THE WEsT Will HElp us

GovErnor is sEEkinG roWdy

Black BusinEss of THE nEW planT

is iT TruE THaT ruslan of THE nEW GEnEraTion Has crasHEd

iT`s cHEapEr WiTHouT a piloT

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open regionAugust 2014 Ulyanovsk economic magazine

region development institutes

Ulyanovsk regional government http://ulgov.ru

representation of the Ulyanovsk region

in germany (Berlin)

Ulyanovsk aviation clUster

Ulyanovsk region corporation

for enterprise development

agency for development of rUral areas

of the Ulyanovsk region

Ulyanovsk regional resoUrce center for toUrism

and service development

Branch of Jsc special economic Zones in the Ulyanovsk region

Ulyanovsk technology transfer center

(Ulyanovsk nanocenter)

Ulyanovsk region development corporation

+7 (8422) 737 001 — unified telephone on cooperation with the investors

e-mail: info@ulregion.comhttp://ulregion.com/

First deputy prime minister of the ulyanovsk region Alexander Smekalin + 7 (8422) 589 395e-mail: invest@ulgov.ru

First deputy prime minister of the ulyanovsk region Vildan Zinnurov +7 8422 27-37-84e-mail: zampredvhz@gmail.com

Head of representation Igor Kuznetsov + 49 157 803 26 419 e-mail: i.kuznetsov@ulregion.com

director Igor Knyazev + 7 (8422) 412 185e-mail: avia-klaster@mail.ru http://www.avia-capital.ru

Chairman of the board Ruslan Gainetdinov + 7 (8422) 418 671e-mail: sme73@mail.ru

director Mariya Shpak +7 (8422) 73 59 38 e-mail: ma_shpak@mail.ruhttp://agro-agent.ru/

director Sergey Lakovsky +7 (8422) 241 804 e-mail: ultourism@bk.ruhttp://goulyanovsk.ru

Branch manager Denis Baryshnikov +7 (8422) 249 417 e-mail: ulyanovsk@russez.ruhttp://ulsez.ru/

general director Andrei Redkin +7 (8422) 27 24 27e-mail: projects@ulnanotech.comhttp://www.ulnanotech.com

Chairman of the board of directors Dmitry Ryabov

Ceo Sergey Vasin +7 (8422) 444 573

First deputy Ceo Igor Ryabikov + 7 (8422) 444 852, +7 927 271 2526

3open region

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HometAsKSergey TiTov

“Arkhangelsk is closed. No weather. Mezen and Pescia, too. So far we ve got a stock of fuel, we ll go back home, although even there the weather worsens,” the commander shouted over the noise of the engines of our Mi-8. “How can we return home? We have flown so far and all for

nothing?” I shouted. “Why do we go back if soon Naryan-Mar will be closed?” Just that morning it had seemed that everything was going well, there had been a clear sky, all the airports along the route had been opened... But forecasts were not justified — and even there already, from the height of a kilometer, one could see lead-gray low clouds slowly creeping from the Barents Sea, carrying snow squalls. In a moment we were isolated from everything, alone in that unfriendly sky, where one only could rely upon himself. The commander called me to come closer, took off his earpiece and told calmly right into my ear: “The situation has come like that, and in the new conditions we must urgently make the right decision. And the right thing — it's mine: to go home today, and tomorrow everything will be okay. The reason is that home is always open. Everything there is my own. At home I will land to the touch. Do not worry. We can t change the weather. We can only respond to it properly. Tomorrow the weather will get better and everything will be fine again.”

Now, due to the changes in the foreign policy weather, we have suddenly found ourselves in a different reality. And aviation was one of the first to feel it, for it combines thousands of economic relations and conditions. The new reality requires self-reliance on our own forces, our intellectual potential, it requires to make sound, but quick and correct decisions. Once isolated, on returning home, we must learn to rely only upon ourselves. But what is the right decision? Will Russia itself be able to produce all aircraft and helicopters it needs, from small aircraft to long-haul? Will it be able to create modern avionics for them? Whether it will manage to ensure the production of aircraft engines for airplanes and helicopters to replace those that had been supplied by the Ukraine? All these questions are still to be discussed at the upcoming International Air Transport Forum. One can trust the government's plans for import substitution, another does not believe it, but it does not change the situation. The weather has come out to be like that, and we can do nothing about it. But I think Russia will cope with it. And it is able. Moreover, I even like the course announced, because even if not all is accomplished, it could at least help to restore the authorities care about aviation industry and the country s former deserved position in the aviation, the prestige of the aviator profession, decent jobs for many not highly positioned, but highly skilled professionals. Despite all the upheavals, the country has not yet lost its intellectual potential, talented designers are yet efficient, new talents are being born, only they yet remain unclaimed. The rest is just a matter of time and money. However, the task is set, and it should mean that at least the second thing will come true, although the first one has been lost since the 90s, when the aircraft industry was left alone with all the problems of the transition period, so neglected that it will have to catch up for a long time.

All this is necessary. Another question is to what extent. But the thing about aviation is that it is versatile, high-tech. And its interrelations if not directly, then indirectly, still go far beyond the country. It does not tolerate barriers. We ourselves are open. Both today and tomorrow. Sooner or later the wind will change, the fog will lift, the cold will retreat, the sky will once again be open to all. And the next day again there will appear the opportunity to head for a given route. Only this time with renewed vigor and at a new qualitative level.

Editor

ContentTargetsPositions returnUAC president Mikhail Pogosyan: about strategy of the aviation industry ................................... p. 4

Situationthe West Will helP russian aviation industryRussian aviation found itself in a new coordinate system. Where should we fly?That is what experts discussed at the virtual roundtable ......... p. 5

From the first person“they are crazy!”Interview with the Ulyanovsk region government Sergei Morozov about challenges and responces .......................... p. 9

Investment advance block Ulyanovsk Region Development Corporation cannot cope with the demand ................... p. 13

Synergy not according to Porter Why aviacluster requires a guiding hand ...................... p. 15

Technology secretsin a clean-clean room a black-black Wing is madeHow Ulyanovsk tries to overtake West ...................................... p . 18

Agenda ruslan hit the fog Is it true that new generation An-124 has crashed ................ p. 21

Meeting pointmultifunctional zoneResidents of airport SEZ begin to interact with each other ...p. 24

Concept investors Will be offered a smart city Region authorities follow Moscow .......................p. 28

Trends centriPetal force Who and why should unite ..p . 30

Experienceflying at half Price and reality Trying to accustom passengers to aircraft .............................. p . 32

ImplementationhelicoPter creWs have found lift Why the officials will be offered vertical takeoff ...................... p . 35

Necessitysmall aircraft Pulled on Work Who will undertake finding an economical analog to An-2 ...p . 38

Perspective Pilot is not needed Why there is no mass production of UAVs for civilian purposes in Russia ................................p. 40

Business environment authorities have got the tool Entrepreneurs ask to bring them nearer to foreign investors .... p. 43

Staffto create conditions close to combat Lawyers and advertisers cannot master a modern machine ... p. 45

Vocational guidance staff comes from the sky Children will be drafted to aviation .............................. p. 47

4 open region

This new model of leadership is based, among all, on conquest of leading positions in transport aircraft. Development of this segment provides for a full range of competitive transport aircraft, which will ensure the needs of customers in the domestic market and export supplies.

Domestic aircraft is successfully developing competencies in this segment and can regain its position in the global market of military transport aircraft through implementation of programs to create a full line of transport aircraft: light, me-dium, and heavy class.

Currently, the State armaments program pro-vides for delivery of over 100 new transport aircraft, which is a good basis for comprehensive develop-ment of the segment and also enables to provide a stable load of aircraft enterprises and to take a rightful place in the global market of transport aircraft. In the structure of corporation revenues transport equipment should take no less than one quarter, thereby ensuring the UAC sustainable development on the whole.

This year we begin deliveries of serial IL-76MD-90A aircraft produced by the Ulyanovsk Aviastar-SP. The plant is thus becoming an im-portant element of the UAC strategy not only in increasing the volume of production, but also in mastering new technologies that may be in-volved in production of other aircraft of the UAC transport line.

The Ulyanovsk plant is actively working on creation of components for our new medium-haul MS-21 aircraft, and these competencies can and should be used in new transport aircraft programs. Looking ahead, UAC is developing solutions for the program of creating a promising line of versatile transport aircraft that may appear within 10-15 years and ensure the UAC competitiveness in this market in the long term.

I am sure that Aviastar-SP and the Ulyanovsk region have a great potential in the development of Russian aircraft construction in general and of transport segment in the UAC product line, and thus they will contribute to achieving strategic objectives of the corporation.

Positions' return

The main strategic objective of domestic aircraft construction is to achieve long-term competitiveness among the leaders of the global market.

mikhail pogosyan, united Aircraft Corporation (uAC) president

Aviation industry strategy

Photo by Sergey Titov

5open region

Discussions of aviation experts on how to develop domestic aircraft industry were suddenly interrupted by the events in the Ukraine, which since the days of the So-viet Union has historically been linked with quite a big part of Russian aviation. Thus, the Experimental Design Bureau Antonov, established in 1946 in Novosibirsk, in 1952 was transferred to Kiev. It is with the Antonov Design Bureau (now Antonov state enterprise) that the fate of all An aircraft line planes ope-rating in Russia is linked, and this means the supply of components, technical support, and maintenance of the necessary improve-ments. Now implementation of joint RF — Ukraine projects of An-148 production (VASO, Voronezh), of An-140 (Aviakor, Samara), of the long and very difficult to promote project to resume production of new generation aircraft An-124 Ruslan in Ulyanovsk, is questionable. In the Ukraine there also is one of the world's largest manufacturers of aircraft engines Motor Sich, engaged in production and repair of aircraft engines for An-12, Be-12, Be-200, An-24, An-26, An-30, An-140, An-148, Yak-40, Yak-42, L-39, An-124, Mi-8, Mi-24, Mi-26, Mi-171, Ka-32, operating in Russia, as well as for a large line of Russian aircraft and helicop-ters for military purposes (all in all 55 types and modifications of engines for 61 kinds of airplanes and helicopters). The same plant produces auxiliary power units for many Russian aircraft.

The political situation has already af-fected Russian aviation industry: Ukrain-ian president Poroshenko on June 17 gave the order to National Security Council to stop entirely working with Russia in the military-industrial complex, and the State Concern Ukroboronprom in April “tempo-rarily suspended all shipments” of dual-use goods to Russia. Russian airlines observe interruptions in the supply of components already today. Moreover, no one excludes that at some point Europe and US sanctions can also touch aviation. The first harbinger of this was the statement, announced in March by the president of Canadian engi-neering corporation Bombardier Inc. Pierre Baudouin, that the project to build in Uly-anovsk a joint venture together with Rosteh for Q400 aircraft assembly may be postponed due to the events in the Ukraine, and the corporation “intends to adhere to the sanc-

tions, whatever they were.” Indirect reaction is noticeable also on the part of foreign resi-dents of the Ulyanovsk-Vostochny airport special economic zone, that for one reason or another have slowed implementation of their projects.

In turn, deputy prime minister Dmitry Rogozin said in March about the need to move on to import substitution and deve-lopment of production of own Russian air-craft and their components, avionics, and engines. According to the head of Industry and Trade Ministry Denis Manturov, the work on the project of import substitu-tion program is already underway. The program is designed for 2-3 years, during which it is planned to completely aban-don the products produced by the Ukraine defense industry, including the aviation industry. However, some experts believe that the program will require 12-13 years. Meanwhile, the airmen say that every cloud has a silver lining, and the western and Ukraine sanctions will only give new impetus to the development of Russian aircraft industry.

Nevertheless, Russian aviation and air-craft construction have found themselves in the new coordinate system, where other actions and approaches are required al-ready. Where today there are more ques-tions than answers.

1. What dangers in the new political reality can await Russian aviation industry? How can it affect civil aviation?

2. Can Russia establish production of aircraft engines for airplanes and helicopters, previously supplied from Ukraine? How much money can it take? It is reasonable, or is it necessary to look for other ways? Which could be the ways?

3. What projects of civil and transport aircraft mass production may finally collapse in connection with events in the Ukraine?

4. Whether Russia can independently implement the project to resume production of the new generation An-124? Under what conditions?

5. Given the possibility of the West sanctions against airlines flying to the Crimea, is there any point to return to the topic of state support (in the forms permitted under WTO) of Tu-204SM production?

6. Whether and under what conditions is Russia s transition to manufacturing of small aircraft on its own possible? Which means will it take?

7. Is there a reserve capacity to reorient aviation industry and its related industries (accessories and avionics production) for cooperation with China, India, and other countries friendly to Russia today?

We asked our experts all these questions at a virtual roundtable.

Experts roundtable

according to experts, in the new coordinate system russian aviation industry will restore its direction, but part of the projects may completely collapse.

the West will help russian aviation industry

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Russian aircraft industry intends to follow its own path

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Boris rybak, infomost Consulting company Ceo:1. In my opinion, almost to no extent. All the

existing problems of the Russian aviation industry, if they certainly are present, are purely domestic. So I would not talk about any external dangers.

As for the civil aviation, it largely depends on the situation and the political climate in the world. But I would like to remind you that even in the most difficult years of the Cold War the Soviet civil aviation activities were conducted on all continents and in most countries of the world, and as soon as in the early 70's came the detente, the Trans-Siberian route was opened for flights of the European and Asian airlines over Russia. Overall, the world civil aviation is very interdependent, global, as they say now. So today it is extremely difficult to imagine any sanctions in this area. Russia today is more necessary both to the West and to the East as a partner in the field of civil aviation, not as an adversary.

2. Nowadays probably is not yet in condition. Attempts to organize production of helicopter

engines TV3-117 (for helicopters Mi-8) and VK-2500 are being made for a long time, but, apparently, it is still far from the mass production. Russian-French Sam-146 (light turbofan of the class of Ukrainian D-436) still requires refinement and mass produc-tion. Engines of the class of Ukrainian D-18T (for An-124 Ruslan) are not designed and manufactured in Russia. A likely way to solve this problem is a real international cooperation. This can be realized in the form of establishment of foreign production of existing foreign engines in Russia and in the framework of joint research programs of Russian and foreign engine builders.

3. All.

4. Sure it can. In my opinion, except the desire nothing is required, all preconditions are in place. Success of the IL-76MD-90A program is a very good proof. There is nothing what the Russian engineers and scientists would not know about the Ruslan. 70% percent of all R&D in this program was carried out in the USSR Ministry of Aviation Industry spe-cialized institutes, now located at the territory of Russia. All, as they today like to say, competencies and present now. We need some kind of political will to start the program. Everything else is quite elementary. Another thing is what to reproduce if the technologies are from the last century, it hardly makes sense. Conditionally speaking, bas-ing on the An-124, we can create a plane which would correspond to the technical level of, say, the beginning of this millennium. But in practical terms, in this case nothing will remain of the initial aircraft except general configuration. This will be a new aircraft, somewhat similar to An-124. Such planes could really solve both military and special and civilian tasks up to the middle of this century, and perhaps further.

5. No. Tu-204 is the outgoing nature. There is no demand for this plane (corresponding to the technical level of the second half of the last century), and probably will never be. In my opinion, we should not spray the resources available to the UAC, but should focus on the program of the

new aircraft in this class, MS-21. It is the plane on which all software solutions were adopted at the state and corporate level, and which is already invested heavily.

6. In development and production of small aircraft in our country there is no problem. There are people who can design such planes. Production exists in which such aircraft can be produced. Even today there are quite a number of new aircraft projects in this class. However, there is completely no need in small aircraft in our country and, as a consequence, there is no, and in the foresee-able future will not be a real deal. When such a need arises, then such aircraft will appear in a prominent enough, mass quantity. Anticipating a logical question, when this might happen, I will say that if the dominant economic model in our country maintains, that will not happen earlier than within 15-20 years.

roman gusarov, Avia.ru branch portal editor 1. Everything terrible that could happen to our

aviation industry has already happened. And by no means today. No situation can harm what we don t have. We all have witnessed the slow death of

Experts roundtable

There is a way out

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Soviet civil aviation for 23 years. Piece production of aircraft cannot be called aviation industry, and it is hopelessly outdated. And the new one is being born in pain, great effort and cost do not give the expected result. With the same SSJ 100, in fact, we found ourselves in financial and industrial impasse, and its critical dependence on foreign suppliers does not let us sleep well. But for civil aviation I do not see any threats. Western aircraft manufacturers are no less dependent from Russian orders than our airlines are from western aircraft supplies. Not to mention the interest of Western aircraft manufacturers in broad cooperation on supply of Russian raw materials (titanium) and products. Pragmatism of Western business will not allow politicians to bring the situation before the crisis, from which their aviation industry will suffer much more.

Also I do not believe in sanctions against our airlines from the EU. Everyone understands that they, like a boomerang, will hit the European airlines in the Russian market, in which they are extremely interested because it, unlike stagnating Europe, is growing and extremely attractive.

2. Russia is able to completely replace export of engines from the Ukraine independently. But it will take time. Considerable investments have been made. In St. Petersburg a new plant was built for production of helicopter engines. It should be still saturated with equipment and personnel. And in terms of the possibility of developing new engines I also do not see any problems. The main developer of helicopter engines in the USSR was Leningrad plant Klimov, which yet now is a leader in this area, and the main research institutes are located in Russia. Until now the development of domestic helicopter engine construction was hampered only by the absence of the state will. Everything is in our hands, and there are no unrecoverable problems in this field.

3. The first project which collapsed under the blows of the bells of the Orange Revolution in the Ukraine in 2004 became the An-70. More precisely, the work and the funding were still going on, the commissions were meeting, the tests were con-ducted. Here only Russia, not trusting cooperation with such a shaky and unpredictable partner, was engaged in parallel project of IL-76MD-90A. Since its first flight the An-70 project has become outdated for Russia. And now it is possible to put bold cross on it. Although personally I am sorry, it came out to be an excellent plane. But apart from Russia it is of no need for anyone in the world (except China, as always ready to copy anything and everything), and to build it by itself is too tough for the Ukraine.

