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Economic Times
4 days ago
- Business
- Economic Times
Russia's struggle to build commercial jets reflects deeper industrial malaise
Russian aircraft makers have delivered only one of 15 planned commercial jets this year, data from Swiss aviation intelligence provider ch-aviation shows, as sanctions on foreign components stall production and high interest rates crimp investment. Since Russia's February 2022 invasion of Ukraine, Western sanctions have cut off access to foreign-made aircraft and spare parts. With a fleet of more than 700 planes dominated by Airbus and Boeing jets, Russian airlines now rely on complex, indirect import routes to source critical components. "There is no component base, no technology, no production facilities, no engineers," said one Russian aviation industry source, who declined to be named due to the sensitivity of the matter. "To create all this from scratch takes years, if not decades." Given Russia's geographical challenges as the world's largest country, it depends on commercial aircraft for domestic freight and passenger transport across its 11 time zones. Recent major incidents highlight an urgent need to prevent the fleet degrading. In late July, a Soviet-era Antonov An-24, built in 1976, crashed in the country's far east, killing all 48 people on board. Days later, flag carrier Aeroflot grounded dozens of flights following a crippling cyberattack. The aviation sector's struggles to become self-sufficient are part of a broader industrial slowdown. Russia's factory output contracted at its fastest pace since March 2022 in July, according to Purchasing Managers' Index data, and industrial growth continues to decelerate. High interest rates have played a part in dwindling car production, coal sector bankruptcies, slowing export volumes of commodities like metals and oil products, as well as the missed plane-building targets, officials and businesses have said, contributing to slowing economic growth. "Industry is being hit faster and harder by tight monetary policy," said Dmitry Polevoy, head of investment at Astra Asset Management, warning that the industrial sector was on the brink of recession. In 2021, Russia added 52 new commercial aircraft to its fleet - including 27 from Airbus, three from Boeing, and 22 Sukhoi Superjets built with imported parts - for airlines including Aeroflot, S7, Red Wings, Rossiya, and Ural Airlines, data from ch-aviation shows. Since then, only 13 new planes have been added: 12 Superjets used by several Russian airlines and one Tupolev Tu-214, a twin-engine, narrow-bodied jet designed for medium-haul flights, the data showed. The Tu-214 is being used by First Deputy Prime Minister Denis Manturov, according to a person familiar with the matter, FlightRadar24 data, and Russian media reports. The government has repeatedly revised its production goals. In mid-2024, it cut the 2024-2025 delivery target to 21 from 171 aircraft. Last month, officials said targets would be revised again, citing high interest rates, which have made financing more expensive and slowed production. State conglomerate Rostec, which oversees production of the Superjet-100s, Tupolev Tu-214s, Ilyushin passenger planes and the new Yakovlev MC-21 jet, has struggled to meet deadlines. Rostec CEO Sergei Chemezov told Reuters last year that Russia would produce its own passenger planes, but delivery dates have repeatedly slipped. The MC-21 aircraft, built entirely with Russian-made parts, was much heavier than the version built with imported parts, reducing range and fuel efficiency - so airlines have been reluctant to adopt it, according to the Russian aviation source. On Tuesday, Chemezov told Prime Minister Mikhail Mishustin that serial production of the MC-21, SJ-100, and IL-114 jets would begin in 2026, two years later than originally planned. United Aircraft Corporation, the Rostec subsidiary that manages all the conglomerate's aircraft production, did not respond to a request for comment. Despite efforts to localise production, Russia continues to rely on foreign suppliers. Customs data seen by Reuters shows that parts worth at least $300,000 were imported in 2024 via intermediaries in Turkey, China, Kyrgyzstan, and the UAE. These included components from France's Safran, U.S. Honeywell, and Britain's Rolls-Royce. There is no evidence of these companies having violated sanctions. Russia has developed a system of parallel imports, allowing goods to enter the country through third parties without the manufacturer's knowledge or consent. Safran and Rolls-Royce did not immediately respond to requests for comment. Honeywell said it is not providing any equipment, parts, or products to any company in Russia and is "actively working to identify and interrupt any possible diversion of our products into Russia via third parties." Russia is trying to solve a unique and "hypercomplex" problem, Industry and Trade Minister Anton Alikhanov said last month. "No other country in the world produces fully import-substituted planes," Alikhanov said. Reduced aircraft supply while demand remains high is pushing up prices for consumers, with ticket prices rising steadily throughout 2023 and 2024, Rosstat data shows. Meanwhile, Moscow has been forced to get creative, asking airlines from Central Asian countries like Kazakhstan and Uzbekistan to run domestic Russian routes.
