Russia's New Airliner Readies for Takeoff

Moscow's hoping Sukhoi's Superjet 100, aimed at the competitive niche market for regional jets, will revive a dormant civil aviation sector

by Jason Bush

It's an event of huge significance for Russia. On Sept. 26, hundreds of guests were flown to the remote Far Eastern city of Komsomolsk-on-Amur to witness the ceremonial unveiling of the Sukhoi Superjet 100, the first Russian commercial aircraft designed since the end of the Soviet Union. The new plane, a midrange passenger liner, symbolizes Russia's bid to revive its aviation industry by making a comeback in the highly competitive international market for civil aviation.

In a sign of the project's importance, First Deputy Prime Minister Sergei Ivanov was on hand to introduce the long-awaited aircraft to the guests assembled outside of a hangar at the KnAAPO aircraft factory, where the plane will be built. "I urgently recommend all potential customers to take a close look at this novelty," Ivanov told them, shortly before the hangar doors lifted to reveal the shiny new Superjet. Even the chief executive of Boeing Commercial Airplanes (BA), Scott Carson, had recorded a message for the ceremony, which was broadcast on a giant screen. "Aviation is Russia's future," he said. "I congratulate you."

Targeting International Buyers

The fanfare represents the high hopes riding on the new aircraft. The Russians are hoping to sell at least 800 of them, including 600 to international buyers—with 60% of the total to be sold in North America and Europe. Unofficially, officials at United Aircraft, a recently created umbrella company that includes Sukhoi, have suggested that sales could reach as many as 1,800 units. With a price tag of $28 million, the targeted 800 aircraft would bring in over $20 billion, money that is badly needed to rebuild Russia's struggling aviation industry.

The country remains a major player in military aviation, thanks largely to Sukhoi's sophisticated Su-30 fighter, which has found ready customers (BusinessWeek, 4/10/07) in China, India, and even Venezuela. But during recent years Russia has produced just five or six passenger liners each year—outdated Tupolevs and Ilyushins that even Russian airlines (BusinessWeek, 5/1/07) are increasingly loath to fly.

The Superjet, Sukhoi's first foray into civil aircraft, is aimed at the niche market for smaller aircraft, so-called regional jets, that is estimated to be worth around $8 billion each year. The plane will come equipped with either 75 seats or 95 seats, with a range of either 3,279 km or 4,630 km (2,037 miles or 2,877 miles), depending on specification.

Competitive Advantages

The Superjet will face direct competition from two existing makers of regional jets, Brazil's Embraer (ERJ) and Canada's Bombardier (BBDA.TO), which until now have dominated the market. (The smallest jets from Boeing and Airbus seat more than 100 passengers.) But Sukhoi believes it has a number of trump cards that will enable it to take on these established competitors. Thanks to lower-cost, locally sourced materials, the Superjet is around 20% cheaper to build than the competitors' craft. The Russians also believe that new, fuel-efficient engines, developed with the help of French engine-maker Snecma (SAF.PA), will lead to operating costs that are 10% to 15% lower than rival offerings.