Today, apparently, it is the sad turn of the regional An-140, produced in Samara. Our govern-ment in previous years did not notice it, and now will forget even more so, because some components and the engines come from Ukraine. Although it is a great pity. Good plane with excellent performance, ideal for the Russian North and Far East.

The most unpleasant thing will happen if they halt production of An-148 short-haul. The demand for it even in the past considerably exceeded the

pace of construction. It is claimed both by state agencies and commercial airlines. It is built in Voronezh, but part of the airframe and engines are from the Ukraine. After the new Ukrainian go-vernment removed Antonov chief designer Dmitry Kiva down as chairman of the board, the plant in Kiev was almost paralyzed, and whether it will be able to fulfill its obligations is unknown.

The plans for resumption of joint production of An-124 Ruslan also crumble.

4. Theoretically, everything is possible, including self-renewal of An-124 production. Another thing is at what cost. The process of creating an An-124 new modification on its timing, effort, and money is al-most equivalent to creating a new airplane today. In my opinion, this sacrifices are absolutely inadequate to expected result. Even during the active growth of freight traffic in the world the mass demand for such aircraft was not detected. And the RF Defense Ministry needs do not exceed 20 boards. Very sorry, a gorgeous plane, but today I do not believe in the reality and feasibility of the project.

5. The assumption that the West can impose sanctions on aircraft and components of its own production is absurd. It would be like flogging themselves. Virtually all foreign aircraft in Russia are leased from Western companies, and if because of the lack of spare parts they cease to fly, it will lead to mass termination of contracts with lessors with the return of aircraft. The West will not be happy if 600 aircraft fall at once on the secondary market, which will lead to collapse of the market. As for delivery of new aircraft, the order book for them from Russian airlines makes many billions of dollars. No one in his right mind would refuse such money.

It is possible to produce Tu-204SM, but it cannot become an alternative to Western aircraft. First, it does not belong to the most demanded in the mar-ket aircraft type. And secondly, its mass produc-tion is technologically impossible. It is necessary to emphasize the development of the new MS-21 aircraft and, responding to new challenges, to take care of maximum interchangeability of its western production systems with domestic ones.

6. In Russia there are no serious problems with organization of aircraft production for small avia-tion. There is a problem with their development. At one time UAC, which collected the main production and intellectual assets of the country, said that it would not develop planes with a capacity less than 100 passengers since it was not interested in them, and there was no demand for such machines. This led to a severe crisis in the segment of regional transportation and to almost complete absence of small domestic aircraft.

And today the design bureaus and plants not included in UAC are extremely weak and in many respects have already lost their competence. They can create a plane, but it will be the yesterday aircraft, as they do not possess modern techno-logy design and production. The only one solution is organization of licensed production of Western developers aircraft in Russia.

Experts roundtable

Operating commercial aircraft fleet structure

mainline aircraft — 688

name number

of domestic productionIl-96-300 13Tu-214 11Tu-204-100

8

Il-62M 8Tu-204-300

6

Tu-154M 25Tu-1545 2Yak-42 42SSJ-100 13total 128of Western productionB-747-400 20В-777-300 9В-777-200 14А330-300 19А-330-200 5В-767-300 34В-767-200 6А-310 1В-757-200 36В-737-800 70А321 56В-737-700 16В-737-400 23В-737-300 5А-320 112В-737-500 65В-737-200 2А319 67total 560regional planes — 298of domestic productionTu-134 38An-148 15An-26-100 25An-24 77An-140 2Yak-40 33An-38 3total 193of Western productionDash-8-400 3

ATR-72 15CRJ-100/200 56

SAAB 2000 5

Dash-8-300 4

ATR-42 8ERJ-135 4SAAB 340 5EMB-120 3Dash-8-100/200 2

total 105State research institute of civil aviation data

Cargo planes — 154

name number

of domestic productionAn-124 17Il-76TD- 90

5

Il-76 42

Tu-204 S 5

Il-62M 2

An-12 6

An-74 10

An-32 2

An-30 3

An-26 27

total 119of Western productionB-747-8F 5B-747-400F

7

B-757-200F

1

B-737-400SF

2

total 151

Helicopters — 1124of domestic productionTu-134 38

An-148 15

An-26-100 25

An-24 77

An-140 2

Yak-40 33

An-38 3

total 193of Western productionAW-139 7

W-3 1

ЕС-155 2

Вк-117 5

Bell-429 1

AW-119 2

А-109 6

ЕС-135 11

ЕС-130 5

Bell-407 4

AS-355 10

AS-350 23

R-66 1

R-44 74

ЕС-120 3

Во-1 05 5

Bell-206В 4

total 164

8 open region

7. As the Emperor Alexander III said, Russia at all times had only two allies: the army and the navy. And to change dependence from the West to dependence from the East is extremely unwise. The sad experience of cooperation with the friendly Ukraine has something to teach us. We should cooperate with all who are ready for partnering with us. But at the same time in such a strategi-cally important industry as aircraft construction Russia should be self-sufficient and independent. For any system supplied to us by foreign partners we should have a domestic equivalent.

oleg panteleyev, head of the Aviaport branch agency analytical service1. The impact of the international situation on

civil aviation and aviation industry will be both direct and indirect, and the indirect effect will come out to be much more significant.

First of all, we are already seeing problems in cooperation of Russian companies with Ukrainian suppliers. It all started already in spring, when a number of engines repaired in Zaporozhye were not promptly returned to customers. Then fol-lowed the well-known events and statements by Poroshenko. As a result, today it is difficult to predict how events will unfold in the supply of components from the Ukraine.

Everyone understands that for Ukrainian air-craft builders the Russian market is the key one. Furthermore, there is co-operation, within which Ukrainian manufacturers buy materials and a number of units in Russia. Therefore Ukrainian companies are themselves struggling to demon-strate that they are ready to continue cooperation with Russia. But this does not guarantee that the situation will not deteriorate.

If we talk about problems, helicopter build-ers remain the main hostage of this crisis, for they are tied to the supply of Ukrainian motors. We are also talking about the TV3-117 for shock and transport helicopters, and about D-136 for a giant Mi-26. Another trend is AI-222 engines for Yak-130. The third is D-18T for Ruslan. And the fourth is D-436 for An-148. In fact, there are also issues related to renovation of AI-20, AI-24, AI-25,

D-36, and others, but their repair in Russia has been already mastered, and in some cases it is not particularly relevant.

There are issues concerning not only engines. A number of units of Ukrainian origin are set on IL-76MD-90A. Under the An-148 program there is a large volume of counter cooperative deliveries. Continuing An-124 airworthiness is also largely dependent on the relationship with the developer (at least for commercial operators).

However, all these problems can be solved, it is only a matter of time and money. Much worse is that for Russia it has become much more difficult to negotiate with its partners on international projects; taking measures to support the Crimea and the anti-crisis measures — all this diverts resources from other purposes, among which there might have been accelerated development of aviation. And also economic sanctions have had an impact on the ruble exchange rate and the price of shares in Russian companies — all this can outweigh the negative that we have already received in relations with Ukrainian partners.

As for civil aviation, it is already feeling the eco-nomic downturn and facing customers fears. Thus, inbound flow from Europe to Russia fell by almost 20%, and it was not possible to fully replace it with the tourists from China. Airlines, whose revenue`s significant part is nominated in foreign currency, suffer exchange rate losses. Obviously, hitting a difficult financial situation, carriers will be forced to revise their fleet renewal programs.

2. Organization of engines serial assembly from fully Russian components is a task that was applied to VK-2500 (TV3-117VMA modification for Mi-8, Ka-32, and other helicopters) already in 2012. Today there is an understanding that by 2016 as-sembly rate of completely domestic VK-2500 will be sufficient to completely replace the supply of foreign machines.

But pre-production for additional hundreds of engines a year is considerable investment. At the

same time, until the end of the decade Klimov will present a completely new design, which will differ from the original in weight, fuel efficiency, and operational reliability, but along with this it will be completely unified on seats. To spend money on production development of the outgoing type of engine is not the most rational decision.

3–4. Restarting normal production or deep modernization of An-124, as well as An-70 assembly in Russia — these projects have no prospects in the light of current events. On An-148 collaboration is likely to continue. On An-140 — as well, but down-ward. At the same time Russia plans to restore An-124 park through overhaul reconditioning and small modernization, so that there won`t be any need for new aircraft yet. Ilyushin Aviation Complex became the chief for Ruslan continued airworthiness.

5. Tu-204SM will revive only if there is a consoli-dated state order. But given the “optimization” of budget expenditures, the likelihood of its conclu-sion tends to zero. So Tu-204SM most likely will not be made.

6. Small aircraft are produced in Russia by doz-ens a year, but for the most part are not certified. In principle, if the support amounts tens million rubles, this issue can be solved, but government funding for small aircraft development under the state program of the aviation industry develop-ment is provided only from 2016.

7. With regard to the change of partners, we yet see the desire of the industry executives to keep cooperation with the West (at least in terms of components purchase), but at the same time to enter other markets in terms of sales of civil aircraft. We must understand that the world market today has got a distinct division: in the West aircraft are built, in the East they are bought. China or India as manufacturers of aircraft engines and avionics are less attractive than own Russian companies.

Experts roundtable

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9open regionFrom the first person

— Let me begin with a painful issue. The situation with the Ukraine and subsequent Western sanctions seriously affected avia-tion. The Russian government is already adjusting its plans and developing a program of import substitution. At the same time in your activity a lot of attention was paid exactly to foreign investment. Whether the regional government intends to adjust its strategy and plans for key areas of the Uly-anovsk region aviation cluster development, or do you think that everything can still go back to square one?

— I have such a nature — I'm pushy. Though fond of some interesting long-term projects, at the same time I am conservative in my policy, and if I undertake something, then I try to do everything to understand perspectives: will it be a success, or there is no way, and we have only benefited in get-ting another experience. I'm not going to close down European direction of the region investment activity, on the contrary: I plan a large regional meeting on new relations in international policy of the Ulyanovsk re-gion. We will not only assign the responsible ministers again for joint work with European countries and reformat them for more spe-cific breakthrough directions, I'd like us to interact not only with specific companies, but also with the associations to which they belong, so that they, too, became a kind of

guarantee for businessmen that they will accurately implement their projects. But it would be stupid not to see what is happening in the world and to say that someday all will resolve. It will resolve, of course. But it s a sin not to use today's situation in relations with China, Japan, South Korea, Turkey. And I spe-cially flew to China and Turkey to feel if their companies are willing to invest in Russia, or is it just a smokescreen. That is why at St. Petersburg economic forum I was interested in whether the Korean business is ready to go

to the center of Russia, and now in Ulyanovsk we will meet with representatives of Korean business elite to discuss possible cooperation. I think that in aviation we could “marry” our experience, intellectual capacity and devel-opment to China, and enter joint projects. I think that the possibility of agreement on cooperation in modern wide-body passenger aircraft creation is only the first step. I think that we could work together with China, and in the interests of the Ulyanovsk region we could aim for at least two projects. One is the

sergei Morozov:

“they're crazy!” about new challenges and responses, disagreement with experts and continuation of work with the West, the role of government in aviacluster development and influence of culture on investment, outrunning the time and importance of dreams the ulyanovsk region governor sergei Morozov told in a conversation with the open region editor sergei Titov.

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10 open region

main Tu-204SM airplane. Whatever they say about it, it's still a promising project; having appeared later than its Western counterparts, it has already embodied everything most modern. The second possible project is an aircraft for regional transport.

— Do you mean that China may be inte-rested in buying Tu-204 SM, or it comes to working together for further improvement of the airliner?

— Both. For China with its vast spaces such an aircraft is certainly necessary and interesting, at the same time we could work jointly to improve some of its characteris-tics. And I think that emergence of a rival to Boeing and Airbus is also in China's inte-rests. You know that our businesses which

works for aviation, Utes and Ulyanovsk instrument design bureau (engaged in de-sign and production of avionics — OR) have received very serious money to develop, and I think China will also be interested in our new technology in joint projects.

If we talk about the government's import substitution target, then it is certainly good for us, too, because under this program we will create new production, which, as you know, only leads to positive effects in the economy: increased tax revenues, increased purchasing power, and improving socio-economic situation in general.

— Do you have any kind of global develop-ment plan for the Ulyanovsk aviation cluster? Unlike the West, where cluster is a voluntary

association of geographically adjacent inter-connected and even competing companies for more revenues, in the Ulyanovsk region aviacluster was created on the initiative of the regional government and actually started working under its leadership. Five years have passed. Has anything changed, or the guiding hand of power is still needed?

— There is a big problem, a birthmark of the 90-ies of the last century, the fear of busi-ness community to unite. While business is not ripe yet, the government guiding hand is needed anyway. On the other hand, power also has not done the necessary steps: you will not find a single instrument on cluster policy in Russia, and cluster concept is still perceived differently. In the region we try to do everything consistently, and it was not by chance that we spent a lot of time in Germa-ny, studying their cluster policy. Soon we will have our own regional laws on cluster policy. I don t think we should lock aviacluster only within the borders of the Ulyanovsk region; this year we will offer businesses, scientific and educational institutions of the Samara region aviation segment to join forces and to create a single Ulyanovsk— Samara aerospace cluster, which could become the strongest in Russia, as well as a competitor and part-ner for leading aviaclusters in Europe and Asia. You know that in the Samara region small aircraft creating is well developed, and our Aerocomposite plant could actively help them to use extremely necessary com-posite materials; moreover, small Samara enterprises specializing in small aircraft production could become residents of our special airport zone with all the benefits, facilities, and preferences.

— Which direction of the region aviation and aircraft construction development do you intend to pay special attention to? Why?

— Maybe I will not be really understood by many leaders or even experts, but I would like to engage more in development of small aircraft. Large aircraft projects, the same IL-76, still have the guarantee of develop-ment under the current attention of the state. But as for small aircraft, it is, unfor-tunately, more talk than real cases yet, and the country is experiencing a need for small aircraft. I would like to work out these is-sues actively, so that in Ulyanovsk, on the territory of Russia's only airport special economic zone, small aircraft of various types were produced.

— You're talking about the demand for small aircraft, but many aviation experts say the opposite: in the country there is completely no need for them yet, and until the demand

From the first person

Photo by Pavel Shalagin

Governor believes that small aviation is necessary, and we must develop it, primarily the helicopter direction which provides high mobility

11open regionFrom the first person

appears it is meaningless to produce them today, and for business it is risky ...

— Maybe I'm getting ahead of time to a number of years again, of what they often accuse me ... But I think that today a huge number of people are sick about aviation; see how many people attend various events dedicated to general aviation. This is like tourism, cycling — it is entertaining, this process involves completely different people, whole layers of people, regardless of whether they are rich or poor. They're all crazy! In the best sense of the word. And it cannot be stopped. Even many members of the authorities are already sick about it, and they are “the fifth column” in the government itself, where some officials would not like to develop general aviation, but rather to develop a policy of iron curtain: “do not fly, do not move, do not come with suggestions”. Now we only need one thing to do: the more of us will be, the sooner we will defeat the inertia in relation to small aircraft. In fact, a lot of light aircraft that we could bring to mass production have already been created in Russia. We need just to show people that we want to create, we want to fly, want to be a great Russian movement. And if we can, in the near future we will see several new residents in our special economic zone, which will produce such aircraft.

— That's just about small aircraft. You recently signed an agreement with NDV group to establish a helicopter center in Ulyanovsk,

stating that you consider it the missing link in aviation cluster. In fact, since July the first helicopter Robinson R44 has already started working in the region. Are you sure that helicopter services will be claimed by Ulyanovsk business, or do you provide an opportunity for investors to assess the risks themselves?

— I'm sure that helicopter deal will be demanded. And not only among the wealthy: a few people in the region already have helicopters, but there they are just big toys. I do not think that Mr. Khrus-talyov (NDV principal owner) is a sort of adventurer, they were choosing the region very scrupulously and have counted eve-rything. And third, who said that it will only work for business? A huge number of boys and girls could become passion-ate about helicopter sports and all that relates to helicopter construction, and now they will get a unique opportunity to approach this, including through our established youth aviation academy. We expect that future pilots and engineers will also study helicopter case at our school of civil aviation. In the end, given our ambi-tious plans, we expect that eventually we will turn into a kind of helicopter center of the Volga Federal District, although our neighbors, Kazan and Samara, have more experience today. It will be another sig-nal to investors that they can go here and build helicopters or plants for production of their components in Ulyanovsk. And of

course, the state needs helicopter services. Now we are completing an application for 2015 on the use of helicopters in the MES, healthcare, law and order, monitoring of forest and agricultural areas.

— And what about the money? The media have already stated that the regional govern-ment officials intend to use helicopters for service needs. Clearly, this is very convenient, saves time and gives a lot of extra opportu-nities. At the same time observers note that for the Ulyanovsk region deficit budget it is too expensive.

— Yes, it is budget money. But let's also consider the cost of organization of work, and how much a working hour costs. When holding meetings I drive through five areas in a day, spending eight hours on the road; probably it is not entirely rational. And if the first persons are paid quite a lot of money, their working time should be used as efficiently as possible, this is the notorious budget saving.

— The need for helicopters in sanitary avia-tion is undeniable. But will it not be a great burden on the budget to use a helicopter at a cost of 28,000 rubles an hour for monitor-ing fields when, as they say in the Ministry of Agriculture, it is necessary almost every day for 6-8 hours?

