But for some reason nobody is doing that. There are only hints, well, you just give it out. Thus, they are talking not about integration with equal rights preserved but about a commonplace merging, which I naturally can’t accept, as there are thousands of specialists, successful projects and perspective programs behind me that will be out in case the company’s proprietor is changed.

I’ll say more: I’m ready to carry out negotiations in constructive course.

■ Q: They say Russian companies would be interested in having an additional helicopter engines supplier in Russia so that they are not dependant on the Ukrainian party. So to say,

to decrease production costs, for helicopters to be cheaper. What do you think about that?

■ A: First of all, engine production opening up at a new plant requires considerable fi nancial expenditures for assimilation as such as well as for its reliability and durability, that means it will result in its cost increase, which will decrease its competitive ability.

Those, who put forward such offers and initiatives, have extremely superfi cial understanding of military technical cooperation, the essence of the current mutually profi table cooperation between companies. As a matter of fact, their understanding of economical cooperation, including that in aviation, is generally limited to one simple task — merge successful companies. Hardly does it come to a French supplier-cooperant, integration issue is automatically put away. Whereas native plants that are time-checked and capable of operating not worse but even better than foreign ones (located in NATO countries) are pushed to background by all means. This policy contradicts native manufacturers’, national economy interest and logic of sovereignty provision and defensive capacity sustenance.

I responsibly claim that Motor Sich JSC has always viewed and will view cooperation as joint work of participants having equal rights in specifi c projects. In the whole civilized world it is done in a different way: let them buy license on technologies, on drawings, on the right to manufacture, on the right to sell. But there`s nothing about purchasing license, market levers are not applied at all.

I am ready to talk in a civilized way, because Motor Sich is already acknowledged in the European capital market. We are the only machine building company from the former USSR that carried out IPO. We are transparent, and if I want to purchase something from somebody — area or building — I come and discuss that.

■ Q: What does IPO give you, besides transparency and civilized communication?

In crisis the main task to put forward –

to retain people.

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41A I R F L E E T · 4 · 2 0 0 9 ( 7 8 )

■ A: IPO (Motor Sich JSC did it 2 years ago) set the company to European level. Now record keeping and accounting are done according to European standards, and this helps us to speak the same language with European bankers, fi nanciers, funds. We got access to cheap loan in Euro. We took a loan of $50 mln, get tranches of $10 mln. For this money we purchase equipment and components. All in all during 15 years $600 mln was spent on company’s technical re-equipment and new engines development — in average $20 mln per year. And besides $10 mln is annually spent on new equipment purchase. We learnt to produce coordinate machines on our own, Salut followed the same way. The world develops very quickly in technological outline, that is why it should be caught up with, and we leave off everywhere.

The biggest problem in Russia and the Ukraine today — lack of technological basis. Machine tool building is pulled down. But in the developing Iran they produce good machines using unique components from South Korea, Taiwan, China. I saw them, they have been working for about 5 years. And we still try on our own. And only because there is no state policy, there are no professional people in aircraft and engine construction who could contribute to machine tool building ascent to the level required today.

■ Q: Has Motor Sich suffered from the crisis, did you have to dismiss people, reduce some programs?

■ A: We were seriously damaged by the crisis — out of the expected 300 mln grivnas we got revenue of 3 mln only. This happened because of dollar exchange rate 22% decline, grivna —

40% decline. We conclude contracts in dollars, Euro, Swiss franks. At some point it was profi table. Afterwards it wasn’t. Unfortunately, world banking system goes back to virtual money again.

In crisis the main task was put forward — to retain people: we didn’t dismiss anybody, didn’t reduce salaries — we didn’t fail. At that we create new developments, expand our service in the countries where we are represented, build repair plants, technical maintenance centers — and all those at our own expenses. And even in the conditions of the crisis the price of our stocks increase. Of course, that makes our shareholders happy. This is a positive example of our unity with workers. None of our managers lives in Miami, San-Francisco — everybody is here in Zaporozhe. Even me being a member of parliament don’t live in Kiev: fl y there every day to take part in law making process, then after lunch come back here. And this way it goes on every day.

We have enormous orders for this year: we are to manufacture more than 1000 plane and helicopter engines, including more than 300 — for Russia. For the coming year a good amount of orders is also anticipated.