Straits Times
4 days ago
- Business
- Straits Times
Russia's struggle to build commercial jets reflects deeper industrial malaise
Sign up now: Get ST's newsletters delivered to your inbox Russian aircraft makers have delivered only one of 15 planned commercial jets this year, data from Swiss aviation intelligence provider ch-aviation shows, as sanctions on foreign components stall production and high interest rates crimp investment. Since Russia's February 2022 invasion of Ukraine, Western sanctions have cut off access to foreign-made aircraft and spare parts. With a fleet of more than 700 planes dominated by Airbus and Boeing jets, Russian airlines now rely on complex, indirect import routes to source critical components. "There is no component base, no technology, no production facilities, no engineers," said one Russian aviation industry source, who declined to be named due to the sensitivity of the matter. "To create all this from scratch takes years, if not decades." Given Russia's geographical challenges as the world's largest country, it depends on commercial aircraft for domestic freight and passenger transport across its 11 time zones. Recent major incidents highlight an urgent need to prevent the fleet degrading. In late July, a Soviet-era Antonov An-24, built in 1976, crashed in the country's far east, killing all 48 people on board. Days later, flag carrier Aeroflot grounded dozens of flights following a crippling cyberattack. The aviation sector's struggles to become self-sufficient are part of a broader industrial slowdown. Russia's factory output contracted at its fastest pace since March 2022 in July, according to Purchasing Managers' Index data, and industrial growth continues to decelerate. High interest rates have played a part in dwindling car production, coal sector bankruptcies, slowing export volumes of commodities like metals and oil products, as well as the missed plane-building targets, officials and businesses have said, contributing to slowing economic growth. "Industry is being hit faster and harder by tight monetary policy," said Dmitry Polevoy, head of investment at Astra Asset Management, warning that the industrial sector was on the brink of recession. PRODUCTION DELAYS AND NEW TARGETS In 2021, Russia added 52 new commercial aircraft to its fleet — including 27 from Airbus, three from Boeing, and 22 Sukhoi Superjets built with imported parts - for airlines including Aeroflot, S7, Red Wings, Rossiya, and Ural Airlines, data from ch-aviation shows. Since then, only 13 new planes have been added: 12 Superjets used by several Russian airlines and one Tupolev Tu-214, a twin-engine, narrow-bodied jet designed for medium-haul flights, the data showed. The Tu-214 is being used by First Deputy Prime Minister Denis Manturov, according to a person familiar with the matter, FlightRadar24 data, and Russian media reports. The government has repeatedly revised its production goals. In mid-2024, it cut the 2024–2025 delivery target to 21 from 171 aircraft. Last month, officials said targets would be revised again, citing high interest rates, which have made financing more expensive and slowed production. State conglomerate Rostec, which oversees production of the Superjet-100s, Tupolev Tu-214s, Ilyushin passenger planes and the new Yakovlev MC-21 jet, has struggled to meet deadlines. Rostec CEO Sergei Chemezov told Reuters last year that Russia would produce its own passenger planes, but delivery dates have repeatedly slipped. The MC-21 aircraft, built entirely with Russian-made parts, was much heavier than the version built with imported parts, reducing range and fuel efficiency - so airlines have been reluctant to adopt it, according to the Russian aviation source. On Tuesday, Chemezov told Prime Minister Mikhail Mishustin that serial production of the MC-21, SJ-100, and IL-114 jets would begin in 2026, two years later than originally planned. United Aircraft Corporation, the Rostec subsidiary that manages all the conglomerate's aircraft production, did not respond to a request for comment. SANCTIONS AND SUPPLY CHAIN Despite efforts to localise production, Russia continues to rely on foreign suppliers. Customs data seen by Reuters shows that parts worth at least $300,000 were imported in 2024 via intermediaries in Turkey, China, Kyrgyzstan, and the UAE. These included components from France's Safran, U.S. Honeywell, and Britain's Rolls-Royce. There is no evidence of these companies having violated sanctions. Russia has developed a system of parallel imports, allowing goods to enter the country through third parties without the manufacturer's knowledge or consent. Safran and Rolls-Royce did not immediately respond to requests for comment. Honeywell said it is not providing any equipment, parts, or products to any company in Russia and is "actively working to identify and interrupt any possible diversion of our products into Russia via third parties." Russia is trying to solve a unique and "hypercomplex" problem, Industry and Trade Minister Anton Alikhanov said last month. "No other country in the world produces fully import-substituted planes," Alikhanov said. Reduced aircraft supply while demand remains high is pushing up prices for consumers, with ticket prices rising steadily throughout 2023 and 2024, Rosstat data shows. Meanwhile, Moscow has been forced to get creative, asking airlines from Central Asian countries like Kazakhstan and Uzbekistan to run domestic Russian routes. REUTERS
Reuters
28-02-2025
- Business
- Reuters
Russia's central bank seen keeping key interest rate on hold at March meeting: Reuters Poll
MOSCOW, Feb 28 (Reuters) - The Russian central bank is seen keeping the key interest rate on hold at 21% at its meeting on March 21 while the rouble is seen retreating after the rally at the start of the year, a Reuters poll of 11 economists showed on Friday. The central bank's governor Elvira Nabiullina said this week that the interest rate is at the appropriate level to stop inflation from accelerating, while a turnaround in factors affecting prices is being observed. The central bank raised its benchmark interest rate to 21% last year, the highest since the early 2000s, to cool the economy and reduce inflation, which is currently running at about 10%. Economists saw the rate of inflation falling to a median of 7% by the end of the year from the current rate of around 10%, compared with 6.8% seen in the previous poll. The Russian rouble has strengthened by around 22% against the dollar so far this year and by 10% since the start of February, mostly due to expectations of better relations with the United States and an eventual peaceful settlement in Ukraine. "Any positive geopolitical news will be an important disinflationary factor," said Dmitry Polevoy of Astra Asset Management. The rouble is seen retreating from the multi-month highs of around 87 to the dollar it had reached during the rally to a median of 93 to the dollar by the end of March and to 105 to the dollar in 12 months from now. "In January-February, the rouble exhibited abnormal strength. We expect that in the coming weeks the rouble will stay possessed by the geopolitical headlines and volatility," Rosbank's Evgeny Koshelev said. Economic growth is seen slowing down to 1.7% in 2025, the same as in the previous poll. The Russian economy grew by 4.1% in 2024.