— We could use special lighter and more efficient aircraft, but we do not have them. In Russia, unfortunately, there is generally no effective domestic small aircraft, and that is why I raise the question of the need to produce them. But we will not invest in the inefficient.

— And did not you think about the pos-sibility of using UAVs for the same purpose of monitoring forests and fields, for fire situ-ations or law enforcement, as their use is tenfold cheaper?

— I believe that the use of drones in aerial work is more than a promising direction. Perhaps its development will encourage reducing services cost of the same helicopters and small aircraft. And within the framework of reformatting our aviacluster we want to prescribe eve-rything that concerns the possibility of using drones and even their production as a competence. Ulyanovsk has a unique infrastructure and human resources to create transport and passenger aircraft, but our investment legislation also al-lows us to build assembly plants for un-manned aerial vehicles. By the way, from cooperation of our IT-cluster (where great programmers work) with aviation cluster a unique center for unmanned aerial vehi-cles development could occur, and if there is a company ready to produce UAVs in the region, using all the benefits of airport

Photo by Anastasia Stolbova

On a simulator at high school of civil aviation UVAUGA. To understand this you should try it yourself

12 open regionFrom the first person

special economic zone, we will give it all the support measures: we are interested in such projects.

— In recent years the staff problem in aviation exacerbates more and more. With increasing Aviastar load and aviacluster development this issue is of particular im-portance in Ulyanovsk. On the one hand, you put much effort to attract the younger generation into aviation, to create a system of vocational guidance ... on the other, aviation sports, where in the Soviet era many aircraft specialists began their way in aviation, today barely survives without any funding from the federal government or from the region.

— Of course, it is sad that those who have to deal with this direction at the level of the country are blaming the problem on the regions. But most regions do not have funds, while in fact quite a large investment is required there. And I need to know that our investment will return. Remember what Vysotsky sang: “real rowdy are few, so there are no leaders…” There are no those rowdy who could pull this project. And until I feel that we have a team ready to implement our ambitious plans to develop air sports, not only due to regional funds, but also by attracting private investors, I will not venture to allocate even a small investment in avia-tion sports.

— You recently announced the possibility of establishing an international resource center for aviation in the region. What are the prerequisites for this and what will it be like?

— Yes, we are planning to create exactly an international resource training center for aviation cluster, where vocational training, retraining, and professional development will be held. It will combine the Ulyanovsk technical and aviation colleges and high school of civil aviation, aviation technology

institute, youth aviation academy as a school for further education, as well as private aviation academy created at Volga-Dnepr airline. It should be a multi-level network structure with international standards of professional education, a large consortium of multifaceted training, from nurturing love for aviation to formation of specialists with high professional competence. And for us it is another real step to increase the number of highly qualified professionals in the in-dustry, that in fact is one of the areas of the RF president orders' implementation.

In November, 2013 we signed an agree-ment between the Ministry of Education and Aviastar which, having become a part-ner in the project, provides co-financing in the amount of 11 million rubles. The agreement allowed us to enter the number of 45 RF subjects — winners of competi-tive selection for 2014 and 2015, and to get federal funds for the program of training skilled workers and mid-level professionals in aircraft industry.

And I would also like to invite the best professionals in the field of aviation and air-craft industry to give lectures at the center. Moreover, I would like to invite visionaries here, including foreign ones — those who live by aviation no less than we do. So that boys and girls in their creativity could overtake their peers from other regions and countries for decades. We should teach to dream. And without a dream, I think, there is nothing to do in aviation.

— In September under the auspices of the Federation Council the IV International cultural forum “Culture and investment” will be held in Ulyanovsk. Do you seriously think that culture influences the investment?

— Now we are passing a new stage in formation of creative industries cluster, and I was literally struck by volcanic creative activity of various projects' authors. They make all our life multifaceted, interesting

and creative, create a special atmosphere. We confess that though we have gone away from a dangerous level of socio-economic life of the region, a large part of population continues to be in some kind of doldrums, and traditional culture has not yet healed us from sadness and disbelief in our own strength. And the stars also do not heal. But when we allow creative development of our own talents, we are proud, rejoice, gain confidence. In the province it is especially apparent.

— And what does this have to do with investment?

— I will not even talk about culture in the broadest sense of the word, the absence of which scares investors. It's obvious. But these depression, moodiness, distrust, in-security, lack of optimism among popula-tion of the region is also an investor's scare. And when he is faced with this, even if only at the grassroots level of officials, he who, having communicated with us, had be-lieved that all will be well, suddenly begins to feel that his money is not needed. And in such a situation there will be no good investment and business climate.

— Many people notice your special atten-tion to the subject of aviation. Is it a sober calculation of the governor or a personal pas-sion? And aren t these projects too far from problems of majority of the region population, the villagers?

— Despite all my passion for aviation and love for bright and ambitious projects, I am a pragmatic person. And I understand well that all what is associated with the development of aviation and aircraft con-struction means tens of billion rubles that we have nowhere else to take, because we will never have oil in millions of tons, and in comparison with our neighbors who have oil and gas we will not be competi-tive. This is precisely the material base for solving many problems in the region. It is the aviation industry that is a powerhouse of economy and gives us further resources for development, and thus for the flow of funds which will go for solution of social problems. In addition, for us it is a great opportunity to increase the share of high-tech and knowledge-intensive industries, again thus fulfilling the president orders. Aviation gives us the opportunity to be recognized in the world. And if China ap-plauds us at meetings because we are the birthplace of Lenin, Europe — because we are an aviation capital. And the fourth. I just love speed. Perhaps because of this I`m nipping on ahead sometimes.

Understanding the role of state in aircraft industry development, UAC president Mikhail Pogosyan discusses the problems of Aviastar-SP development directly with the governor

Photo by Anastasia Stolbova

13open regionInvestment. Results and Prospects

TaTiana Fadeeva

The region has enhanced its investment attractiveness in terms of productions accommodation, as it was stated by Rus-sian and foreign experts. The Ulyanovsk region has taken second place in the first National ranking of investment climate in Russian regions, prepared with the assistance of the Agency for strategic ini-tiatives. Besides, in 2013 a joint study was carried out by KPMG international com-pany and Russian union of industrialists and entrepreneurs, named ”Assessment of investment climate in Russian regions by the eyes of foreign investors”. It showed that the Ulyanovsk region, along with the Kaluga region and Tatarstan, was one of the three regions which were most at-tractive for foreign investors. The study draws on the findings from analysis of 200 stories of foreign companies on their experience of doing business in Russia.

The Ulyanovsk region was also noted at the World Economic Forum in Davos.

Currently, according to the Ulyanovsk region first deputy prime minister Alex-ander Smekalin, the region investment portfolio is 218.06 billion rubles. 88 invest-ment projects with a total investment of 91.27 billion rubles are underway.

Today over twenty companies imple-ment their projects on the Ulyanovsk region industrial sites, including Bridgestone (tire manufacturing), DMG Mori Seiki (machine tool plant), Schaeffler (production of auto-motive and industrial components), Jokey Plastik (production of plastic packaging), Nemak (production of automotive compo-nents), Hempel (varnish and paint factory), Hermle (machines assembly line), and oth-ers. In 2014 a number of agreements were signed on a few more projects implementa-tion in the region, including a plant of the Russian company Sedrus for production of dry building mixes, a training center of

the German company CCA Engineering for management of investment and construc-tion projects, and an Ibis brand hotel of the French Accor Group.

In the Ulyanovsk Region Development Corporation (URDC, engaged in attracting investment, 100% owned by the region) they believe that such significant results have been achieved “thanks largely to the well-functioning system work of “develop-ment block”, uniting resources of regional government and of corporations. We have a team that already for eight years has been professionally engaged in attracting invest-ment, we understand investors' needs, and often at the first meeting we can already tell them how they can implement their

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Ulyanovsk region development corporation CEO Sergei Vasin (center left): “We understand what investor needs, and often already at the first meeting we can tell him how he could implement his project in Russia”

despite the slowdown in global economy, 2013 was quite productive for the ulyanovsk region. investments in fixed capital grew from 73 billion rubles in 2012 to 76.2 billion in 2013.

14 open regionInvestment. Results and Prospects

projects in Russia,” said Corporation CEO Sergei Vasin. According to him, attracting large and medium industrial enterprises in the Ulyanovsk region remains the leading trend in the investment field. “In view of the current foreign policy situation, which has been deteriorating lately, to our tradi-tional countries on which we have lately focused — Germany, France, and others, the countries of Southeast Asia and the Middle East were added,” said the URDC head. “For several years we have been actively seeking investors in Japan, now we continue this work and also begin to work with China, Turkey, and the United Arab Emirates. We started active cooperation with the Invest AD investment company of Abu Dhabi (it is the country's state investment fund) for implementation of projects in the field of agriculture and logistics in our region.”

Mr. Vasin called development of indus-trial parks in the Ulyanovsk region another, no less important area. In addition to the existing Zavolzhye park, where most of the residents locate their productions, UAZ, DAAZ, Novoulyanovsk, Novospasskoye, and other sites are being developed. Sergei Vasin also noted that “last year a new and very significant thing was the start of en-chanced action to create private industrial parks in the region.” Thus, in the industrial zone Karlinskaya on the right bank of the Volga the first of such parks will be cre-ated, DEGA Park “Ulyanovsk”; the invest-ment agreement on its establishment was signed with the Swiss developer company DEGA Group in April this year. Currently an industrial park is being formed in the UAZ of the Sollers group. Construction of ready industrial buildings is also planned, which will give room for medium and small companies. According to Sergei Vasin, there is a demand in leased areas from both Russian and European companies, which the region cannot yet meet. The demand is confirmed by the example of DMG Mori Seiki, which has rented one of the two production facilities of the nanotechnol-ogy center for the time of construction of its own production site.

At the same time the region's priorities for industries have not changed: they are for automotive components productions, for production associated with aviation, for food production, and for building materials industry, as Mr. Vasin said.

It is worth noting that since 2014 sup-port of all investment projects in the Uly-anovsk region, both social and industrial, which formerly was made by the regional government, was transferred to URDC “in order to work more effectively with inves-tors”. Mr Vasin explained that the regional government “has also set before Corpora-tion the task of overall coordination with investors from all development institutions

in the region, such as the Agency for rural development, Ulyanovsk region enterprise development centers, and others.”

A new promising direction which ap-peared this year was the URDC participa-tion in developer projects realization and in urban construction territorial develop-ment. “Being a development institution engaged in attracting investors, we are directly interested in creating a favorable living environment, as it is one of the “soft” factors for investor in choosing the region,” as Sergei Vasin emphasized. “Previously we only took a consulting part in discussing projects of urban environ-ment development. This year we began developing the concepts of two projects: of the smart city, a business district in the central part of the New city in Aircraft builders' avenue, and of the “Green Venets” project of urban development of the Volga slope. Currently, together with the well-known company Ernst & Young we are de-

veloping the concept of smart city project that concerns the “Green Venets” project; at the moment a partner is chosen, a St. Petersburg company.”

In URDC they note that the main re-source of success of their plans will be new businesses' personnel, and believe that the search for professionals and their training and development is one of the priorities of the region. According to experts, the near limit of the Ulyanovsk region industrial development, which may occur in the fu-ture 3-5 years, will be shortage of skilled workers, although the region yet differs in a better way from its neighbors by pre-sence of qualified professionals. Wanting to avoid the perceived risks, governor Sergei Morozov identified the development of human potential into a separate priority, having made his deputy a supervisor of this direction, who has already begun to engage in creation of a staff training system for investment projects.

%

The period of the validity of tax incentives starts from the moment of emergence of taxable base and is not limited to the payback period.

The cumulative effect for the Investor makes

FROM 30% UP TO 40% OF ECONOMY OF INVESTMENT EXPENSES

* 0% rate is achieved through the mechanism of subsidies and incentives

10 years

10 years CORPORATE PROPERTY TAX

8 years LAND TAX

1.1% 11th – 15th years

10 years *

15.5% 11th – 15th years

TRANSPORT TAX

CORPORATE PROFIT TAX

Conditions for implementing investment projects in the region. Tax incentives.

investments in the region (billion rubles)

6.9 11.4 12.9 21.7 32.5 47.8 48.7 44.8 61.7 73.0 76.2

15open regionSynergy

gennady elTSov

They say everything new is a well forgot-ten old. Rightfully this can be attributed to today's aviation cluster of the region.

total recall Recall, when constructing the Uly-

anovsk aviation industry complex (now Aviastar-SP) it was planned to place six specialized factories on the same site, a flight-testing complex, a branch of the famous TsAGI, a number of research insti-tutes and educational institutions. In fact, it was about creating an aviation analog of the Siberian branch of the USSR Academy of Sciences, or “Russian Seattle”. It did not work. In the course of economic reforms of the 90s Russian aircraft construction went into a deep dive.

Fortunately, Aviastar and some other companies which were part of its environ-ment have survived yet. One of the reasons of their survivability was mutual support. Living example is the continued production of An-124 in Aviastar in the absence of state order. Then Ruslans were built on money earned abroad by commercial freight of such airlines as Volga-Dnepr and Polyot, the flying aviators helped the earthly aviators to stay afloat.

Another example. Director of the Uly-anovsk science and technology Center (USTC, a branch of the All-Russian Insti-tute of aviation materials VIAM), doctor of technical sciences Vyacheslav Postnov said: "At that period which was economically difficult for the branch the Volga-Dnepr airline came to us with a proposal to de-velop the repair technology for An-124-100 constructions from polymeric composite materials (PCM) on its base. In short time we have created a technology for repair of large (length 14.5 m) rear cargo hatch flaps constructions and prepared the necessary production bases in Ulyanovsk and in Shan-non (Ireland). From 1995 to 1998 the PCM constructions on five An-124-100 planes were renovated, and this has supported USTC financially and ensured the safety of our laboratory team. At the same time due to the lack of such links laboratories for casting aluminum alloys and non-destructive testing of PCM technological

properties have entirely disintegrated, laboratory for protective and functional coatings has decreased... "

Airlines need a plant for construction and repair of aircraft, the plant needs sci-ence for its competitiveness, science needs orders, and all together they need com-petent staff, workers and specialists. The complex, a territorial community of diverse companies united by a common product, has shown its strength.

network instead of hierarchy However, in market conditions tough

hierarchical models are often ineffective. If all the links in the scientific produc-tion chain are meant for one product, but it is unclaimed, it will happen as in the proverb: one link broken, the whole chain is broken.

Cluster forms of business interaction, described at the end of the 90s by Michael

Porter, are more efficient. According to Porter's theory, a cluster, being a terri-torial community of diverse but related businesses, including competitors, unlike the complex, is not a hierarchical but a network structure, when even the interac-tion between competitors has benefit for all parties, and where each participant is guided not by administrative requirements but by profitably. The aforementioned USTC is a typical example. Its know-how and production capacities are in demand today not only by Aviastar and Volga-Dnepr, as it was before, but also by Russian Helicopters holding, by aircraft factory in Voronezh, by shipbuilders, and many others. Hence rapid growth. If by 2008 the volume of USTC domestic production was 6-8 million, last year it was 82 million already. Now there is high salary in Ulyanovsk standards, and big plans. To implement them, with the support of the Ulyanovsk region go-

ulyanovsk aviacluster completes its first five years with takeoff of the first serial il-76Md-90a, materialization of the airport sEZ, and the first russian “black” wings, but it is still developing not according to porter, but with supervision of regional authorities.

not according to Porter

Today deeply modernized Il-76MD-90A aircraft is the main product of Aviastar-SP. In future the plant will make up to 18 such aircraft a year

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vernment and the powerful VIAM, USTC is building a new block of 2,800 square meters area where production of parts from thermoplastics and coal plastics will be launched which were not manufactured in Russia before. In fact, from materials of the future. The basis of cluster coopera-tion, an initiative business unit (enterprise, organization), does not wait for directives but offers services itself, anticipating mar-ket needs and partners. Exactly the way how in recent years the classic Ulyanovsk state university has been developing: it has unexpectedly turned into... aviation school. Its teachers and students are active participants of Il-76MD-90A (manufactured by Aviastar) production and full life cycle digitalization. On Aviastar areas, draw-ing on strategic partnership agreement, the university has opened a base chair of digital technologies in aircraft production and established a competence center for training and implementation of research and development.

However, these examples are still a rar-ity. There were few of those who responded to the call of the regional authorities to support Aviastar's implementation of the grand state order for 39 Il-76MD-90A with outsourcing and thereby to increase the region's share in the cost of aircraft from 35 to 50%. “We yet do not have successful examples of outsourcing which started from scratch,” said Aviastar-SP CEO Sergey Dementiev to the Open Region. “Of 100 companies that have expressed interest in working with us at the vendors conference “IL-76: yesterday, today, and tomorrow” only one in ten applications was considered promising by our technical directorate. In

aviation there are the highest requirements for safety, we cannot do without licensing and certification. Accordingly, to become an Aviastar supplier is a troublesome busi-ness, and not everyone dares to set foot on this thorny path.”

one for allUlyanovsk air cluster core, aircraft fac-

tory Aviastar-SP, unlike in previous post-Soviet years, today is loaded “to the eye-balls”. The main thing is serial production of Il-76MD-90A under a contract with the Defense Ministry. This year it will deliver two of these aircraft to the customer (the first is ready); with each succeeding year this figure will increase to 18 boards per year, and their total number up to 2030 will be not less than 200 aircraft, including transports, air tankers , fire aircraft, flying hospitals, etc.

Soon a new Tu-204-300 for the Office of presidential affairs will be built with the delivery of the aircraft to the customer in 2015. The plant is completely ready for serial production of Tu-204SM, and moderni-zation of the previously released 124-100

Ruslan is continuing. In addition, Aviastar actively participates in UAC global projects: it mounts interiors on SSJ100 aircraft, as-sembled in Komsomolsk-on-Amur, and produces large range of components for final assembly of the prospective Russian MS-21 airliner in Irkutsk.