By the end of second quarter this year An-148 program started sucessfully: we sold six engines to Kiev and four were shipped to Voronezh. Aircraft constructors sold two An-74-300TK with low engine position (produced by Motor Sich JSC — editor) to Libya. One engine is already shipped, the second one will be shipped till the end of the year. Egypt armed forces ordered six An-74 planes. In Iran already 14 AH-140 planes are series assembled with our TV3-117VMA-SBM1 engines, till the end of 2009 two more planes are to be assembled.

In two years we will have a new engine — the fi fth generation for helicopters — and D-36 MB which is upgraded at wide chord ventilator. So, the work is in progress, we don’t stop.

■ Q: What is the Russian supplies amount in per sent ratio?

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42

■ A: 30% of our turnover is to Russia, the rest 70% are directed to 110 world countries we cooperate with.

■ Q: You have said you build repair plants and technical maintenance centers in foreign countries. Is any new form of technical maintenance to be implemented?

■ A: Earlier it was like that: sold an engine and left, and now we are to sell and perform maintenance during its life cycle. Our machines will work 40 years, and we will maintain them for forty years. Our engineering-technical staff lives abroad — 370 families. They maintain our engines in 110 countries at technical maintenance centers, at repair plants. In Russia we also build repair plants. For example, in Bykovo we are at fi nal construction stage of repair base for D-36 repair, in Voronezh we repair D-436, and in Ulyanovsk and Yekaterinburg — D-18. We have forty nominations of engines, and they are all to be repaired.

■ Q: To what extent is it reasonable to build repair plants?

■ A: Only on engineering services we get 15% of revenue, this makes $15-20 mln per year. So it is reasonable.

■ Q: With whom is it easier to interact: with foreign companies that purchased your engines or with Russian ones?

■ A: The word given by a foreign partner is by an order more responsible than the word of a Russian partner. There they take to court even for breaking a verbal promise. I wish we had such degree of responsibility.

■ Q: What could you say about SuperJet plane?

■ A: I cannot comment upon foreign machinery, but will answer like that: I won’t fl y by SuperJet. About SaM-146 engine nobody knows anything: all the data is classifi ed.

■ Q: What will you bring to MAKS?■ A: D-36 MB is the fi rst engine of

the type with wide chord ventilator blade in post-soviet area. Until now we made anti-vibration rods as D-436 has. Now the engine will have increased power and increased thrust by 6-7%. Besides, fuel effi ciency is also improved, that is, specifi c fuel consumption will be less. We will also exhibit MS-14 engine of 1500 horse power. It will be installed on An-3. Besides, on Motor Sich JSC stand you will see MS-500 — engine of the fi fth generation for helicopters and light planes.

■ Q: They say, modifi cations of An-2 in An-3T production in Omsk plant was very expensive and non-profi table, for that reason there were few of those who wanted to purchase the modifi ed plane. Do you offer anything else?

■ A: It can be non-profi table for different reasons. For example, because of the plane being not in demand on market, or because the modifi cation is failed. We just don’t have a plane of that class. But we have market. Agriculture is actively developing, that means the plane is required to water, to fertilize. We offer engine with long life, with good fuel effi ciency. Our An-3 plane will be better than that An-3T which is produced today.

■ Q: Shall we see TV3-117VMA-SBM1V engine? Tell about it please.

■ A: This engine has longer life than the previous TV3-117, and it is specially designed for hot climate. The previous engine had claims as to its operation in hot countries. By the way now in the Ukraine they decided to replace the old TV3-117 engine by a new one — TV3-117VMA-SBM1V. We have a state program on fl ying vehicles park remotorization, that is, on engine replacement. Our Ministry of Defense believes: it’s better to take a new engine

than repair an old one for the fi fth time. Some consider that it is cheaper to repair, but if to sum payment for 5 repairs it will equal the price for a new engine. That is why it is better to buy a new one and forget about repair for the rest of life. This is a correct policy.

■ Q: You have spoken that money in the Ukraine fi nally started being invested into aircraft constructing companies — plants, design bureaus. Is it alternation in mentality?

■ A: There are no gas and oil dollars in the Ukraine. That is why machine construction is the basic tax payer — we pay taxes regularly. Thus those gas and oil dollars during 15 years should have been invested into machine construction companies upgrade and not into allotments. What have we reached? Mineral resources are sold, energy is sold. Nowhere to take money for upgrade, we have to buy foreign transformers, foreign wires, insulation materials, oil. And our industry, which could have produced the same insulation materials and transformers, is static and doesn’t develop because nobody has invested money in it. We should have developed machine construction in time. That is why I can’t but be glad about the Ukrainian government investing money into aircraft construction branch.

