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Aeroflot May Agree to Lease 6 Ilyushin's Il-96 Planes

March 22, 2005

OAO Ilyushin, a Russian airplane maker, may lease six Il-96 planes to OAO Aeroflot as the company raises production to meet rising demand from airlines.

An agreement with Aeroflot may be reached in two to three weeks, said Konstantin Dozhdikov, head of analytical department at the Moscow-based plane maker's Ilyushin Finance Co. unit. Ilyushin also has a contract to lease two Il-96 long-distance planes to Cuba by the end of the year, he said.

``Stable market growth and a decline in air carriers' fleets are stimulating demand for new planes,'' Dozhdikov said today at an Adam Smith Conference in Moscow.

Ilyushin plans to produce and supply 11 passenger planes worth $450 million total, including six Il-96 aircraft and five Tupolev planes, by 2007. Ilyushin Finance, which operates the company's leasing, supplying and technical services, expects net income to rise this year from 2004's preliminary results of 50 million rubles ($1.8 million) as demand rises, Dozhdikov said.

Aeroflot may pay about $57 million per plane under the agreement, Dozhdikov said.


Ilyushin Finance may sell about 500 million rubles ($18 million) of promissory notes this year to help fund production, Dozhdikov said. The company has paid off 1.6 billion rubles of its 2 billion rubles of promissory notes sold in 2003.

The leasing company is in talks with Russia's OAO Sberbank, the country's largest bank, and Vneshtorgbank, the nation's second- biggest lender, over loans for production, Dozhdikov said today in an interview. The company raised $60 million in loans last year, he said.

``Expensive credit resources in Russia are one of our main problems,'' Dozhdikov said at the conference. ``Borrowing rates are starting at more than 10 percent.'' Russian banks can't give loans for periods longer than seven to eight years, he said.

Ilyushin Finance, in which the state holds 38 percent, is discussing with shareholders and the government a plan to raise its three-year production plan to 24 planes worth of $815 million, Dozhdikov said at the conference.

If the plan is approved, Ilyushin will produce and lease 8 Il- 96 planes, four Tupolev's TU-204 and 12 AN-148 aircrafts by the end of 2007.

Russia's National Reserve Corporation, controlled by billionaire Alexander Lebedev, holds a 36 percent stake in Ilyushin Finance, Dozhdikov said. State-owned Vnesheconombank holds 16 percent of the company, with remaining 10 percent controlled by different shareholders, he said, without naming those.

Ilyushin Finance's assets stood at 9.9 billion rubles at the end of 2004, Dozhdikov said at the conference, citing preliminary financial results.

To contact the reporter on this story: Maria Ermakova in Moscow at

To contact the editor responsible for this story: Tim Coulter at

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