To accomplish all of this year plans Avia-star should increase production by at least 47%. In future it is planned to participate in creation of a Russian-Indian multipurpose medium-duty transport aircraft in which Aviastar hopes to be the final assembler; also cooperative involvement in release of IL-112 light transport aircraft is possible, and much more.

It is obvious that under such a program there is not enough qualified personnel. Current deficit of production workers only at Aviastar is 700 people. Plant produc-tion plans for the next three or four years require supplements of 3,000–3,500 work-ers still. And here interaction within the cluster is triggered.

From kindergarten to the factory gates

Aviacluster helps to solve personnel problem through interaction with the regional government, which is using its capabilities to build a system of vocational guidance, recruitment, and training for aviation. “We want to build a system so that it operated from a kindergarten to the factory gates. And this model, composed of selected institutions of secondary, voca-tional, and higher education, has already been created. Moreover, it includes some unique elements that cannot be found anywhere else. These, for example, are

Aviacluster. Development indicators

indicators/ Years 20132016

forecastNumber of participating enterprises

58 240

Including small and medium business

4 184

Number of employees 28,000 37,000Volume of production, bln.rubles

50 250

Cluster share in GRP, % 6 15

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17open regionSynergy

the youth aviation Academy, the League of young aviators, regional Festival of aviation sports, and more. The task is to scale ex-perience of units for tens of kindergartens, schools, and vocational schools. And top of all this “pyramid” should be an effec-tive system of motivating young workers already within aviacluster enterprises: decent working conditions, high wages, good social package, support in acquisition of housing, and the ability to upgrade their qualification,” said Mr. Zinnurov. Thus, the “Aviastar of the new generation” housing program launched in 2012 became the in-centive for staff. It involves construction of about 4,000 apartments for employees of the enterprise, and besides, it is focused also on attracting compatriots from abroad, primarily from the Ukraine and Uzbekistan that have professionally qualified airmen. Over recent months about 100 such special-ists have expressed a desire to move to the Ulyanovsk region.

In 2014 — 2015 in Ulyanovsk on the basis of aviation and technical colleges a Re-source Centre for training specialists for aviation cluster and for engineering will be established, in which organization of the educational process will be carried out in accordance with international standards of professional education.

not according to porter It is worth noting that, being formed

in 2009 as an interactive association, the aviacluster has significantly increased the number of its members — from 19 to 58, but it does not operate entirely on Michael Porter: yet there are no fundamental chang-es in initiative interaction of enterprises themselves, which would be oriented on development and profit. Regional governor Sergei Morozov acknowledges that “as a birthmark of the 90s there is a problem, the reluctance of business community to join together to solve common problems.”

So the guiding hand of the regional gov-ernment is necessary yet. According to Denis Baryshnikov, head of the Ulyanovsk branch of SEZ JSC (management company of the Ulyanovsk-Vostochny airport SEZ), cooperative relations between companies that have already developed before the ad-vent of the cluster, are yet observed in Uly-anovsk aviacluster, “and new connections were manifested only in the interaction of participants at major aviation exhibitions and air shows such as International air transport Forum MATF and International Aerospace Salon MAKS. Unfortunately, we have not recovered from the problems remaining from the socialist structure of production, and in fact cluster members are still the elements of vertically inte-grated chains,” said Mr. Baryshnikov. At the same time he believes that with time the structure formed from “above” will bear

fruit when the cluster members, includ-ing direct competitors, get real mutual interests, giving them the opportunity to expand their business. “This situation is already beginning to be observed in the airport SEZ, where residents, even being competitors, are themselves planning to interact with each other in the field of maintenance and repair, stuff, mutual supply,” said Mr. Baryshnikov.

Meanwhile, the Infomost consulting company CEO Boris Rybak believes that “there is nothing wrong with that as long as aviacluster is an artificial entity created by government, and its artificial stimula-tion is made. The world economic practice has million examples when it is done that way. Even now, here at the exhibition (at the Farnborough Air Show), there is some-thing that has never happened before: the huge stands of the American territories which want to attract investors — Ala-bama, North Carolina — they tell us what comfortable places and what benefits for business they have. As far as I know, in the US reindustrialization is now going on, and they do the same thing that the Ulyanovsk region makes — artificially stimulate. Yes, they respect the theory, but if the theory is not working or is running slowly, they do it by force. Paradoxically, but the Ulyanovsk region has anticipated the trends, and America is doing today what started five years ago in Ulyanovsk,” said the expert.

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Aviastar CEO Sergei Dementyev admits that only a few companies responded to offers on outsourcing of Il-76MD-90A: the demands for product quality and reliability are too high

Also a customization center will soon appear in Ulyanovsk, where interior and additional equipment installation will be made on SSJ 100, MS-21, IL-76 MD-90A, and on other types of foreign and Russian aircraft

18 open region

lyubov Chilikova

the most modernIn November, 2010 at the territory of the

Ulyanovsk aircraft manufacturing enter-prise Aviastar-SP a capsule was laid in the foundation of the future AeroComposite Ul-yanovsk plant for production of composite structures (60% — Moscow AeroComposite, 40% — Aviastar-SP). Its main task is the out-put of a composite or, as we call it, “black” wing for short-medium range civil airliner of the XXI century MS-21, and later for the SSJ-NG aircraft (composite materials or composites are complex materials based on polymers with fillers of other substances; in aviation fibers, woven fabrics, or films

made from carbon, glass, or aramid are used for reinforcement).

The enterprise was built on the basis of an Aviastar empty shop with the area of 90 thousand square meters. One of the basic premises is the so-called “clean room” of 10 thousand square meters size with liquid polymer floors and climatic equipment which provides the necessary tempera-ture and humidity, controls the content of dust in the air. All the production is automated. The equipment, including ro-botics, is of Spanish, French, and German manufacture. AeroComposite general di-rector Anatoly Gaydansky states that the plant is “the most modern of those that we have in Europe and, well, probably all

around the world.” The total investment amounted to 5.5 billion rubles (state funds, UAC, bank loans).

In fact, the company will include two plants: for manufacture of parts made of composites and for aggregate assembly. The first is a unique production of large parts of the wing from the carbon tape using vacu-um infusion. At the second production, the assembly one, which is currently mounted, components of the wing will be assembled (over a thousand), which are manufactured by AeroComposite-Ulyanovsk, Aviastar-SP, and in Kazan by KAPO-Composite (Aero-Composite second plant), and then the wing will be sent to Irkutsk, the place of MS-21 final assembly.

soon first in the world aircraft wings from composite materials will be made in ulyanovsk by infusion technology. in early 2015 aerocomposite-ulyanovsk will supply such a wing for the first prospective russian passenger liner Ms-21 to the irkut corporation .The “black wing”, constructed using infusion, will be the main innovation of the Ms-21, experts say. Ms-21 wings will be lighter and cheaper than their foreign counterparts, Boeing and airbus, as well as more aerodynamic, which in general will allow to save fuel.

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The enterprise official opening is scheduled for August-September of 2014, but as early as in April the plant started to produce full-size wing box longerons and center section panels. Production launch was preceded by a long series of tests of the caisson prototype made in Austria by the AeroComposite employees together with Austrian partners from Fischer Composit. For half a year at the Central Aerohydrodynamic Institute (TsAGI) 120,000 flight cycles have been accumulated, which is twice the wing flying resource.

According to Mr. Gaydansky, the plant will produce the first wing over the next nine months, next year it is planned to make a wing for the first flying aircraft, a wing for the airframe that will be sent to static tests, as well as a caisson for static tests. The company noted that in 2013 it received a “small profit, tens of million rubles,” and believes that “the access to self-sufficiency will occur within seven years.” Now the plant is designed to produce 24 sets of wings per year, but the company noted that with the expansion of the MS-21 production program the annual capacity can be increased to 70-100 sets. According to news agencies, today the total order book for MS-21 aircraft is for more than 270 liners, 175 of them are firm orders. One of the largest orders, for 50 vehicles, was made by the Aviacapital Service company for Aeroflot.

Meanwhile, Anatoly Gaydansky recog-nizes that the cost of the “black wing” is still higher than of the aluminum one due to the high cost of materials, but he notes that “with the increasing use of composites in aircraft construction their price will fall, and then the composite wing cost will get closer to that of the aluminum one.”

The plant is yet focused on performing of the MS-21 program, but “other projects are also being discussed,” including AeroCom-posite participation in building a promis-ing Russian-Chinese passenger wide-body long-haul aircraft of 2020 (memorandum on this aircraft creation was signed in May by UAC President Mikhail Pogosyan and chair-man of the board of the Chinese corporation COMAC Jin Tszanlun). “Most likely, we will be the major manufacturers of the wing,” suggested Anatoly Gaydansky.

trying to overtake the West It is worth noting that in the manu-

facture of composite materials (CM) two different technologies can be used. The world's leading aircraft manufacturers use autoclave technology, when material impregnated with a binder composition (prepreg) is polymerized in an autoclave under high pressure. But AeroComposite has decided to bet on the infusion method (without autoclave), when dry material is placed in a vacuum bag, put in the oven, where it is impregnated with a binder composition and solidifies.

Manufacture of composite details revers-es the usual notion of industrial produc-tion. No clanging of metal or buzz of ma-chines. In the “clean room” several dozen of people in white coats and booties work in silence. Even the terminology is differ-ent from traditional production. If items of metal are cast, machined, or stamped, the CM products are laid out. The process is largely robotic. The robot heats the carbon tape with laser and row after row, layer by layer puts it on the snap-on in the form of the future detail, presses it with a roller, and thus prepares the preform.

The carbon tape width is just 6.35 mil-limeters (the less the width, the more

possibilities for displaying details of com-plex configuration: with bends, thick-ness transitions). One wing takes several tons of tape. Then the preform is placed in a vacuum bag and sent to an oven where it is impregnated like a sponge with a binder, epoxy resin, and solidi-fies at high temperature. After that you only have to subject detail to machining and coloring. After coloring the product, which at first was of the black color of a carbon tape, rough to the touch, will not differ from a metal one, as durable and smooth as it is. Only lighter, thinner and sleeker, less prone to corrosion and fatigue loads. The most important stage of production, nondestructive testing procedure providing exception of defec-tive areas, is also robotized. “We write a program, set a detail, then a robot with interchangeable sensors moves and con-trols all the zones on the detail,” says chief technologist of AeroComposite-Ulyanovsk Alexei Ulyanov. According to him, AeroComposite-Ulyanovsk uses carbon tape of the American company Cytec, made out of high-strength carbon fiber which is produced in Japan. “80% of today's market of carbon fiber is in Japan. Boeing and Airbus are working on Japa-nese fiber,” explains Mr. Ulyanov, noting that AeroComposite in parallel solves the problem of import substitution with Russian scientific organizations, includ-ing the All-Russia research institute of aviation materials (VIAM).

According to VIAM deputy CEO Dmitry Kogan, the institute has developed ma-terials for the elements of MS-21 wing mechanization, and now it is the turn of materials for wing panels and center

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section. “A joint program with AeroCom-posite has been formed involving not only development of composition of the polymer binder and creation of the com-posite material itself, but also carrying out its qualification, climatic tests, as well as working off manufacturing tech-nologies of the wing constructions,” said Mr. Cogan. He estimates that in the next two or three years it is supposed to get off at construction and testing of large field samples of structures.

Alexei Ulyanov notes that “manufac-turing the wing power parts by vacuum infusion is not applied anywhere in the world,” and AeroComposite-Ulyanovsk is the first in this: “Of course, Boeing and Airbus have performed and are still performing all these experiments (with infusion), but given that they have mass production, they understand technological and commercial risks that they may have in case of transition to this or any other technology, and still prefer to remain on the traditional autoclave technology. We are now in more favorable terms, as we start from scratch.”

In AeroComposite they believe that the infusion method will take over in the future. First, it does not require expensive autoclaves. Secondly, by infusion they can produce a complex integral detail in one technological redistribution, it im-mediately comes out one-piece, without

seams and joints, and as a result it is lighter in weight. This makes it possible to make the wing longer, improving its aerodynamics, thus reducing fuel con-sumption. According to Irkut corporation estimates, specially designed MS-21 aero-dynamics in combination with wide use of composite materials and new engines can give fuel savings of 21-24%.

Airport branch agency head of analyti-cal service Oleg Panteleev believes that “the composite trend has the greatest prospects for employment and develop-

ment in Russian aircraft industry, and in the case of realization of the project to create a Russian-Chinese wide-body aircraft the plane will be designed with a composite wing which will be done in Ulyanovsk,” and the Ulyanovsk platform itself “will be an experimental one for implementing new technologies also.” He is confident that “as production of domestic materials is developed, and in large series production the black wing necessarily will become cheaper because its production is more high-tech. The potential of composites in terms of cost reduction is large enough, but it can be realized only when designers have fully mastered all the benefits that the use of composites provides for them,” said Mr. Panteleev. He has no fear that the infusion technology, used for the first time in load-bearing elements of the airframe, carries risks in terms of reliability. “If there are any problems that can compromise technology, they are far beyond the known to mankind. Other pitfalls that may be encountered on the pioneers' way are already tested and many times calculated, the technology itself has long ago been tested in other areas. Ultimately, the reliability will have to be confirmed by certification tests under both Russian and interna-tional requirements, where, of course, the new technology will be paid special attention,” said the expert. He believes that “the proportion of composites in aircraft will eventually grow, and Rus-sian companies will only strengthen their competencies, including for access to international markets.”

Proportion (by weight) of composite materials in aircraft of Russian and foreign production

Aircraft type production dateproportion of com-

posite materials notes

Boeing-747 1969 1%Boeing-757 1982 3%Boeing 767, Airbus A310 1982 5-6%Аn-124 Ruslan 1982 5%Airbus А380 2007 25%

Boeing-787 Dreamliner 2011 50%“Black Wing”. Reducing fuel

consumption by 20%

Airbus A-350 2014 52%“Black Wing”. Reducing fuel

consumption by 20% Тu-204SМ 2013 20%Sukhoi Superjet 100 2008 12%

МS-21Release of the

first aircraft was planned for 2016

35% “Black Wing”

Sukhoi Superjet NG (SSJ 130) Is being designed 25-50% “Black Wing”

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AeroComposite-Ulyanovsk specialists are within range of Spanish company MTorres` robot which spreads 24 carbon ribbons. The robot is designed for spars automatic layout and panels cladding

21open region

MiChael ZeMlyanov

no progress The subject of resuming serial produc-

tion of a unique air athlete An-124 Ruslan is always present on the pages of Open Region since its first issue (2009). The rea-sons are simple. Ruslan is the brightest business card of Russia and Ukraine in the global aviation market, in the world there is still no equal to its freight op-portunities, and is not expected. An-124 commercial trucking allows airlines of both Slavic countries to earn hundreds of million dollars of high-tech export earnings. Resumption of the aircraft production on Aviastar-SP in Ulyanovsk and of D-18T engines for it in Zaporozhye (Ukraine) with even minimum score of 40-50 boards would allow to load par-ticipating plants with orders at least for 15-20 years...

It seemed that a little bit more, and our attention to this topic would be rewarded. On December 17, last year the presidents of Russia and Ukraine, Vladimir Putin and Viktor Yanukovych, signed a series of key documents on economic cooperation, including inter-governmental agreement on measures of state support for resump-tion of An-124 production. However, the change of power which took place in the Ukraine after that, led to actual freeze of December arrangements. Moreover, the Ukrainian side declared a complete cessation of cooperation with Russia in

the military-industrial sphere, and the Russian side, in response, a course for import substitution.

the engine men are “for”“Cooperation of Russia and Ukraine is

immutable,” said Vyacheslav Boguslayev in April. He is the president of Motor Sich in Zaporozhye, which produces a huge number of engines for Russian aircraft and helicopters, including the D-18T for Ruslan. According to him, Motor Sich annually delivers to Russia about 400 engines, it is 40% of total output. In addition, most of the materials used by Ukrainian engine men are originally from Russia: not only metal, but also plastic, rubber, all composites.

Refusing to cooperate with Russia in this situation means to put a padlock on the gates of the factory with a turnover of $ 1 billion, tax deductions of $ 100 million, and 29 thousand employees, to harm the high-tech industry of the Ukraine.

The leading developer, Ukrainian aircraft engine design bureau, Zaporozhskoe engine building SE Ivchenko-Progress, adheres to a strong position of continuing cooperation. Responding to the questions from the Open Region, head of its scientific and technical information department Sergey Dmitriev said that the company has “about 500 busi-ness partners in Russia: research institutes, certification bodies, suppliers of materials and components, aircraft factories and air-lines. And we aim to continue constructive cooperation with them. Moreover, there

are many new plans. For example, we ac-tively cooperate with the UAC on creation of the 5th series of D-18T for Russia's new wide-body aircraft, with ASSAD — on all the engines of our development,” said Mr. Dmitriev. This year Ivchenko-Progress has refurbished five D-18T engines of the 3rd se-ries for the Volga-Dnepr airline (Ulyanovsk). The work on creation of this engine new modification, 3M series, with enhanced consumer properties, carried out in its own interests, is close to completion. The engine will have higher takeoff thrust, it will be more resistant to high ambient tempera-tures, which is critical when operating in tropical countries, it will give less noise and less emission of harmful substances. That will ensure Ruslan promising compliance with ICAO requirements. In addition, the 3M modification is equipped with electronic digital control system of FADEC type, and the engine s assigned resource reaches 50 thousand flight hours, which equals An-124 airframe s resource.