Here is a recent example: An-148 plane has fi nally started passenger transfer, but it has been made without state interference, only at the expenses of cooperation participants. An-148 is a successful project, it should be supported by all means.

This project gives work to a great number of companies in Russia and the Ukraine: more than 350 companies took part in An-148 construction — from manufacturers of specifi c materials to complex accessories producers. Thousands of people are implemented into the chain, new working positions created. Joint programs are the fastest way to progress.

Svetlana KomagorovaTranslation: Ljudmila Vasiljuk

Before speaking about any forms

of integration, it should be clearly understood,

what the ODK is.

Space Technology

44

Development of positioning, navigation, and timing capabilities is one of the top priorities of the Russian Federation, particularly through use of GLONASS as a dual-use system. We spoke to General Director – General Designer of FSUE “RISDE” and General Designer of GLONASS system Yuri Urlichich about the present state of the program on the eve of MAKS-2009.

■ Question: In the conditions of financial crisis when the Government cuts all expenses the GLONASS program is nevertheless provided with big funds. Does this mean that GLONASS system is necessary for the whole country? Is it possible to consider this injection as an investment which will soon pay off and bring profit?

■ Answer: During financial crisis it is necessary for Russia to make a decisive move from economy of raw materials towards high-tech economy. Global navigation system GLONASS is the best project to suit the role of a powerhouse for innovational development of domestic economy. The possibilities of satellite navigation are required practically in all branches of economy from power generation and communications

(synchronization) to building sector and agriculture (effective machine and equipment management, monitoring of complex engineering constructions, precision farming etc.).

There are many examples of GLONASS application which prove the economic effectiveness of satellite navigation usage. But GLONASS also has another mission – to ensure public security. Every year over 30 thousand people, mainly of working age, perish on the Russian roads. The usage of satellite navigation technologies enables to optimize the algorithms of traffic control management, emergency

teams, rescue workers, road police squads and insurance companies. So we are not only creating the technology we have been already applying these solutions to practice in order to ensure human security.

Solutions based on GLONASS technology are actively introduced by the Russian Federal Ministry of Internal Affairs. They enable effective usage of forces and means which are at the disposal of law-enforcement officers. As a result the period of time necessary to react on the reported crimes was substantially diminished. The usage of satellite navigation by the Ministry of Internal Affairs enabled it to increase

crime detection rate by solving the cases “while the trail is still hot” including such enormous offences as brigandage, robberies and homicides.

It will be difficult to ensure the competitiveness of national economy without usage of up-to-date navigation technologies. The policy leading to

“total addiction” of Russian economy to American GPS, taking into account the possibilities of selective access and deliberated “approximation” or distortion of a signal over certain geographic territory as well as existing technogenic, economic and other risks, may be described as shortsighted, to put it mildly.

GLONASS SYSTEM TO BE REALITY

Space Technology

A I R F L E E T · 4 · 2 0 0 9 ( 7 8 ) 45

So the necessity of GLONASS system application is not a question. That is why and also in order to ensure its security and defense capacity the country provides GLONASS with financial resources. By the way, the similar policy is pursued today by China and European Union, which belongs to the same military and political bloc as the USA – NATO. The failed attempt to create global navigation satellite system on commercial basis with attraction of private capital i.e. on the mixture of state and business functions has already led to several years delay in creation of European GALILEO system. According to experts’ estimations GALILEO system will be able to work at full capacity only after 2014. The tasks of state and business should be differentiated. The notions of pay off and profit are more related to business sphere. The state has its own zone of responsibility.

Our state leaders clearly underlined the direction for overcoming the crisis – transition to innovation economy. The introduction of modern technologies, to which satellite navigation technology GLONASS certainly belongs, enables us to form the basis for such economy.

I would like to remind that today there are only two functioning global navigation satellite systems in the world

– GLONASS and GPS, while the rest of the countries did not manage to create anything suchlike.

■ Q: What place is occupied by GLONASS system in the tideway of innovative development of Russian economy? What exactly constitutes its innovative attractiveness and prospects?

■ A: GLONASS is a unique satellite system in terms of its coverage and importance. Apart from global character of its service zone and its penetration practically in all economic branches it’s worth noting that GLONASS is characterized by composition which is quite wide for satellite systems and includes the means of fundamental support (fundamental science about Earth

and complex of astronomic and geodesic parameters), space complex, functional additions (supplements), system for high precision posterior defining of ephemerides and time corrections as well as complex of consumers’ equipment. This is practically full function set – from research works to applied use. Thus, according to its composition and missions GLONASS can be already characterized as an innovative system.

