FLUG REVUE July 2006: VIP-Interview Oleg Demchenko

July 2006

VIP-Interview

OLEG DEMCHENKO

President, Irkut Corporation

Irkut is offering a broad spectrum of products and sees itself well positioned for the forthcoming integration of the Russian aerospace industry.

FLUG REVUE: How has Irkut Corporation developed in the last few years, and what are the prospects in the future?

Oleg Demchenko: Speaking of financial performance, revenues have grown from about 245 million US-Dollars in 2000 to roughly 625 million in 2005, with an EBITDA of 20 to 25 per cent, which we think is a quite good performance compared to other aerospace companies. Presently our orderbook secures work up to 2011, so that gives us a good outlook. I believe it is good that we are a very broad based company, as you know including the Irkutsk Aviation production plant, as well as Beriev Aircraft in Taganrog, the Yakovlev Design Bureau in Moscow and the Russian Avionics design bureau, to name just the most important. Main aircraft types produced today are the Su-30 family of fighters for India, Malaysia and Algeria, the Yak-130 trainer and the Be-200 amphibian. And we also now work on UAVs, including the Irkut-850 based on the German Stemme S10 motor glider.

FR: Do you really now have orders for the Yak-130?

Demchenko: Yes, of course. The Russian Ministry of Defence has ordered 12 and in February we signed a deal with Algeria for 14. There are also 80 options, so this is just the start.

FR: The Be-200 is marketed internationally in cooperation with EADS. So what are chances for export contracts in the next one or two year?

Demchenko: In 2005 we created the “EADS Irkut Seaplane” joint venture, and now we are busy to certify the airplane for the international market. In 2007 we will receive EASA certification. Last year, the Be-200 has flown for fire fighting in Italy. From 1 June it will fly in Portugal for a two-month leasing period, and after that they will take a decision for two or four of the aircraft. So I expect that Portugal will be our first international customer. In Russia, the Emergency Ministry has ordered seven, of which three have already been delivered.

FR: You want to expand your civil products share form 13 to 45 per cent within the next ten years. What role does your Airbus subcontract work play here?

Demchenko: This year we are contracted to produce components for Airbus for ten million Euro and in 2010, we plan to produce parts for up to 100 million Euro per year. This is a substantial increase. To handle it, we have a program to modernise our main production factory in Irkut. In addition to producing components for the A320, A330/A340 and A380 airliners, we have just signed here at the ILA in Berlin an important preliminary co-operation agreement for the conversion of A320 and A321 aircraft into freighters. This conversion work is planned to begin in 2011.

FR: Domestically, you are working on the MS-21 airliner. How far has this programme progressed?

Demchenko: As the MS-21 is a just a study project by now, it is handled by the Yakovlev Design Bureau on our side, in cooperation with Ilyushin and Tupolev. We hope that by the end of the year a decision is taken concerning the development of this aircraft, which will evolve into a family of 130 to 170 seat airliners.

FR: In February, President Putin signed a decree on the formation of an United Aircraft-Building Corporation”, bringing together the aircraft industry in Russia. Which role will Irkut Corporation play in the formation of the UAC?

Demchenko: This new UAC will be formally formed in August, and President Putin has said that the Russian state will bring in assets like the MIG Aircraft Corporation and the Kazan Aircraft Production Association. In the first stage, the state will thus have 75 per cent of the shares. We, as the largest privately owned aerospace company in Russia, offer to take the remaining 25 per cent of the new company. As EADS has taken a ten per cent share in Irkut in December 2005, it will also own a small part of UAC, which should be fully structured by 2007.

FR: But this will be just the first stage?

Demchenko: In the second stage 51 per cent will belong to the state, and 49 will belong to private investors.

FR: Will the state sell its shares to everyone on the stock exchange or just to selected investors.

Demchenko: This it is not yet clear, but this will anyway only happen in three to four years.

FR: In UAC, Irkut will just be a small part, so how can it pursue its strategic aims?

Demchenko: Presently this is unknown, as the structure of the company is not yet defined. The first stage will be a vertically integrated company. Then there will probably be three business units, civil aviation, military aviation and military transport aviation. So this is close to the structures of EADS or Boeing. There are still studies on what kind of structure is the best.

Questions by Karl Schwarz

From page 19 of FLUG REVUE 7/2006

Last updated 8 June 2006

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