Airframe men do not objectHowever, aircraft manufacturers, associ-

ated with airframe of the Antonov aircraft family, also adhere to common sense. This is confirmed by the simple fact that the components for Ukrainian aircraft built in Russia (An-140 in Samara and An-148 in Voronezh), as well as parts for continued airworthiness of operated aircraft, are com-ing from Ukraine in accordance with the contracts. Although this is not easy to do:

ruslan hit the fog is it true that an-124 of new generation

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22 open regionAgenda

in April the new authorities of the country without explanation have dismissed Dmitry Kiva, head of the board of Antonov state company. He is still retaining his status as Antonov president and chief designer. The company team disagrees with it and con-ducts campaigns in defense of their leader, and test pilots of the famous design bureau even asked about this in an open letter to the Ukraine president Peter Poroshenko. Dmitry Kiva himself, answering questions of the Open Region, said: “The choice of the Euro-pean vector by the country does not mean the end of its cooperation with Russia. We would not want to interrupt a mechanism established for years of cooperation with Russian partners ... “

“Eurooptimizm” in the Ukraine is not limitless. New markets always mean fierce competition. By the way, the West did not

fail to remind Antonov about it. According to a correspondent of the transport strate-gies Center (Kiev, http://cfts.org.ua), during the Airbus Innovation Days conference in Toulouse the concern head Fabrice Brejo said: “Airbus concern does not advise the Antonov state company to compete with the military transport aircraft A400M through its transporter An-70 ... I think, Antonov will occupy its niche in certain segments, but, in my opinion, they should not try to compete with us ...” Everyone has his own interests.

though the market is “against”As you can see, all the sane men advo-

cate continuation of industrial-technical cooperation between Ukraine and Russia at $ 15 billion (the value of all contracts). The legal side of things is also on the side of the project to restore Ruslan serial production. Working in the commercial market, they are, as they say, out of politics, because they

have a civil, not a military status. “All ten of our Ruslans,” says Volga-Dnepr airline chief engineer Maxim Gerimovich, “have been certified to the standards of airworthiness for civil aircraft, and have got not the An-124 type certificate, but An-124-100, which are purely civil aircraft. Same story with the engines. Military engines are only D-18 and D-18T of the 1st series, and all engines used in Volga-Dnepr are of the third series. Their developer, Ivchenko-Progress, certi-fied them as civil engines.”

That is, there are no insurmountable technical or production obstacles to set-ting a series of new Ruslan, and even a certain innovative groundwork for this has also been established. In Antonov a glass cabin was developed for them, if needed Ivchenko-Progress is ready with necessary investments ($ 500 million) to bring to mind and to certify in five years a new D-18T of the 5th series with a maximum take-off thrust of 32 tons against the previous 23.4 tons. In Uly-anovsk Aviastar-SP, as the company CEO Sergey Dementiev confirmed to the Open Region, all technology and equipment have been reserved for serial production (not yet digital).

But today other edge problems arise. Pri-marily financial. Recall, for a long time it was clear that such a huge project (UAC es-timates the cost of production preparation at 20 billion rubles) cannot be done without governmental support. Russia and Ukraine for a long time could not agree about it, and that was why the project skidded in many ways. But in the deep economic crisis in the country that came after the political one there are no hopes for Ukraine's participa-tion in state support.

people want to fly more than loadsKey indicators of the Russian civil aviation development

indicators 2012 2013 1st half of 2014 2014/2013

Passanger transportations, mln people 74 84.6 41.4 110.6%Freight transportations, thou tons 988.4 1001 480.8 100.7

Rosaviatsia data

unique cargo transportation goes to reductionPerformance indicators of An-124-100 Russian operators, thou tons

Airlines 2012 г. 2013 г.January —

April 2014 г.2014/2013

Volga-Dnepr 66.5 53.8 11.8 59.2%Polyot 21.6 10.6 1.4 26.4%224th flight detachment 16.7 15.5 3.1 35%

Rosaviatsia data

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Apparently, today the legendary Ruslan goes by the wayside, giving place to new perk projects

23open region

Second serious blow to the project can be observed through the world decline in demand for air transportation of super-heavy and oversized cargo. The ones that are undivided patrimony of Ruslan. And the depth of the recession casts doubt on the whole concept of the project for resuming production of unique machines.

This project was developed in the pe-riod of rapid growth of demand for Rus-lan services . As a result, during the first decade of the new century the volume of its market grew from $ 200 million in 2001 to $ 1.1 billion in 2008 — more than five times. At those times, extrapolating current dynamics in the future, experts began to assert that by 2030 the tonnage of superheavy transport and oversized cargo on the planet will respectively reach 500-700 thousand tons, and the market volume will grow to $ 7.5 billion, which will require at least hundreds of new Rus-lans, for those that will be available at that time will be charged.

However, due to the global financial and economic crisis that burst in 2008, the Ruslan services market shrank to $ 807 million in 2013. While in 2008 Volga-Dnepr airline, the market leader, trans-ported 136.6 tons of goods, in the last year, according to Rosaviatsia data, only 53.8 thousand tons. And this year the pace of decline has gained a landslide general nature (see Table 2).

What follows from this? The collapsed market will not be able to generate profit necessary to purchase new Ruslans. Even flying with profitability of 10% (in the freight it is usually lower), such a market ($ 800 million) will require four years (!) to buy a single new Ruslan with the declared value of $ 300 million. This means that there yet will be no civilian customers for new generation aircraft. And even if Russia takes all of the funding, Ukrainian enterprises will not be allowed to ensure the military order today.

Alternatives Apparently, the project to resume Ruslan

production needs to be analyzed again, and with the open mind. What do we want from it? If the new Ruslan is needed to pro-tect the homeland, then the Commander-in-chief will decide everything. But if we want merchantability, then we can t go without rigorous calculations and busting alternatives.

First, how much more will the existing An-124 serve? It is well known that their assigned resource is set at 50 thousand flight hours, 10 thousand flights, and 45 calendar years. Of the entire Ruslan fleet the most intense flying are Volga-Dnepr ships, it owns the so-called leader (those

that flew more than others) planes of this brand. Specifically they are the Ruslans with tail numbers RA-82042 and RA-82045, built in 1991, that is those which have reached 26 thousand flight hours during 23 years of operation. But the period of high load on the aircraft, as shown above, is in the past. Accordingly, all Ruslans will be withdrawn, most likely, not for flight hours but because of the age, after 45 years since they were built. In this case the lion's share of military transport Ruslan aircraft will be decommissioned in 2030-2036, and com-mercial airlines' Ruslans — in 2036-2040. That is, we still have the time to prepare a replacement for them.

The idea to build airplanes of a smaller size, which is now examined in UAC, looks quite viable. That was what first deputy chairman of the Ulyanovsk government Vildan Zinnurov told the Open Region: “The fact is that 90% of loads transported by Rus-lans do not exceed 75 — 90 tons. It means that Ruslan has excessive load capability for them, and this is never economically efficient. And in case a 90 tons airplane is created, it will overtake these loads, thus freeing Ruslan from “light weight” work and allowing it to develop in the sector where it has no rivals, in the 90 — 150 tons niche. We plan to discuss this issue at the international air transport Forum.”

Agenda

reSumPTion iS needed. BuT wiTh whom?What might be further aviation cooperation between russian enterprises and se Antonov? What prospects does the designer of the aircraft see for resuming production of the An-124 ruslan, and is it possible? these questions of the open region are answered by Antonov president-chief designer dmitry Kiva:

Choosing European development vector by Ukraine, in principle, should not mean termination of its cooperation with Russia. After all, Russia is working perfectly with the EU countries. We would not want to interrupt the mechanism established over the years of cooperation with Russian partners, but it should be noted that it started to unravel even before the well-known events.

The need to resume normal production of Ruslan is shown by the market. This aircraft is still the leader in air transportation of oversize and outsize cargo. Often, as we know, this is the only vehicle capable to deliver the desired goods to their destination in necessary time. Ruslan is that rare product that has practically no worthy competitors in the world. One evidence of this is the demand for these aircraft in the framework of NATO and the EU SALIS program, which Antonov is implementing jointly with the Russian company Volga-Dnepr.

Conditions of the project were specified in the intergovernmental Ukrainian-Russian agreement on resumption of normal production of Ruslan, signed in early 2005. It should be done. Aviastar was chosen for final assembly of the aircraft. However the Ulyanovsk plant was occupied with the work on Il-76MD-90A and Tu-204 production, it has increased its share in the SSJ-100 project, there appeared plans to use it in the Il-112 program. Thus, the factory is downloaded with other projects, in our view, leaving no manufacturing capacity for the program of Ruslan mass production.

In today's world such an integral product as a plane is generally produced in broad international cooperation. It is primarily the market requirement. Especially if we are talking about Ruslan. Of course, understanding the importance of implementation of the project, we do everything possible, including negotiating with foreign partners to resume Ruslan production.

Photo by Pavel Shalagin

After the 2008 crisis air cargo market has gone sour, and the air giant often has to wait for work on the ground

24 open regionMeeting point

viCToria ChernySheva

Amendments on developmentThe reform of special economic zones

management structure, apparently, was a matter of time. Four-leveled management structure in which, for the moment, the RF Ministry of Economic Development, the parent structure — SEZ JSC, as well as regions and municipalities are involved, was very complicated and “clumsy”. As a result, the timing of projects was delayed. To cope with this problem and to increase

the responsibility of SEZ management companies for the work results, it was de-cided at the federal level to move the SEZ branches into subsidiaries and to convey their management to the subjects.

According to the head of the SEZ branch in the Ulyanovsk region Denis Barysh-nikov, it is assumed that this will happen already by the end of 2014. “The region will take over the management, but will not just get all the rights to make decisions for the project development, but also will be finan-cially responsible for achieving indicators

that will be fixed in the agreement with the Ministry of Economic Development,” said Mr. Baryshnikov. According to him, most likely, the shares of the subsidiary will be transferred to the region s trust management.

In addition, changes in legislation will also be made that will allow SEZ residents to work with fewer administrative procedures

This year should become another milestone in development of the ulyanovsk airport sEZ (special Economic Zone). in the near future, on the initiative of the federal center and the regions, reforming the sEZ governance structure will be held. and closer to autumn, after the state duma makes amendments to the legislation which governs the work of federal special economic zones, construction of the second line of sEZ will begin in ulyanovsk. Both zone residents and management expect that development of the area should finally go on with the pace scheduled on the stage of the idea.

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25open regionMeeting point

(and hence to save certain funds). “Unfortu-nately, the law on SEZ was redrawn many times: first when the Customs Union was organized, then when Russia entered WTO, which led to worsening of some conditions for residents. We made several suggestions for its improvement. Among the main ini-tiatives related to SEZ aviation specializa-tion was freeing port zones residents from paying customs duties ensuring, enabling the temporary export of goods placed in customs-free zone procedure. We hope that in the near future at least some of the proposals will be adopted,” said Mikhail Vinogradov, the AAR Rus executive director (SEZ resident company).

The amendments, which are prepared for submission to the State Duma, also sug-gest removal of restrictions on the activities permitted in special economic zones. “Due to this we can attract residents who are also engaged in technical innovation and industrial production activities,” said Mr. Baryshnikov. “This will seriously expand the list of companies that will want to work with us. Thus, if the PSEZ first start-up complex was meant mostly for aviation activities, the second one will accommo-date companies near to aviation, involved in, say, generation of cargo traffic, as well as other businesses.”

“Correct” businessStrategy for formation of the airport

zone development concept in four and a half years (since the signing of the Rus-sian Federation Government Decree on the establishment of PSEZ) has changed sig-nificantly. And it's not only the Ulyanovsk, but a common federal trend. “According to our experience, in order to attract residents successfully we need not only to invest in capacity development and creation of tools to increase the investment attractiveness of the region. We have progressed greatly in this way, and we cannot stop there. Today tax benefits are no longer so im-portant. The next step is investing money in infrastructure, as well as providing civil law guarantees to observe terms and prices of connection to networks and so on, regardless of circumstances. The investor should be spared from functions unusual for him,” said the executive director of the Association of industrial parks of Russia Denis Zhuravsky.

“Indeed, today investors are beginning to appreciate not only the tax benefits, free or cheap connection to the network

and infrastructure, and low cost of land. There are SEZs in different regions, and in principle aircraft component manufac-turing can be placed everywhere where there are appropriate conditions: Tatar-stan, Samara region, Lipetsk. We can differ from competitors, only forming special environment for business in the zone,” said Mr. Baryshnikov. This, above all, is the release of residents from unnecessary burdens: providing the maximum number of services (accounting, legal services, recruitment services, and so on) that will be given to outsourcing.

In addition, in the territory of the Uly-anovsk SEZ “microaviation clusters” are already being created when one investor is either a supplier or buyer of products of another investor. “In this case the added value chains are formed, residents save time they would otherwise have spent on building links with contractors. Air-craft production cycle is reduced, quality increases, logistics wins seriously. Thus, our task is “to land” the “right” kinds of business in the zone, so that they would not compete to each other, but cooperate,” said Mr. Baryshnikov.

One of such business cases will be “MRO supermarket”. The first PSEZ resident, AAR Rus company, is currently completing a warehouse terminal construction. The second phase of the project is construc-tion of a hangar complex (it already has a conceptual design). As Mr. Vinogradov explained, a 40 meters high building will consist of two identical sections, each of them will be able to accommodate any of the world's aircraft, including the Airbus A380, An-124 Ruslan, Boeing-747 and 777. “In the most optimistic case we will be

able to start preparatory work on the site of the hangar complex in late summer — early autumn, but maybe it will have to be postponed for spring of next year. In any case, we plan to put the hangar complex into operation at the beginning of 2016,” said the executive director of AAR Rus.

The company considers the storage ter-minal and hangar complex to be the basis for future business development. In future the terminal will become a hub for delivery of various commodities and goods to Rus-sia (not just aviation ones). It will facilitate

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August 2013 was the start of PSEZ construction. Manager of SEZ Ulyanovsk branch Denis Baryshnikov (center): “The task is to “land” the right kinds of business on the zone territory, so they would not compete, but cooperate with each other”

referenceThe airport special economic zone in Uly-anovsk was created by RF Government Decree of 30.12.2009 № 1163.

The PSEZ first turn has an area of 120 hec-tares, the second — up to 640 hectares.

Six companies currently have got the status of zone residents:

— Vityaz Aircraft Factory — production and maintenance of DHC-6 Twin Otter airplanes;

— Volga-Dnepr Technics Ulyanovsk — wide-body aircraft and ramp MRO;

— FL Technics Ulyanovsk — single-aisle aircraft MRO;

— AAR Rus — logistics center and Western aircraft MRO;

— InterAvionika — production and MRO of aircraft instruments;

— Promteh Ulyanovsk — manufacture of aircraft electrical cables.

The total volume of investments declared by residents makes 6.7 billion rubles.

26 open region

decentralization of supplies ongoing now through Moscow. And the hangar complex under construction for MRO can also be used for other works: engine maintenance, repair and manufacture of components, modification and conversion of aircraft, not only Western but also new Russian. “Accommodation of the zone in the center of Ulyanovsk aviation cluster gives ad-ditional benefits. We are seeing strong interest from a number of leading Russian, European, and Chinese companies,” said Mr. Vinogradov.

AAR Rus hangar will be the first “brick” in the future “MRO supermarket”. Another PSEZ resident, Volga-Dnepr airline, also intends to provide such services. It has been negotiating with AAR Rus to lease part of hangar complex for their own needs. However, as it was noted in the airline, so far no decision has been made. For a variety of reasons (including the unstable financial situation) the resident is not in a hurry to begin implementing its own project. Most likely, Volga-Dnepr will finally set a date after the zone will actually begin to work. In addition, another PSEZ resident intends to get engaged in single-aisle aircraft MRO, FL Technics Ulyanovsk company.

“We want to concentrate here all the business processes that exist in the life cycle of the aircraft, from pre-sales to dis-posal, for all types of aircraft. Such a plat-form will become more attractive not only for operators who themselves are within business processes, but also for customers. In fact, an aircraft flown here will be sub-jected to a maximum number of operations in a short time. This is the same as to come to the supermarket and quickly acquire all the necessary goods, and not to ride to specialty stores throughout the city,” said Mr. Baryshnikov.

Thus, in his opinion, the main factors of PSEZ attraction are no longer tax breaks or investment in infrastructure, but business environment itself, which is formed at the site. “In Russia there is virtually no such thing anywhere else: we win due to organi-zational approach to selection of investors, rather than by spending money, creating unique products,” said the PSEZ head.

everyone goes to the parkAnother promising vector for developing

the airport zone is an industrial park, to be built. Its price has not been determined; it is assumed that the area of the park will be about 14.5 thousand square meters (10,000 of them for production). Premises planned to be built are designed for the second wave of investors (eg, aircraft components manufacturers), which, unlike the anchor residents, do not demand unique infra-structure and use universal production fa-cilities. Mr. Baryshnikov added: “As a rule,

these are the so-called “companies of light assets” having competence, knowledge, technology, and equipment within them-selves. Typically, they are located on leased sites, quickly deploy their production, and, if necessary, fold it also quickly.”

“Today in our short list there are about 12 of such companies,” said the PSEZ head. “The number of potential residents who are ready to come to the area under lease is much more than of those who want to expand their own construction. From par-ticipants in the first pool we have received the parameters of the room they need, have formed a versatile industrial module that meets the requirements of most customers. This year we plan to design an industrial park, to begin to build it in the spring next year, and to put it into operation at the beginning of 2016.”

“The right of the first night” in the park will be provided to aviation business, and only then to the rest, for example, to manu-facturers of automotive parts for foreign brands, to companies carrying out ope-rations on fine-tuning and debugging a wide range of products, primarily from Southeast Asia: warehousing, packing and unpacking, fault detection of pro ducts before releasing them to the Russian do-mestic market.