One of the most massive areas for employment of GLONASS system is the use of GLONASS technologies in transport sector. State-of-the-art systems for transport monitoring and

management make it possible to diminish expenses on transportation of people and cargoes, save fuel, optimize logistics, reduce discharge into the atmosphere. Altogether this is providing substantial economic effect. The experience of using corporate and monitoring systems in commercial transport sector enables us to state that they pay off in a year or less.

■ Q: For many years we have been observing the same picture: along with several launches of “GLONASS” satellites some part of the previously launched satellites of this range leaves the orbital group. So there are not enough satellites on the orbit at the same

Usage of satellite navigation technologies enables to optimize the algorithms of traffic control management, emergency teams, rescue workers, road police squads and insurance companies.

Space Technology

46

time to form the required group of 24 space vehicles. When will the duration of our satellites in space be not 3–4 years, but 10–15 years as of American space crafts?

■ A: Unfortunately, the myth generated by technically illiterate “analysts” about GLONASS performance ability – which can be ensured only if we have 24 space vehicles on the orbit – appeared to be surprisingly enduring. Despite the fact that the navigation community has managed to debunk it, similar speculations are quoted in some media until now. As a principal designer of this system I can assure you that 18 space vehicles functioning as an orbital group are already enough to ensure practically 100 percent accessibility of GLONASS navigation signal on the territory of the Russian Federation, while in global scale this parameter is equal to 94 percent.

At present the orbital group consists of 19 “GLONASS-M” satellites with 7 years of guaranteed duration of active existence on the orbit and of one satellite of “GLONASS” range which despite 3 years of guaranteed duration of active existence has been working on the orbit for 5.5 years. It is planned for 2010 to start flight development tests of new generation satellites “GLONASS-K” which will have the duration parameter not less than 10 years.

The same problem of supporting the necessary number of space vehicles for the orbital group is also intrinsic to GPS. This year the US General Accounting Office (GAO) has issued its report on the future of GPS system, which contains

deep concern about the fact that the orbital group might be unable to provide the characteristics required for system exploitation in the period between 2010 and 2018 (System Design & Test Newsletter, May 2009, GPS World, May 27, 2009). Brad Parkinson, the first program director of Global Positioning System (GPS), chief architect and defender of GPS stated: “It is possible that the group will have less than 24 satellites”. Finally the development of new generation satellites named IIF and aimed to replace the existing ones has been unjustifiably lingered on (the contract was signed in 1996 but the standard satellite does not exist so far) and seriously exceeded the budget limitations. Brad Parkinson considers that whole IIF design became outdated and characteristics of these satellites do not meet the latest requirements.

■ Q: The PR-campaign with the participation of Vladimir Vladimirovich Putin and Sergei Borisovich Ivanov has persuaded everybody that GLONASS device is necessary for automobilists and dogs. But this is purely household sphere. How wide-spread is the usage of GLONASS within industry and economics?

■ A: GLONASS system is neither distant future nor advertising or PR campaign. It is a reality. Those space vehicles that function within orbital group at present time ensure the coverage of our country’s territory 24 hours a day.

Practical use of GLONASS system provides substantial advantages. If we talk about navigation only on the basis of GLONASS system or only on GPS basis in the real city environment the situation of lost

navigation signal with entirely operative equipment is possible due to high buildings and narrow streets, because in order to solve the navigation problem successfully one needs to receive high quality signal from four satellites simultaneously while under modern “canyon-like” city landscapes so-called “clear-sky” zone is very limited. This is also characteristic of rugged terrain (mountains, ravines, forests). The use of integrated double-system GLONASS/GPS receivers ensures practically two-fold increase in the number of simultaneously available satellites, so the situation of lost navigation signal occurs far less frequently.

Besides, due to specifics in composition of orbital groups GLONASS provides better results when it is used in high latitudes, while GPS – in near equatorial areas.

In order to characterize economic effect of the use of GLONASS system I will quote only some objective data provided by the administration of Yaroslavl region (this is one of the regions where we first started to introduce GLONASS technologies):

– acceleration in performance of geodesic work – by 2-3 times;

– reduction of costs for cadastral works – by 2 times;

– diminishing of delays in cargo transportation – by 17-20 percent;

– reduction of fuel consumption – by 12 percent, etc.

■ Q: From the very beginning the global navigation system was aimed to meet the military needs – to detect the location of submarines and surface-craft in the World Ocean. How far has the military sphere of GLONASS usage expanded today?

