Bloomberg News

Russia to Boost Financing Guarantees to Help New Aircraft Sales

July 12, 2012

Russia plans to offer government guarantees for bank debt to help market a narrowbody aircraft being developed by state-owned OAO United Aircraft, the company’s chief executive officer said.

United Aircraft has been seeking to develop the MS-21 single-aisle plane that would challenge Boeing Co. (BA:US) and Airbus SAS and seek to attract new airlines that haven’t previously bought planes of that size, United Aircraft CEO Mikhail Pogosyan said in an interview at the Farnborough air show.

“You create a system of sale financing for the aircraft you’re manufacturing,” Pogosyan said in an interview, speaking through an interpreter. “We’re actively working on creating an export agency in the same way as in the Western countries.”

In the U.S., the Export Import Bank guarantees bank loans to some airlines outside the U.S. to help support job creation at home. France, Germany, the U.K. and Spain also have export credit agencies to help support sales of Airbus planes.

The Russian aircraft, seating 150 to 212 passengers, will offer a choice of engines by United Technologies Corp. (UTX:US)’s Pratt & Whitney or a Russian-developed engine. The MS-21 will compete in the same category as Boeing’s 737 and Airbus’s A320. It will also go up against a 168-seat model, the Comac C919, being developed in China, which is set for entry into service in 2016.

Initially, the Russian plane will be flown by domestic airlines and those from countries of the former Soviet Union. Pogosyan said he expects Southeast Asia to be the most likely region where the program will flourish in early years.

“We aren’t trying to repeat what Boeing and Airbus or Comac are doing in the market,” the executive said. The MS-21 will have an all-composite wing, instead of the traditional aluminum now used on narrowbody models, which he said would give the plane a performance advantage.

The strongest prospects may be with new airlines, which may have difficulty getting delivery slots at Airbus and Boeing, where mounting backlogs can mean a waiting of several years for a plane, particularly narrow bodies, he said

“Certainly many airlines will be going for Boeing and Airbus but there are quite a number of new airlines emerging in the Pacific region that will want to have new products, and these new airlines would have to join a queue that lasts seven or eight years,” he said. “They want new products right now, so this may be an advantage for us.”

To contact the reporters on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net; Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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