It is planned to build the first part of the industrial park with public funds, but further to attract bank loans. It is promised that the lease terms will be most favora-ble, at a cost slightly lower than average (though residents of the industrial park will be subject to all the PSEZ benefits). Plus, it is expected to provide the maximum amount of services: general administrative

services concerning the use of buildings and so on, so that investors could focus on the unique competencies that make up their business.

Housing against the personnel shortage

Increased competition from other SEZs contributed to the birth of yet another interesting project, the township of inves-tors. Its main objective is to consolidate qualified professionals in the region. “The quality of labor force in the next five years will be a key factor in competitiveness of investment market,” said Mr. Barysh-nikov. “We are already helping second-ary educational institutions to develop specialties, for which there is a demand, such as aviation technicians. The second way is to attract professionals from other regions and countries. To this end, together with the Ulyanovsk Region Development Corporation, on 150 hectares of land near the Arkhangelskoye village we will build a cottage village.”

A similar project called “Alabuga — Three bears” is already implemented in Tatarstan. A comprehensive development without “cubbyholes” — fenced plots and assorted buildings. Such projects in ge-neral architectural style are rather typical for Europe. It is assumed that it will be a self-sustaining project: half the land will be given or sold to residents, and the rest will be sold on the open market. At the same time the cost per square meter in the cottages will not exceed the price of accommodation in the blocks of flats of the neighborhood microdistrict of aircraft manufacturers.

Meeting point

the first pseZ start-up complex with residents' areas

— plot for Vityaz aviation plant occupancy— plot for FL Technics Ulyanovsk occupancy— plot for AAR Rus occupancy— plot for InterAvionics occupancy— plot for PROMTEH- Ulyanovsk occupancy— plot for hangar complex occupancy— plot for industrial park occupancy— plot for industrial park development

27open regionPriorities

It is known that industrial parks, ready platforms with appropriate infrastructure for doing business, are one of the most promising direc-tions in development of investment attractiveness of regions. According to experts, “creation of industrial parks with detailed description of specifics and performance is the most effective way to attract foreign investors,” and “for investors in strange Russia they are a more friendly product that also exists in other countries.” That is why development of industrial parks and industrial zones is one of the priority areas of investment activity in the region. The work which began in 2008 is now yielding results. Industrial zones being formed now are gradually moving to the status of full-fledged industrial parks, and the Ulyanovsk region becomes one of the leaders in creation of development areas.

ZavolZhye indUstrial park One of the first certified industrial parks in Russia. Greenfield. Provided with all necessary engineering and transport infra-

structure. Residents: EFES, MARS, TAKATA, nanocenter, Bridgestone, Nemak, Schaeffler, DMG Mori Seiki, Jokey, Hermle, CCA Engineering, Narodny plastic, Molvest.

Management Company of region industrial parks (subsidiary of Ulyanovsk Region Development Corporation) provides support for residents from August 1, 2013.

dega park “Ulyanovsk” Greenfield. The region's first private industrial DEGA park “Ulyanovsk” under

control of the Swiss company DEGA Group is formed in Karlinskaya industrial zone. Area: 300 hectares. Manufacturing, retail, logistics, business construction, development, data-center. Implementation: 2014-2015.

The plot is adjacent to the federal A151 highway Ulyanovsk-Tsivilsk, 1 km from the road junction to Moscow, Samara, Syzran, Nizhny

Novgorod, Cheboksary. On the northern border of the park there is a railway line.

Due to location in the city of Ulyanovsk the park is staffed.

novoUlyanovsk indUstrial Zone Greenfield. 10 km from the city of Ulyanovsk. In the immediate vicinity

of the city of Novoulyanovsk.Distance to federal highways — 1 km, to airport — 15 km, to

river port — 3 km.Residents: logistics center Globus; Technonikol corporation

— production of extruded polystyrene; glass wool production plant.

novospasskaya indUstrial Zone Ulyanovsk region, settlement Novospasskoye, 840 to 847 km from

highway M5-Ural. Greenfield. Leading direction is building materials industry. Residents:

Starately — production of dry construction mixtures.

UaZ indUstrial park Brownfield. Industrial buildings with all necessary infrastructure, storage

and office space, favorable logistics position of the platform.

daaZ indUstrial park (dimitrovgrad) Brownfield. Industrial buildings with all necessary infrastructure, storage

and office space, favorable logistics position of the platform.

investors implementing particularly significant projects in the ulyanovsk region are provided with 15-year tax holiday, allowing to save from 30% to 40% of all costs.

AN UNDERSTANDABLE PRODUCT IS MORE ATTRACTIVE

investment areas of the ulyanovsk region

Airport

Passanger river port

Commercial river port

Federal highway

Railway

ulYAnovsKnovoulyanovsk

dimitrovgrad

Karlinskaya industrial zone. 350 ha area.

novoulyanovsk industrial zone. 150 ha area.

novospasskoye industrial zone. 300 ha area.

industrial park on the ulyanovsk automobile plant uAZ base. Free area is 50,000 sq.m.

Zavolzhye industrial zone (industrial park). 706 ha area.

industrial park on the dimitrovgad auto units plant dAAZ base. Free area is 70.000 sq.m.

28 open regionConcept

lyubov Chilikova

EY has signed an agreement with the Ulyanovsk Region Development Cor-poration (URDC) at the EXPO REAL in-ternational exhibition for commercial property and investment, held in October 2013 in Munich.

The authorities have allocated 9 hec-tares of land near the microdistrict of aircraft manufacturers for the smart city. “This will be our own Wall Street, a high-level financial and business center on the basis of international achievements in the field of urban development,” said

the regional governor Sergei Morozov. According to him, smart city will include an innovation center, a center of infor-mation communications, engineering, sports, social, and cultural infrastructure facilities.

“Given investors' demand for office space, quality housing, hotels, and social facilities, we are developing a project of the so-called smart city, where all necessary conditions for development of innovative, high-tech businesses and for implementation of social innovations will be created,” said chairman of the URDC board Dmitry Ryabov.

It is assumed that the project will be financed through private investment. The total volume of investment required is not yet called even approximately. Ac-cording to the Corporation first deputy CEO Igor Ryabikov, investors will be selected separately for each object, and the Corporation itself will be the project integrator. “Potential investors interested in participating are already available, but specific interested parties will be deter-

new smart city microdistrict with skyscrapers, upscale offices, modern infrastructure, like Moscow city which is under construction in the capital, only on a smaller scale, may appear in future in Zavolzhsky district of ulyanovsk. Ernst&young company (Ey) develops and promises to present the concept and financial model of this social and business center this year.

investors will be offered a smart city

The Ulyanovsk smart city, according to the project initiators, is somewhat similar to the Moscow City project, only a bit more modest and small

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mined only after the complete concept of smart city is ready,” said Mr. Ryabikov.

First the Ulyanovsk region presented the idea of smart city in March 2013 at the International real estate exhibition MI-PIM 2013. “Developers praised the project as a very real for the region, given the increase in investment,” as they noted in URDC (for 10 years the amount of di-rect investment increased more than 11 times, from 6.9 billion rubles in 2003 to 76.2 billion in 2013).

What is a smart city? Is it new materials and technologies used in construction of buildings? Or is it a place where smart peo-ple, scientists, live? By definition of Ernst & Young, smart city is a territory where “new information and communication technologies are introduced to improve the quality of social and business services in different sectors and to create an intel-ligent digital “nervous system” that runs through the city and control all processes.” It is assumed that the smart city urban brain, computer, will control traffic, light-ing, water supply, waste disposal, and so on. As a result buildings will be operated more effectively, resources used economi-cally, efficiently, with the mind in a literal sense. Availability of services will increase. In such a city it will be comfortable both for residents and for businesses.

Note that Ulyanovsk is not the first to attempt to develop the idea of a smart city. In different versions such concepts are being developed in Samara, Kazan, Nizhny Novgorod, and some other regions. But if other regions rely on ecology, com-munication, and energy efficiency for residential neighborhoods, in Ulyanovsk they believe that all of these benefits and high standards are required exactly for a business center.

According to the URDC plan, the smart city project is needed in Ulyanovsk to at-tract smart businesses. As Igor Ryabikov explained to the Open Region, the lion's share of corporation work is to engage in-dustrial business in the region and to help investors coming into agriculture, “but the authorities would also like to bring smart businesses to the region: operating offices of banks, IT companies , pharmaceutical companies, research organizations, 90% of which are now placed in Moscow. At such companies there are high demands for offices. Essentially smart city will be an office quarter, the same as Moscow City, only smaller (Moscow-City is built on an area of 100 hectares). It can include also an educational part, and a sporting one, but most important are “smart” offices,” said Mr. Ryabikov. He is convinced that involve-

ment of intelligent business in the region would be beneficial for culture of the city in general, will give impetus to the develop-ment of universities. In addition, smart city itself will decorate the city as it will change its architectural silhouette in its left bank part (currently the only skyscraper in Uly-anovsk is a 23-storey hotel Venets, built in the 70s of the last century).

However, according to Alexey Mogila, head of the Russian representation of Ross-mils investment company that works in the field of real estate, for the region with a small budget, which is the Ulyanovsk region, the project of a smart city is rather risky, because “it has great chances to turn into protracted, and if you are able to quick-ly build it, you may have trouble finding te-nants of office space. Rent in tall buildings cannot be cheap, as the cost of construction per square meter in a skyscraper is two or three times more than in a conventional building. This is another foundation, an-other concrete, metal constructions, and all utilities quality. In a high-rise building the area of glazing, ventilation systems, fire fighting, high-speed elevators, under-ground parking — everything is different, and service of a high-rise is expensive, too. For example, special fire equipment must be provided there, which is currently not at hand in Ulyanovsk.” According to Mr. Mogila, even Moscow City is unlikely to have economic effect soon. “Moscow City is more a political project than a commercial one,” said the expert, noting that a smart city project is also being implemented now

in the neighboring Kazan, but Tatarstan has another economic situation since the republic receives great support from the federal government.

Ulyanovsk nanocenter proposed Ernst & Young its own version of the concept, a low-rise residential community for scientists, engineers, researchers, who will soon be coming to the region when new enterprises are opened in Zavolzhye industrial zone and airport special economic zone (according to the experts, about 10 thousand highly paid Russian and foreign experts can come and live in Ulyanovsk). According to na-nocenter CEO Andrey Redkin, this micro-district should have comfortable modern housing, kindergartens and schools with English-speaking teachers. It is also impor-tant that the coming specialists will live together and socialize. “In order to attract top managers the region can make if not a golden, then at least a silver bridge,” said Mr. Redkin.

But Corporation insists that smart city should be just a business center. “Housing is a sector on which developers react quickly. For it we have the least fear,” said Mr. Rya-bikov. According to him, now a settlement for investors is being drafted.

EY company will give the final answer, what the Ulyanovsk smart city will con-sist of. It has not disclosed the details yet, explaining that the concept was still in development. There we were only informed that “in any case the project will be indi-vidual, with features of the Ulyanovsk city terrain, economy, and culture.”

Even future concept creators cannot yet say exactly how smart city will look

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vikToria ChernyShova

to gather into the fistNobody doubts that all the components to ensure produc-

tion and life cycle of transport aviation should be centralized in Ulyanovsk. In the regional government they state that here the foundation is situated, the Aviastar-SP aircraft factory which is implementing the largest order in the history of domestic aircraft for production of heavy transport planes. The competencies in the transport aircraft construction are supported by educational institutions that train aircraft manufacturers, as well as civil aviation pilots, technicians, and other specialists. At the terri-tory of the international airport, capable of receiving any type of aircraft, the country's only special economic zone of airport type has been formed.

“We want to bring together all the resources into a single fist, we analyze the range of possible participants: it can be quite ex-tensive, as well as their geography,” said the first deputy chairman of the Ulyanovsk region government Vildan Zinnurov.

The final decision on the choice of the legal form of future Center should be taken by the end of the year. At the same time the issue of funding will be solved. “We expect to receive federal support after the projects are formed. Having proved their use-fulness, we will send them to the Ministry of Industry. And the preparatory stage is the responsibility of the Ulyanovsk region

government and the UAC,” said Mr. Zinnurov. “But then all the resources, including federal, should be allocated to development of the Center. The task of the region will be to provide support for the project: to provide staff housing, to create necessary in-frastructure and a development zone.”

The Center management company (MC) will most likely consist maximum of 10 people and be located in the same office. “There is no need to build a 20-storey building and populating it with aviation officials. It will be a company of light assets, where projects will be generated,” says the first deputy chairman. “The MC main task is to understand what is needed for whom, what strings to pull, where to change legislation, where to allocate financial resources. Most importantly, all links in the chain must work according to the rules which are adopted by business in the first place. I do not think we will be able to realize successful aviation projects only at the cost of budget investment for a long time. Prospects will appear only when there is a commercial interest.”

promising outsourcing The regional authorities put two aspects into the basis of the

transport aircraft construction Center ideology. The message for manufacturers is that in the Ulyanovsk region Russia s best conditions to grow their businesses will be created. For the fe-deral government it is that the region will be the most competent platform in all respects that will bring together final assembly of aircraft, aircraft components production, and stuff. “It will be a platform where we will be the best in a particular segment of aviation industry. Thus, there we could “land” any project relating to air transport, which should be implemented with high quality, but with minimal cost,” said Mr. Zinnurov.

The next step in the Center formation will be approaching everything, connected with creation of aircraft, to Ulyanovsk: aircraft parts manufacturers, final assemblers, design offices. “I would like to work seriously with the airlines on the issue of pilot training so that we did not hire foreign commanders, but they would be ours, and ideal variant — trained in the Ulyanovsk high

By the end of 2014 ulyanovsk authorities together with the uac have to determine the legal status of the future centre of russian transport aircraft construction. agreement on its establishment was signed by the governor sergei Morozov and the uac head Mikhail pogosyan at Maks-2013. initiators of the idea said that the main purpose of creating the center was organization of an effectively working platform in the region, which would unite many different structures of competence, and that should directly affect the quality and global competitiveness of russian transport aircraft.

Сentripetal force

Time has come to join forces

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31open region

school of civil aviation,” said Vildan Zinnurov. “We also intend to approximate everything related to materials science: we have got Aerocomposite, VIAM branch, where you can carry out any tests and apply technologies of metal processing. We must use the fact that the region has machine-tool plants, Gildemeister and Hermle enterprises are being built, in order to make machining for aerospace industry the most efficient.”

Today it is very difficult to move the aviation industry forward: on one scale there are serious demands for materials, technolo-gies, certification, on the other there is virtual absence of mass production. Mr. Zinnurov is sure that investors will not invest into business that has no guarantees. It will be interesting for them only after the release of the series. But there are also universal things, for example, a number of positions in avion-ics, ground equipment, which can be outsourced. At last year's conference of IL-76 providers Aviastar-SP CEO Sergey Dementiev noted that “in order to reduce the cost of the new Il-76MD-90A and to improve quality of the final product the aircraft factory is ready to transfer part of works on manufacturing units and components to outsourcing and to increase the existing supplier base significantly.”

The more orders Aviastar will get, the wider will be its product line, the stronger will be the need to outsource some

work. Today it is difficult to imagine a plant which employs 50,000 people: we need to involve small and medium busi-nesses,” said Mr. Zinnurov.

A question of priorities In the framework of creating the Center they also talk about

reformatting design bureaus work. Today in Ulyanovsk five branches of the leading design bureaus are opened, but they have different technology platforms and approaches to design. And creation of a new, full-fledged design office will take at least six years of hard work.

The problem of introducing uniform standards both for de-signers and manufacturers and for educational institutions is rather sharp today. Efficiency is reducing: because of the different design bases the design bureaus cannot quickly read draughts, and their transmission to other specialists is a painful lesson. To reduce costs we need unified, modern facilities, which can also be created within the Center.

First steps in this direction have already been made. Thus, the UAC and the Aircraft equipment holding, belonging to the Ros-teh state corporation, began to work together in order to build a unified system of design and storage of current products data on the Siemens PLM Software platform. In future the Teamcenter system will help to reduce time for development and introduction of various assemblies' manufacturing.

According to the Infomost consulting CEO Boris Rybak, the prospects of the Russian transport aircraft engineering Center will depend on the UAC position: “The Center is already more cre-ated than is yet being created, though it is still in its infancy. It is definitely needed because transport aircraft is where we have retained competence in production and operation. The UAC policy will play the decisive role: if development of the transport group gets a priority, then there is a chance. Yet it has got a respect-able fifth place. Head of the Ilyushin aviation complex Viktor Livanov was a major lobbyist for the topic, after his death we need someone who would grow up to his level. I hope that this man will appear.”

In opinion of mister Rybak, “all the prerequisites for the Center are set up, and are very serious. Organization of defense order on Aviastar is a colossal thing, but it is not sufficient to ensure that the process will be irreversible. This requires one more “live” program, another transport aircraft,” said the expert.

Trends

First deputy premier of the Ulyanovsk regional government intends to collect all resourses and possibilities “into a single fist”

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After the first period the rules are changed

According to the RF Ministry of Trans-portation, 8.5 million passengers were transported on regional routes in 2013 (between the subjects of the Russian Federation, as well as within them, ex-cept Moscow). Thus, while the growth in this segment of air traffic since 2000 has amounted to no more than 3-4% a year, in the last year this figure rose to 15%, as they say in the Ministry. Implementation of the subsidy programs for regional air transport

has largely contributed to the growth in passenger traffic in 2013. This was imple-mented in the Volga Federal District as a pilot project. According to the Federal Agency of air transport Rosaviatsiya, 91.7 thousand people have used regional air services in this district last year, which is more than twice the total number of pas-sengers transported between the district regions in 2012 (41.6 thousand people).