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■ A: The character of contemporary war conflicts (on the former Yugoslavian territory, in Iran and Afghanistan) shows that success in modern warfare is mainly ensured by the use of high precision weapons. In case of using high precision weapons the casualties both of the attacking and defensive sides are numerically insignificant, and civil infrastructure is prone to damage to a lesser extent. High precision weapons suggest first of all precise determination of relative position of warhead damage agent and target, which is ensured by the use of navigation systems. It’s difficult to overestimate the role of GLONASS in that. Besides, present-day navigation equipment is widely used in the Navy, Air Force, in guidance systems of conventional and salvo fire artillery, etc., and individual navigation devices are efficiently used in operations by special forces.

■ Q: Situations related to the search of lost airplanes and helicopters occur regularly, sometimes searching lasts for months. Is it possible to create a system, which can constantly monitor the flights of all aircraft?

■ A: Surely, it is possible as may be required. However, COSPAS-SARSAT international satellite system is already operating at present for facilitating the task of search and rescue of distressed airplanes, helicopters and marine vessels, with the help of which over 26,000 people have been rescued as of late 2008. Equipment of COSPAS-SARSAT emergency radio beacons with GLONASS/GPS receivers makes it possible to achieve by an order higher precision of positioning and, as a consequence, to reduce considerably the time of searching for the distressed. Our Institute is leading organization for the

Russian segment of this system. This year we have started modernization of the Russian segment of COSPAS-SARSAT system. In July new Russian satellite “Sterkh” has been successfully put into orbit. In prospect the constellation of space vehicles of the search and rescue system will be enhanced, which will make it possible to respond to emergency situations in the shortest possible time. However, far from everything depends on technical capabilities. Human factor is frequently a determining one (emergency radio beacon is not installed or not activated) as well as organizational issues.

Besides, it is planned to equip new satellites “GLONASS-K” with apparatuses for repeating COSPAS-SARSAT signals, analogous plans are available for GPS and Galileo. Consequently, we can see a kind of synergy of various global satellite systems in the interests of safe human development.

As to the issue of the possibility of monitoring the flights of all aircraft, at present there are space systems operating on commercial basis, which conduct monitoring of aircraft flights for distinct regions (USA and Europe).

INMARSAT is the only space system of global nature, which ensures monitoring of aircraft. “Morsvyazsputnik” is the Russian operator of this system. The price of one set of equipment for low rate data transmission (1,200 bit/s) amounts from 20,000 to 30,000 US dollars. The cost of one data package (latitude, longitude, altitude, time) is 2 rubles, with addition of three velocity vectors – 4 rubles. There are no limitations for the number of packages.

FGUP “RNII KP” has the opportunity of developing regional-scale aircraft

monitoring space system, which will make it possible to monitor aircraft above the territory of Russia, Europe, Central and South-East Asian countries. The Federal Space Agency has entrusted our Institute in cooperation with government departments concerned with the task of development of system project on this range of problems by the end of this year.

■ Q: It is understandable what GLONASS receiver is. And is it possible to combine it with transmitter? That is to say, traffic controller, rescuer on duty or militiaman will be able to receive distress signal with map reference? Will it require participation of additional communication satellite?

■ A: As practice shows, even the notion of navigation receiver is understood by the so-called “experts”, whose incompetent opinion is frequently cited in the mass media, as absolutely different devices up to a multi-purpose unit built on the basis of navigation technologies application. Frequently such approach is used for manipulating audience opinion.

Receiver of satellite navigation signal (GLONASS/GPS-receiver) is microchip or a set of microchips (sometimes context-sensitive with or without antenna) with appropriate software, the task of which is to receive and decode signals of satellite navigation system and output object coordinates in defined format.

Communication channel is required to ensure transmission of data about the position of the object under observation and, if necessary, other parameters of the object. GSM/GPRS-modem is used most frequently. In the situation when it is required to transmit data out of the range of cellular network, satellite communication

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channels may be used (with utilization of appropriate equipment) or other types. For instance, VHF/UHF communication is requested by the Ministry of Internal Affairs. And this is also incorporated in the existing equipment utilizing GLONASS/GPS.

Beginning from 2010 e-call (“emergency call”) program adopted by European Commission will start its operation in Europe. In European Community countries, which have signed the Memorandum on introduction of “emergency call” program, legislation has established requirements to automobile manufacturers to equip the automobiles supplied for sale on the markets of these countries with telematic units, which make it possible with the use of satellite navigation to ensure precise positioning of road traffic accident and speedily call for necessary help by contacting the control center by wireless communication channels. Analogous

Russian emergency response program (ERA GLONASS), being developed by the Association “GLONASS/GNSS-Forum”, Professional Association in Vehicle Risk Prevention, FGUP “RNII KP”, NP “ITS-Russia” and representatives of insurance community, is based on GLONASS technologies.