The Ak Bars Aero airline, major opera-tor in the project development of regional transportation in the Volga Federal District, considers the start of the program to be successful, although difficult. “Essentially

we act as pioneers,” said Ak Bars Aero com-mercial director Felix Kozlov. “People have lost the desire to actively use the flights for personal and business purposes, they are not ready to go, say, from Ulyanovsk to Ufa and Saratov not by car but by plane. The routes should be bumped, “rolled”, and it is not easy. It is difficult to guess the need for some or other flights, especially since it is constantly changing.”

flying at half price and reality potential passengers were signalled

The attempts to revive regional air flights through sponsorship and lease payments have not yet led to a marked recovery in passenger traffic in this area. The number of flights has increased, but they are mostly run by small capacity aircraft, and that does not allow directions to become profitable. carriers are set before the task to teach people to fly again, but it takes time and additional support from the authorities.

In Ak Bars Aero aircompany they believe that eventually regional transportations will be in high demand, and it will become possible to move to more spacious aircraft

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However, according to Mr. Kozlov, the first experience has shown that the mecha-nism for subsidizing the number of pas-sengers is flawed: at first the occupancy of the aircraft was very low, and as a result part of flights had to be canceled, but the losses from those that were fulfilled have exceeded all reasonable limits. From 1 Janu-ary, 2014 the rules for granting subsidies from the federal budget to air transport or-ganizations have changed. While last year co-financing from the regional and federal budgets was produced on an equal footing (50% to 50%), the next three years (2014-2016) 60 percent of the costs will be taken by the federal budget (620 million rubles), and 40 per cent — by regional budgets (412 million rubles). Nevertheless, in the Volga Federal District embassy they believe that the air transportation development project has succeeded. “For us, it is imperative that the program has been approved for three years, that is, it is a signal to airlines, a signal to the market that airplanes can be bought, that they can train pilots and plan their activities on a long term basis. This is also a signal for potential passengers that the program will not finish, that people liked the program, and it delivers convenience and comfort. This is not a one-off event,” that is how the press office quoted the presidential envoy in the Volga Federal District Mikhail Babich.

subsidies after subsidies Aviation Explorer expert Alexander

Kanischev considers that development of regional air transportation using state sub-sidies is deadlock, noting that “it is the way to stimulate tactical demand growth in the early stages of the project, but as the project progresses and traffic growth, subsidies amount will only increase, so it is more expedient to invest in capital-intensive facilities, in means of production, and es-pecially in aircraft. Also it is possible to talk about the profitability of interregional flights only when aircraft with a capacity of not less than 70 seats are being operated and only when the occupancy of at least 75 percent of seats is provided, and with ad-

ditional measures of state support in the form of removal of customs duties on foreign aircraft, of value-added tax, with airport fees subsidized by 50 percent. How much do we need to “roll out” the current routes in order to ensure such a passenger traffic? And, most important, where to take such a number of regional planes?” the expert asked.

However, Felix Kozlov is more opti-mistic. According to him, the average oc-cupancy of Ak Bars Aero on regional routes flights in the Volga Federal District is 77%, and in the near future on some flights, for example, Kazan — Samara, Kazan — Perm the airline plans to replace 9-seater Cessna with 50-seater CRJ200.

But the deputy minister of construction, transport, housing and utilities of the Uly-anovsk region Andrey Tyurin recognizes that today even those small planes that fly cannot be filled: maximum occupancy of seats on flights from Ulyanovsk is 50%. “Two or three years — this is the minimum period for which formation of regional air routes will go on. And here it is important to keep government subsidies to support the airlines, on the one hand, and on the other — to gain the confidence of passengers, to

form a strong demand for air travel. Then we can talk about moving to more spacious planes and entering the breakeven,” said the deputy minister.

Meanwhile the results of the first year of the project have also identified another number of shortcomings. Thus, apparently the routes have been chosen not on the ba-sis of in-depth analysis of passenger traffic and the existing human and business inter-ests, of the availability of alternative modes of transport. For instance, Ulyanovsk is connected with Ufa by several rail routes with travel time of about 13 hours (on the Ulyanovsk-Ufa flights access occupancy does not exceed 20%), while there is no direct rail link with Nizhny Novgorod.

Another distinct disadvantage was poor information provision: many passengers are not even aware of the existence of such flights, and on the search engines and spe-cialized sites selling tickets these flights are not identified, e-ticketing is impossible. “One of our main objectives is to elimi-nate the gap in information support of the project, to inform passengers about flights, as well as to increase the effectiveness of e-sales,” recognized Mr. Kozlov.

Experience

Experts assure that it is possible to speak about cost-effectiveness of regional transportations only when operating aircraft with capacity of no less than 70 seats

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role of aviation in rF transport system structure of transportation on rF domestic airlinespassangers transported

%Average distance of transportation,

kmTransportation on mainline aircraft

30,454,883 86.00 2,188

Transportation on regional aircraft (20–83 seats)

4,491,565 12.68 1,036

Transportation on aircraft for local airlines

452,930 1.28 289

Business aviation 13,911 0.04 876Total of domestic airlines

35,413,289 100 2,017

State research institute of civil aviation data, 2012

Air transport

Distance traffic railway transport

Year

pass

ange

r tu

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billio

n pa

ssan

gers

/km

34

they do not acceptGeneral director of Aurora airline Konstan-

tin Suhorebrik considers shortage of aircraft to be major deterrent for the development of regional air transport. “In recent years we have stopped operation of An-24 and Yak-40, continuing to fly Q-300, and there is a great need for Q-400,” he said. “When we purchase this aircraft we carry additional 20% of the cost of import customs duties, that is up to $ 5 million for each machine (depending on the production year), which constitute additional financial burden on the airline. Moreover, the action of the state program subsidizing lease payments (resolution number 1212) is focused just on the small capacity ships' customer support. It turns out that the state gives with one hand and takes away with the other (with customs duties).”

Meanwhile the RF Industry and Trade Mi-nistry insists on retaining customs duties on aircraft of 50 or more seats capacity, hoping in a relatively short time to develop an assembly of regional jets in Russia. This, in particular, comes to placement of a plant for production of Bombardier Q-400 aircraft in the special economic zone of the Ulyanovsk-Vostochny airport. Implementation of the project, how-ever, could be derailed in case Canada intro-duces economic sanctions on Russia.

In limbo is the problem of value — added tax, the abolition of which would reduce the financial burden and improve the economy per seat-kilometer for inland transport,

experts say. According to deputy transport minister Valery Okulov, the Russian govern-ment financial and economic unit s position is unambiguous: the airlines will not receive the approval of zero value — added tax if they do not offer a mechanism for compensating the lost revenues. According to Felix Kozlov, another significant problem is the situa-tion with the airport charges, their share reaches 20 percent or more in the cost of tickets. “The situation differs greatly in the regions. Somewhere, like in Ulyanovsk and Cheboksary, airport taxes were abolished for the duration of the project, somewhere discounts from 20 to 80 percent were pro-vided, but somewhere there is nothing of this,” the interlocutor said.

Very strange situations arise. For exam-ple, coming to Magnitogorsk, for which the development of regional routes is profitable, Ak Bars Aero has got absolutely no support from the local airport, while when opening flights to Munich, for which a small airline coming from Russia, it would seem, should not be of particular interest, the airline has received the whole program of targeted sup-port, including a huge list of free services, newsletter to 3000 agencies working with the airport, and a lot more.

the nodes will tieAndrey Tyurin considers it necessary

to expand the route network within subsi-dizing air transportation. “The Ulyanovsk

people want to fly not only within the Volga Federal District,” he said. “In early June we were able to get into the pro-gram with the Ulyanovsk — Simferopol route. Workload of seats (flights are per-formed by RusLine company on CRJ-200) for departures from Ulyanovsk is 100% (from Simferopol — 50-75%), with discount tickets (worth 3940 rubles) snapped for flights until September. Also in demand are flights to Yekaterinburg. Currently we are negotiating with several airlines about opening regular flights to St. Petersburg.” Mr. Kanischev believes that as the project develops, if the growth of effective demand is provided, in the national network there can be found 4 -7 trunk and 7-12 regional nodal points — hubs (airports which carry out concentration and redistribution of passenger traffic). At the same time, in his opinion, in Russia it would be appro-priate to apply the experience of the US and Europe, where regional airlines may receive subsidies from the major trunk carriers, as well as serve as feeder carriers, driving passengers to flights of mainline airlines. Head of analytical services agency Airport Oleg Panteleev considers such a mechanism to be an effective measure to support local carriers, but recognizes that at first the regions need “a haircut”: to tidy their budgets, to upgrade fleet, to improve service, “otherwise major airlines just will not want to contact with them.”

Average price of passanger per km: examples

the need for subsidies and cost of regional transportation sales

Ak B

ars A

ero

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Trunk domestic air routes

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Average tariff rubles / passenger

Regional domestic air routes

Local domestic air routes

Lav.

2.5 5.07

35.04

35open region

viCToria ChernySheva

the market started movingThe desire to create a helicopter center in the Ulyanovsk re-

gion has appeared in the regional government long ago. “We are engaged not just in extension of aviation assembly enterprises and educational institutions, but also in involvement of different companies offering different ways of airspace development, and we see that the helicopters are the missing link of the full-scale air cluster,” said governor Sergei Morozov.

According to the first vice-premier of the regional government Vildan Zinnurov, they were constantly looking for a partner, for four years negotiated with ChelAvia, “but it did not work.” Meanwhile, in recent years helicopter services market has started moving. Adoption of a package of laws that facilitate the fate of general aviation has contributed to it. Today up to 200-300 machines a year are sold in Russia, and in future it is expected that the market will grow to 500 machines. “Yes, light planes are cheaper: a vessel for four people can cost 6-7 million rubles, while the cost of a helicopter is 15-20 million. But a helicopter does not need a complicated and expensive aviation infrastructure, and therefore there is a growing interest in its prospects,” explained Mr. Zinnurov.

In late January this year the regional authorities found the first potential partner: investment agreement was signed with Aerosoyuz helicopter company president. Stated initial invest-ment in the project was expected to reach 60 million rubles. The company intended to provide a standard set of services on repair, maintenance, and basing of foreign-made helicopters, as well as to open its training center for amateur pilots and athletes.

However, as early as in April Mr. Morozov discussed with NDV group of companies CEO Alexander Khrustalev the pos-sibility of creating an Ulyanovsk helicopter center Heliport. Two potential investors were tied by a common project, Moscow Heliport, designed for 200-250 helicopter places, with Russia's largest air show, four star hotel, restaurant, yacht club, and entertainment center. However, two months after the an-

nouncement of the largest helicopter center establishment NDV officially stated that Aerosoyuz was not a partner in the Moscow Heliport project (although Aerosoyuz Helicopter company with 35% share remained one of the co-founders of Heliport manager Airbase). And soon NDV has also bypassed the former partner in Ulyanovsk: in May the investor rebased his helicopter here, and since August it intends to begin construction of the first objects of multipurpose center.

A traveling horseHelicopter Centre will be based in Ulyanovsk Zasviyazhskiy

district, near the Imperial Club Deluxe hotel. On 7 hectares located near the bypass road it is planned to construct a complex of build-ings: a landing pad, infrastructure for flight management, hangars for storage of helicopters, technical center for maintenance and repair of helicopter equipment, as well as a showroom, a coffee club for enthusiastic people, a hotel or a camping for the crews

helicopter crews have found liftin august construction of the first

russian regional multipurpose helicopter

center will begin in ulyanovsk.

ndv group of companies intends

to invest in the project 200 million rubles

at the first stage, and in future —

up to 700. The investor expects that

the center's services will be in demand

both in business and in budgetary

structures: in the region they are already

talking about possible perspectives

of sanitary aviation.

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Implementation

36 open regionImplementation

who will fly for basing, and a guest parking for cars. In the long term there will be an aviation training center for pilots. Investor says that Robinson, Eurocopter, and Bell helicopter brands will constitute its fleet in Ulyanovsk.

The volume of investments allowed the project to obtain the status of special significance. What to do with the land, to buy or rent, the investors have not decided yet. “Most likely, we will go by the standard route: before the advent of permanent facilities we will rent it, and after that buy it,” said Mr. Zinnurov. In the near future a legal entity Heliport-Ulyanovsk will be registered. Regional authorities will support the project by providing a pack-age of tax preferences (according to the regional legislation on especially significant investment projects) and by supporting it in order to avoid unnecessary administrative barriers, as well as by working with the public, businesses, and educational institu-tions to promote the helicopter center.

In NDV they believe in payback. “We see prospects. The people appear who use helicopters as “a traveling horse”. Today enterprises not only from aviation, but also from other sectors come to the region: those which make tires, food, from pharmaceutical and other indus-tries. All of them are our users. Imagine a transfer from Karamzin airport to PSEZ or to Zavolzye zone by roads through the city, taking into account traffic jams — up to one and a half hours. And compare it with 7-10 minutes of movement by helicopter. A huge difference. A helitaxi service that we begin to implement is in demand,” said the Heliports of Russia director of network development Oleg Kruglov.

According to Mr. Kruglov, the investor intends to make the main focus exactly on providing high quality services for trans-portation, as well as repair and maintenance services for heli-copters: “The complex will be a center of attraction for residents and visitors. Virtually all of it except the airfield, of course, will be open for access. Since Ulyanovsk is located on the flight time from Samara, Togliatti, and Kazan, the complex will work for a few regions. I think the center has a good prospect to take a large share of business segment transportation in the Volga region. We will definitely not stay without work.”

Mr. Kruglov clarified that the helicopter Robinson R44, the first of the NDV group fleet, is yet used exclusively for special purposes,

for example, for express delivery of business representatives to a remote area where they need to hold a meeting. “But I think that by September the fleet is likely to be filled up: it all depends on the timing of construction. To put a helicopter as a lawnmower is not our goal. We need that it worked, passed service and main-tenance. This requires a corresponding infrastructure, engineers; for professionals — high-quality accommodation, technical basis,” said representative of the investor.

At the third stage of the center development it is planned to open a training center. The need for training, according to Mr. Kruglov, today is large enough, despite the high cost of the process: “Though it depends on what to compare with. If with learning to drive a car, it's expensive, if with piloting Boeing-737, it is cheap. The cost may be up to one million rubles, it all depends on how well people are trained. But when Ulyanovsk has its own fleet and a permanent board for learning, we will do everything to make the study to be not of lower quality, but of lower cost.”

Cost of one hour flight of various types of helicopters

Helicopter type maximum

flight range Cruising

speednumber of passangers

the esti-mated cost of 1 hour of flight, thous. rubles

Robinson R44 650 km 210 km/h 3 28Robinson R66 610 km 222 km/h 4 33Eurocoptеr EC120 735 km 216 km/h 4 50Eurocoptеr AS35083e

691 km 235 km/h 5 55

Eurocoptеr EC130T2 644 km 236 km/h 7 77Bell 407 634 km 246 km/h 5 65Bell 429 754 km 240 km/h 7 100AW119Ке 991 km 267 km/h 7 80AW109 948 km 285 km/h 7 110AW139 1061 km 290 km/h 15 200

NDV company group data

In NDV company group they are sure that their helicopters, providing speed and mobility, will be demanded by Ulyanovsk business

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37open region

Bet on the budgetAccording to Mr. Zinnurov, today helicopter services market

is just beginning to develop: it is too early to speak about the massive use of these aircraft for a number of reasons. First of all, lack of necessary infrastructure, as well as high cost of flight hours: from 28 thousand rubles for Robinson R44 to 200 thousand for a larger helicopter (including its haul from Moscow). “The culture of helicopters' use needs to be incul-cated. We are already negotiating with gas companies, power companies, who can use them to explore their communications from the air,” said the first deputy chairman of the regional government.

Possible budgetary orders are also worked out. The most evi-dent is medicine, where helicopters are literally irreplaceable. According to the minister of health and social development of the Ulyanovsk region Pavel Degtyarev, there are areas (the so-called “southern bush”), where the delivery of patients to the regional center takes 6-9 hours. “Meanwhile, there is such a thing as “a golden hour” during which the provision of medi-cal care is crucial in preserving life and health of a patient. According to our data, for six months this year emergency services went to the southern districts 85 times. Thus, there is a need for prompt delivery, first of all, for people suffering from cardiovascular diseases, for road accident victims, and young children,” said Mr. Degtar.

The head of the Ulyanovsk territorial emergency medicine center Konstantin Vdovin agrees with him: “Estimated need for medical evacuation by air in the years of 2014-2015 is 60 helicopter sorties and 2-3 plane sorties.”

Ulyanovsk flying club has Mi-2 helicopters which are suit-able for medical aviation, but for many years they are laid up due to expiration of the calendar TBO. As explained by Mr. Zinnurov, each of the aircraft repair costs from 8 to 12 million rubles. “The flying club does not have such money, DOSAAF does not finance this work, and even if we had a strong desire, there are no opportunities to invest since it is the property of RF Ministry of Defence. For many years we have tried to negotiate with DOSAAF on options for cooperation, but it all comes down to the fact that we need to allocate money from the budget. For the treasury it is also expensive. So buying our own aircraft makes no sense: with 20 million rubles we will be able to buy enough flight hours,” emphasized the deputy prime minister. According to him, that is why the authorities are considering the option of renting a helicopter for medical aviation. For now — for timely delivery of a medical team to non-transportable patients, to carry out an operation on site (Robinson R44 is not suitable for transportation of patients). “When a steady demand appears, it will be possible to talk about renting a multifunction Bell 429 or Eurocopter EC130. Understanding exists, but according to the budget process the definition of details will take several months. By November perhaps there will be the first money and contracts,” said Mr. Zinnurov.

Mr. Kruglov evaluates the prospects of cooperation with regional authorities as follows: “Time will tell. We look at the experience of our colleagues from St. Petersburg, Krasnodar region, which have sanitary aviation units. In addition heli-copters have other uses: monitoring areas during the period of floods, forest fires, in agricultural sector helicopter can perform the process of spraying on fields more efficiently. Plus aerial photography. The main plus of helicopters is that there is no need to organize helipads: you only need a flat area

of soil, preferably paved, which should be cleaned of rubbish or snow in winter, and have a small fence so that no children and animals ran there.”