Combination of GLONASS receiver with transmitter is implemented in personal emergency radio beacon PRB-406 of COSPAS-SARSAT system being manufactured in Russia. When emergency radio beacon PRB-406 is switched on, distress location coordinates will become known to rescue services as early as in 5 to 10 minutes.

■ Q: In foreign countries GPS is actively introduced in customer equipment, such as mobile phones, cameras, video cameras. Is anything of the kind planned for GLONASS? Or maybe hardware

components do not make it possible to manufacture such microdevices?

■ A: GLONASS and GPS systems have been developed approximately at the same time, namely, in 1995 and 1993 respectively. Technical characteristics of satellite segment of both systems are comparable.

GPS system and, most importantly, end user equipment for its operation (navigation receivers, navigators, telematic terminals, etc.) have been systematically developed up till present without induced failures or suspension.

The same as the whole country, GLONASS system has passed through systemic crisis of early 1990s, and development both of the system itself, and end user equipment continued only in 2002. Recent years have witnessed serious shoot forward in technological sphere, however, this breakthrough has not yet compensated for lagging accumulated during the years of crisis, taking into account so far unresolved problems with domestic microelectronics. Hardware components making it possible to use GLONASS technologies will become fully competitive in 2011-2012, when fabrication of navigation receivers will be mastered in accordance with present-day technology-specific rules. Thus, AFK “Sistema” announced fabrication of microchips as per 45-nanometer technology, which are required for creation of mass-scale navigation equipment for users. Batch production is starting of GLONASS/GPS “GeoS”, being jointly created by RNII KP, “М2М telematics” and design center KB “GeoStar navigation”, in addition to that there are promising products in the work plans of “Almaz – Antey Concern”.

■ Q: Restrictive customs duties are being mentioned on a rather high level for importation of GPS equipment into Russia. Doesn’t it mean recognition of noncompetitiveness of GLONASS? Are such limitations justified?

■ A: The initiative of the Government is justified, however, its implementation should be conducted in a sensible manner. It is necessary to prepare market participants for the forthcoming changes beforehand.

Our state leaders clearly underlined the direction for overcoming the crisis – transition to innovation economy. GLONASS certainly helps us to form the basis for it.

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At this stage the assortment of products with GPS-receivers, for which customs duties will be increased, has not been determined. It should be noted that besides navigators there are several types of devices with GPS:

ОЕМ-modules, cellular phones, smartphones, communicators, telematic and protection-and-search terminals based on satellite navigation. There is also other equipment utilizing GPS (for instance, high-precision positioning devices or in-built navigation systems in automobiles). Naturally, the effect of increased customs duties for each of the above-mentioned types of GPS-devices will be different from the viewpoint of promotion of GLONASS system and protection of domestic market.

Measures for protection of Russian navigation market should be introduced thoughtfully, so that increased customs duties for imported GPS-devices will become a positive factor stimulating manufacturers of finished products to use GLONASS/GPS and retail trade network to sell equipment on the basis of GLONASS/GPS receivers.

Since Russian market of satellite navigation accounts for less than one percent of the world market, I would place special emphasis on reduction or abolition of export duty for GLONASS and GLONASS/GPS devices, as well as import duties for their components. This will support domestic producers and will lead to decrease of prices of manufactured goods due to growth of batch production volumes.

■ Q: It’s no secret any more that the components for GLONASS devices have to be imported from abroad. Imported dual band devices are already on sale, which are using simultaneously GPS and GLONASS signal. Maybe it is worthwhile to outsource production to South-East Asia altogether and the market will be immediately saturated with cheap produce?

■ A: Except that nobody will be able to guarantee the quality of such equipment.

At present there are only two global navigation systems in the world, namely, GLONASS and GPS. Immediate competitors, namely, European Galileo

and Chinese Compass will appear not earlier than several years later. Therefore, possession of GLONASS technologies is a strategic resource. Possibly it makes sense to license production of chips developed in Russia, but it is impossible to outsource this sphere altogether.

■ Q: At one time they were talking about competition between GLONASS and GPS. Later on they started saying that GLONASS will supplement the more advanced GPS system. And now the impression is that GLONASS is becoming Russian domestic project. How is seen the role of GLONASS on international market of navigation services?

■ A: Thanks to the so-called “analysts”. During a number of recent years even our American colleagues are speaking in negotiations and at international conferences not about competition but rather about compatibility and complementarity of global navigation systems.

In the segment of high-precision positioning, which is using professional equipment worth dozens of thousands dollars, companies are earning up to 30 percent on the sales of GPS/GLONASS double system equipment and solutions on

its basis. Professionals have realized before the rest that two systems are better than one both from the viewpoint of increase of the number of satellites, from which signals are received, and from the viewpoint of enhanced interference resistance.

Foreign customers are displaying sustained interest in GPS/GLONASS double system equipment in other spheres of application as well. Many countries are considering the opportunity of parrying political, economic and technical risks related to utilization of GPS alone.

Therefore GLONASS is an inherently global system.

From the viewpoint of conventional customers, the more the number of global satellite navigation systems, with which their equipment can operate, so much the better from the viewpoint of accessibility and quality of navigation sighting service. Even today one can find on the market double or triple system equipment, which in addition to GPS and GLONASS can work with Galileo signals. In case Galileo and Compass orbital constellations are successfully deployed, GLONASS/GPS/Galileo/Compass-user equipment will appear soon as well.

Translation: Tatiana Zubkova

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Recently ever more frequently one can hear suggestions "from rostrums" to support GLONASS, domestic satellite navigation system, specifically by setting restrictive customs tariffs for GPS units. Alexander Gurko, General Director of "М2М telematics" company told us about the possible consequences of such measures and how the navigation services market is developing in Russia.

■ Question: Alexander Olegovitch, not long ago “round table” was held in the Federation Council on the topic

"Application of GLONASS system in the economy of the Russian Federation", where it was stated that acceleration of navigation market development is possible mainly by means of consolidation of the efforts of the state and private business. What is your opinion?

■ Answer: Obviously at the stage of market creation effective policy and government support are required, but at the same time they should be professional and balanced. The events taking place recently bring about more harm than advantage to GLONASS. These events include a rather unprepared issue on increasing customs tariff, and creation of federal operator without well-defined

tasks and objectives, and senseless law "On navigation activity", which is not determining a single norm besides the possibility of creation of federal network operator, and the initiative on obligatory equipment of vehicles, procured from the state budget, with GLONASS system. In principle the measures are correct, however, their implementation has not been thought over and that is why negative consequences are possible. Extremely negative effect on the reputation of GLONASS system

is inflicted by the attempts to create consumer devices with the use of GLONASS/GPS modules, which are not intended for the use in autonomous consumer devices, and misinformation of consumers about success of this

"project". When unprincipled companies are trying to work on limited and narrow market by supplying Korean trackers and passing them off as Russian ones, it goes more or less unnoticed and is not very harmful for GLONASS reputation, but when these companies are introducing

their poor quality products to consumer market it causes very serious and long-lasting mischief. Against this background we are losing time granted by the crisis for commercialization of GLONASS and dissemination of technology in the world. Starting from 2012 expectations will be strengthened for commissioning of satellite navigation systems GALILEO (Europe) and COMPASS (China) and competition will be expanded, the time for gaining markets will be irreparably lost since planning of the use of such

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type of technologies is conducted on a long-term basis. The main problem for commercialization of GLONASS at present is the absence of product line of state-of-the-art chip sets of GLONASS/GPS. Engineering of such chip sets is conducted by several companies but their series will appear not earlier than in the middle of 2010, that is, they will be integrated into finished devices on series produced basis not earlier than at the end of 2010 or beginning of 2011. Consequently, we have got into the same situation as in mid-1990s, when GLONASS system has been deployed while user devices for services utilization have not yet been designed and series produced.

■ Q: Within the framework of expositions Svyaz-Expocomm and NAVITEX a new integrated GLONASS/GPS-receiver GeoS-1 was on display. What’s the uniqueness of this device?

■ A: The advantage of GeoS-1 OEM-module is that in the majority of characteristics this device outdistances its competitors, in particular, in power consumption, which is two times lower as compared to competitors, and in price. As of today production volumes of such modules are limited by sales volumes only. There are two major parameters, which hamper the use of these modules in autonomous units, namely, price and energy consumption. The price of GPS-modules ranges from 10 to 15dollars, while the cheapest Russian modules so far cost 80 dollars.

■ Q: What is your estimation of market capacity for these modules?

■ A: According to our estimations market capacity for the above-mentioned modules, which can be manufactured by our industry, reaches maximum up to 100,000 units per year. That is precisely market capacity, rather than production volumes. Along with that, these are not bulk products but rather professional devices for traffi c control, telematic terminals. Sales market for next-generation chip sets, which will be in serial production not earlier than late

in 2010 (respectively, fi nished products will appear approximately in the middle of 2011), is larger — several million annually, moreover, two thirds or even three fourths of them will be not Russian but foreign- made. Today Russian market comprises just several percent of the world market.

■ Q: And what is the reason of such lag?

■ A: The thing is that market development started in essence three years ago when precision limitations were lifted and normal cartography appeared. Serious players, such as cartography companies Navteq and Tele Atlas came to the market. The market has started development quite recently and, therefore, it is so far in such a budding stage, although it is developing very fast.

■ Q: Are you experiencing these growth rates?

■ A: We experience growth rates of all the markets we are working on. Last

year world market volume was about 40 million of automobile navigators, according to various estimations from 300,000 to 400,000 of them were sold in Russia. That is just a drop in the ocean.

In the years immediately ahead the Russian market will remain small but fast growing sales outlet. We consider that two thirds of GLONASS/GPS chip sets will be accounted for foreign markets, where GLONASS system is in demand as alternative or reserve of GPS. These are the markets of South-East Asia, Africa, Arab states, South and Central America. Curiously enough, at present such chip sets evoke much interest in Europe as well, since the companies working on this market face the task of being distinguished from their competitors. If price difference between GLONASS and GPS amounts to just several dollars, such chip sets will be in demand. A serious factor, which may complicate our work on

Market capacity for the above-mentioned modules,

which can be manufactured by our industry,

reaches maximum up to 100,000 units per year.

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dissemination of GLONASS system, is development of competing systems, such as European "Galileo" and Chinese

"Compass". We have very little time, literally from two to three years in order to create competitive products and introduce them on the market. The sooner "Galileo" appearance is, the less interest will be displayed towards GLONASS, specifi cally by European customers. Therefore, we should be in a hurry. However, several years have been lost, up-to-date chip set, being used in autonomous devices, has not been yet developed. Meanwhile, it takes approximately two years to develop a chip set, and a number of companies initiated the projects only late last year and early this year, thus, they will be in serial production not earlier than late in 2010.

■ Q: Is the crisis considerably hampering company’s activities?

■ A: Crisis is obstructing our activities, but we have started preparing for it in 2006. The strategy for 2006 included preparation for the crisis of 2008-2009. During three years we have fulfi lled great work aimed at creation of professional managers team, development of specialized products, we have acquired experience in designing and introduction of complicated

control systems for region’s transport complex and integration with other systems. Our competitors, which have lost commercial market, are not very pleased with our today’s success, but I’d like to stress that our today’s projects are the result of our strenuous work during several years with the aim of acquiring experience in implementation of large-scale projects and development of complicated systems in the interest of state and municipal customers. Specifi cally, jointly with federal and regional government authorities we have developed special-purpose products, for instance, software and hardware systems for transport control of the region, administration. The crisis impedes our work mainly due to two reasons: fi rstly, authorized companies appeared under ministries and departments, which have nothing but administrative leverage but are trying to contest and offer their services.

Secondly, after all we are used to work on commercial market with very strict criteria of vendor selection from the viewpoint of quality and composed function of systems, since commercial customers are very exacting, as distinct from state clients, whose selection of supplier is not always conducted in favor of quality and vendor’s experience. Crisis is not a useful leverage for clearing the market from ineffi cient players.

■ Q: You said that in 2008 two-fold expansion was witnessed both in the number of new customers and new partners in the regions. How has the

"M2M telematics" presence geography expanded during the recent six months?

■ A: During the recent four years we were growing two-fold and 2.5 times annually. This year we hope to increase last year’s turnover by 50 percent. We are growing in terms of the number of projects and equipment shipments. We are not reducing headcount, but rather employing new personnel. At present approximately 200 employees are working in the company and we continue to employ personnel. Company’s presence geography is actively expanding and one or two regional control centers in average are monthly opened under the partner program. The most important thing is to fi nd a team, which is interested in development of this business in the region. Potentially we are ready to open regional control centers in any city of Russia and CIS, where we so far do not have partners. We are developing very actively and great interest is displayed towards our offers.

Translation: Tatiana Zubkova

Last year world market volume was about

40 million of automobile navigators, according

to various estimations from 300,000 to 400,000

of them were sold in Russia.