According to the Avia.Ru branch portal editor Roman Gusa-rov, today it is early to focus on private transfers in realization of helicopter center project: “Even in Moscow it is not yet a profitable business. This service segment is clearly not able yet to recoup all the costs that are borne by the Heliport content. So if the Ulyanovsk project initiators say that they rely on provision of commercial services, they are likely to dissemble. Minimum level of stable income can be guaranteed by an order from the regional authorities. And only then we can talk about addition of this source with a commercial component.”

Project initiator and main owner of NDV company group Alexander Khrustalev (right) said that Ulyanovsk has become the first platform in the country where Russian Heliports project is implemented

The regional government believes that helicopter will first be in demand for health care, MES, while monitoring forests and crops, as well as in case of urgent visits of regional ministers to the districts

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Implementation

38

vadiM Pilukov

in search of the customer According to information announced by

the Federal Antimonopoly Service, in 2013 local passenger transport accounted for only 2% of the total work of Russian airlines, re-gional — for 15%, the remaining flights were carried out by the trunk ones. From time to time the country's leadership makes state-ments regarding the need to develop small aviation. For instance, in May the deputy prime minister Dmitry Rogozin after a visit to Moscow Aviation Institute instructed to prepare proposals for the start of production of two- and four- seater light aircraft in Rus-sia, noting that we must learn to do them ourselves, and not to pump money abroad.

The RF Ministry of Industry supports Rogozin's position, stating that govern-ment funding in the next two years will focus on research and development of fundamentally new domestic aircraft for small and regional aviation. In some cases development of competencies in design and manufacture of aircraft will pass in con-junction with international partners: the new aircraft must have export potential, according to the department.

Lack of planes of low capacity and high efficiency is one of the main factors seriously hampering the development of small aircraft, experts say. Here the solution to this problem cannot be found until now. As a substitute to the famous An-2, foreign aircraft Cessna

Caravan and Pilatus-12 are offered today, but even after canceling import duties their price is not available for many operators. As early as in 2010 it was announced that production of small capacity aircraft can be deployed on the territory of the airport SEZ (Special Economic Zone) in the Ulyanovsk region.

One of the first residents of the Special Economic Zone was the Moscow company Vityaz Aircraft Corporation (official repre-sentative of the Russian Federation in the Canadian company Viking Air Limited) with the project of assembling 19-seater aircraft of Canadian development DHC-6 Twin Otter. Initially the appearance of the first aircraft assembled in Ulyanovsk was planned for 2012 (plant capacity — 24 cars per year). However, the project was delayed. According to the head of the Ulyanovsk branch of SEZ JSC Denis Baryshnikov, in 2012 this aircraft was certified by the Rus-sian aviation authorities to operate in Rus-sia. “Aircraft construction plant Vityaz was the first of the zone residents that signed a land lease agreement, but has not started the design of the enterprise until now.”

According to Mr. Baryshnikov, tighten-ing is related to the problem of acquisition of the orders portfolio. “Producers need to get a certain number of orders for new aircraft in Russia. Prior to that investors consider it inappropriate to start to build a plant. Vityaz continues negotiations with airlines,” he explained. At the Aviation plant Vityaz they refused to comment on the situation.

Problems of a different kind occurred in the project to organize construction of 9-to-14-seaters EV-55 of the Czech company Evektor in the SEZ. Evektor has transferred the rights for production, sale, and after-sales service of EV-55 Outback aircraft on the territory of Russia and CIS to Vector En Ji Rus company. According to the company, production of high-wing planes, which was originally scheduled for certification in 2013, has slowed due to lack of funding.

“Evektor hopes to launch a plane that would meet all the requirements at the end of 2014,” says Vector En Ji Rus site. Ac-cording to the Evektor-Aerotechnik head of marketing Peter Grebenishek, “the com-pany is working hard in search of additional sources of funding.” As noted in the SEZ JSC, Vector En Ji Rus has not yet filed an application for SEZ residency. The company management has chosen not to speak about the prospects of the project.

When it is more profitable by airAll experts admit that if aviation work

today may be beneficial, the intraregional air lines can exist only when there are serious subsidies from the state. Accord-ing to estimates of Andrei Martirosov, the

Necessity

small aircraft pulled on work

according to experts, small aviation has good prospects for development in implementation of air works and ensuring business flights, but revival of local air lines needs economic preconditions and support from the state.

Forecast of need for light multipurpose aircraft fleet

Aircraft class 2011* 2020

2030

total including for use of air

power in national economy and for transport work

15–19 seats 27 44–69 120–195 70–13210–14 seats 133 88–124 127–199 66–1237–9 seats 25 156–219 428–623 144–2684–6 seats 35 316–410 861–1131 179–278total 220 604–822 1536–2148 459–801

*2011 — current commercial and general aviation fleet, State research institute of civil aviation data

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Aviators believe that among foreign analogs there is still no modern economic aircraft that could be equal to the merits of the ancient An-2

39open region

UTair CEO (in addition to the main and regional aircraft park the company has 11 An-2 aircraft and 348 helicopters of vari-ous types), if profitability of aerial works on average is 10%–40% (depending on the project and the amount of the order), the maximum profitability in passenger traffic on domestic routes is 5%, and “as usual — about zero.” According to Mr. Mar-tirosov, where there is no economic basis and there is an alternative transport, it is hopeless to stimulate aviation mobility. “It's one thing to ensure livelihood issues, and quite another is to stimulate traffic to increase the mobility of people. When it comes to transportation to Naryan-Mar, where other vehicles cannot get, it is life support. The country, if it seeks to preserve its territorial integrity, should provide such flights. But subsidies to create busi-ness or tourist flows are doubtful. Today when moving even by 400-500 kilometers a person prefers a car: in another city he is not ready to find himself without his usual means of transportation,” said UTair CEO.

Deputy minister of construction, trans-port, housing and utilities of the Ulyanovsk region Andrey Tyurin agrees with Marti-rosov: “Today in the regions there are farms where the aircraft are used for treatment of crops, farmers say it is much more ef-ficient and profitable than ground opera-tions. Though the need for small aircraft is much higher: they are indispensable in forestry, gas companies need them to monitor networks. But not all businesses can afford to have their own fleet. However, there are investors ready to open helicopter

centers in the region (details on page 35). I am sure that this form of transport will soon be used not only in the aerial works, but also, say, for air strolls over the city. In addition, we have those who can afford to book flights to Nizhniy Novgorod or Kazan. As for regular flights within the region, it is very early to think about it yet: one cannot speak here about any economy.”

to fly — nowAnalyzing the fate of the announced

projects of organizing new aircraft pro-duction, many experts agree that in the current Russian conditions it can be done only under the auspices of the United Air-craft Corporation.

“Now a failure has formed on the local lines,” said the AVIA.RU chief editor Ro-man Gusarov. “On the one hand, An-2 can live for a long time: the planes are main-tainable, they still have the exploitation resource. Another thing is that there is no new modern engine, accordingly, the plane has no decent fuel economy. And local transportation is low budget, while transport economy plays an important role

here. Local carriers need an inexpensive analogue of An-2. Who is ready to take up aircraft production for small aviation today, I do not see. At one time the United Aircraft Corporation has announced that they are not interested to build planes with dimensions less than those of SSJ-100 due to the alleged lack of demand. In fact, our country can easily swallow 1,000 such aircraft for local lines and general aviation up to 2020, provided by the state subsidy for the purchase or lease of such aircraft.”

According to Mr. Gusarov, from the start of project to its transfer to the operator a minimum of four years is required for small aircraft (provided that it is developed by a combat-ready bureau and there is a working plant). However, we need to fly right now, so the assembly of foreign ships will not be excessive for the country, the expert be-lieves. “On the contrary,” he says, “perhaps our engineers will gain additional new invaluable experience. And construction technology is the most expensive thing today. We just do not know how to build airplanes at the advanced level, and we must learn to do this.”

deliveries of light aircraft

State research institute of civil aviation data

igor

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In late July Russian president Vladimir Putin, while visiting Progress RCC, inspected the new plane Rysachok, whose production began in RCC. According to Progress RCC, the plane can be a decent modern replacement to the legendary old man An-2. The president approved the project, recommending to equip it with domestic avionics and engines

Necessity

Air

craf

t del

iver

ies,

num

ber

9 monthsYear

Foreign aircraft

Domestic aircraft (re-export, including An-2)

Domestic aircraft (new)

40 open regionPerspective

SveTlana SneZhina

In mid-July in an interview with Open Region the Ulyanovsk region governor Ser-gei Morozov admitted that he intended to consider options of attracting an investor to the region, who would be willing to create an unmanned aerial vehicle (UAV) for civil-ian purposes. According to the governor, civil UAV have great prospects.

Experts believe that Ulyanovsk has eve-rything necessary to establish design and production of UAVs. “Ulyanovsk is one of the leading centers for production of Rus-sian aircraft and continues to increase the pace of technological development,” said the head of Association of unmanned aircraft systems industry Eduard Bagdasar-

yan. Among the Ulyanovsk advantages are noted the airport special economic zone, giving the residents special pref-erences, which can become a profitable platform for production; the availability of qualified personnel, including design en-gineers; the AeroComposite plant opening in Ulyanovsk (light and strong composite materials needed for modern UAVs ); a strong programming and automatic control school; and also the presence of such an enterprise as Ulyanovsk Bureau of Instru-ment Engineering (UKBP), which has long been engaged in development of systems for aviation. According to the UKBP expert Vasily Zhuravsky, the Iskra plant can also play its role, for it is capable of producing control systems for UAV traction motors.

There are certain hopes also for IT-cluster created in the region, which at the time of possible start of UAV production can incorporate specialists who were trained at UKBP school and have experience in software development for UAVs. “Given the strong school of automatic control in the region, we have unique specialists,” said our interlocutor. “As for scientific and technological potential, then the current level is mostly able to provide developers for creating world-class technology. This also applies to software and electronics, and to radio engineering, and other areas,” said Mr. Baghdasaryan.

In fact, in the existing conditions in-tegration of developments becomes the task for potential UAV manufacturer of civil segment.

“Integrator is the person who builds a fuselage, builds a management system. Here in Ulyanovsk we do not build control systems, and as far as I know nobody does fuselages, except for model airplanes. We make orientation systems, parametric systems — we do them in UKBP,” said Vas-ily Zhuravsky. However, he believes that production of all the missing elements for UAV can be deployed quickly enough in the region, integrator company will not face

Pilot is not needed

in 2012–2014 the world market for unmanned aerial vehicles doubled annually. does the ulyanovsk region have chances to become one of the centers of unmanned aircraft development in russia?

Russian UAVs start competing with Western ones, but not yet reach the level of mass production and are mainly produced for military orders. The cost of the Aileron-3SV UAV (Kazan), according to its creators, is several times lower in comparison with Western analogs

The main component of small UAVs services cost is the operator payment

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41open region

intractable technical problems. Experts see the main problem in the

other thing, in absence of a full legisla-tive framework that would regulate the legitimate use of airspace, as well as in insufficient demand for civil UAVs.

Development of normative documents began in 2012. The draft federal law and changes to the Air Code were introduced to the state Duma in September last year, re-cently anti-corruption examination of the documents has been completed. According to the expert group which took part in development of the regulatory framework, adoption of such a package of laws will introduce a clear regulatory environment from which the emerging markets will benefit, where the main demand now is from the military men.

According to Russian association of unmanned aircraft systems industry, un-manned aircraft market in Russia is esti-mated today at 15 billion rubles, which is 7% of the world market. “At 97% these are Defence Ministry and Ministry of Internal affairs, FSB, and Ministry of Emergency Situations (MES) orders, and only 3% of the market is for peaceful use. The same pattern is typical for other countries in the world,” said Eduard Bagdasaryan, but he also clarified that particular geography and nature of Russia create opportunities for development of civil unmanned market, provided that increased requirements for engineering, caused by severe climate, are fulfilled. Mr. Bagdasaryan sees monitor-ing objects of fuel and energy complex and aerial mapping as the main scope of unmanned aircraft systems use.

At the same time the European Union on the basis of trends has formed predicts that in 2015-2020 25% of demand for drones will be in fire departments, 13% in agri-culture and forest conservation goals, and 10% will be demanded by power engineer-ing. If development of the UAV market in Russia goes on rapidly, in a few years we can expect an explosive demand for civil UAVs, for there are many possible niches for drones' use.

“A clear example of the need for a drone: the situation with Arsenal in Ulyanovsk. There just a drone was needed to coordinate actions of fire brigades, to estimate the ignition area and the risk for population. However, all was done on a whim. And again accidents at such facilities in Japan at Fukushima — just the place for the use of drones,” said UKBP department head Lev Vinokurov. According to the expert, the main advantage of modern unmanned aerial vehicle (UAV, or drones) can be their cheapness: “Now super economical drones are made: they are supplied with electric and diesel engines, and they can fly for two days without refueling.” Compared with

helicopters and planes, the drones are ten times more economical for the tasks of monitoring,” Lev Vinokurov ensured.

Data on the cost-effectiveness of UAVs were presented at the international confer-ence Unmanned aircraft — 2014, organized by the Center for strategic research in civil aviation. According to Tranzas deputy CEO Vladimir Voronov, UAV flight hour cost varies between $ 300-500, and an hour of light and medium helicopters' use to solve similar problems is costing $ 1,000 and $ 1,800. And aircraft prices are not compa-rable: now in Russia a typical UAV mobile complex costs less than 5 million rubles.

It is worth noting that the announced UAV hour price is commercial. As a rule, drone creators and operators do not dis-close the cost of operations; however, the head of FINKO-Unmanned Systems (Izhevsk) Maxim Shinkevich explained to the Open Region that with a large or-der the price of their UAV hour work is $ 200, while it includes the whole cycle of works with report and cartography. At the same time a member of the working group on UAV development Yuri Tyn-nikov noted that while the main part of the cost of an airplane or helicopter is the cost of fuel, then the small UAVs have miserly fuel consumption, and the cost of an hour of their work is $ 50-100, the bulk of which is payment to the operator and insurance for the case of loss of an expensive vehicle.

UAV systems are produced mainly by small companies for individual orders from the security forces. Mr. Vinokourov gave an example of the leading domestic com-pany Zala Aero, which supplies drones for the FSB, MES, and border guards. At the same time now in Russia, according to Mr. Baghdasaryan, there are already developed or produced drones in class up to 25 kg that are quite adequate at international standards. “In classes of 200 kg, 1000 kg, and above we will come to the world level in 5-7 years, provided stable funding for work and a teamwork of customers and executors,” said the source.

The problem is in the customers: despite the wide range of tasks that can be solved using drones, the orders from non-military government agencies still have not become widespread.

“I was at the shows, there is interest in UAVs, but they look at them with coolness yet, and it s too early to say about demand. Basically power structures buy them. From non-military — the border guards. Ministry of Emergency Situations(MES) is yet view-ing them, they have some samples. But to massively use them, yet there is no such thing,” said Lev Vinokurov.

Along with this the military purposes UAV segment is gradually detached from civilian UAV market. The reason is the policy of the Defense Ministry, which has made a bet on the exclusive use of domestic components in products for military use.

If the main component of helicopter and even airplane flight cost is fuel cost, with small UAV it tends to zero due to its meager fuel consumption or electric motors use

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Mr. Zhuravsky`s assessment is that from 30-35 UAV models developed in Russia over the past 10 years only about 5 can be called entirely Russian, that is collected on the ba-sis of own element base and equipped with software developed in Russia. Such devices cannot fully compete with foreign UAV on the civilian market. “All UAV systems of UKBP development cost a million and above — for civil segment this is incredibly expensive. For the military segment it is quite possible, since all existing solutions are competitive enough.”

Our interlocutor called several reasons for high cost of military items. First, it is poor quality of domestic element base, what makes us constantly struggle with defects, and secondly — the complexity of development on the basis of domestic electronics.

According to Mr. Vinokourov, to create drones on domestic element base is a doable task, but completely domestic UAV will be very expensive. It is for this reason that the majority of private development companies prefer to use foreign components. This is the only way to achieve competitiveness in the global market in the segment of UAV for civilian use.

“If we talk about the economic outlook, the world turns its face to civil aircraft. There are much more tempting prospects. Today the market of unmanned aircraft around the world ($ 6 billion) is equivalent to the chewing gum market in Western Europe (!),” noted Mr. Bagdasaryan in this regard.

Consequently, the manufacturer has a choice of one of two development strategies: to go to the civilian market, quickly creating a competitive product with a foreign ele-ment base and in-house software, or to look towards the military order and improve the design with domestic electronics.

First deputy chairman of the regional government Vildan Zinnurov doubts the

feasibility of this strategy; he believes that “it is very difficult to create something out of the blue: there should be a design bureau interested in this, and without it the region has no developments, no development, nothing.”

At the same time experts estimate strat-egy of drones' exit on the open market positively. “The essence of drones is mainly orientation and navigation, Glonass system now works very well, whatever they say about it; that is, in terms of drones the do-mestic software is quite competitive,” said Mr. Zhuravsky. Given that nothing prevents to use imported element base in civil UAVs, and the calculation and production of fuse-

lages can be done at Ulyanovsk enterprises, software becomes the cornerstone.

“UAV can be made by an amateur, but nobody can make the software. This is a very high cost, few people in Russia can afford it. One man is almost unable to make software. Making autonomous control systems can also be carried out only by a serious enterprise,” said Yuri Tynnikov.

This requires a developers school which may well appear in the framework of the new regional IT-cluster. UKBP can act as a “training ground” where a relevant devel-opment school is already present.

“It is impossible to get the result in two years by throwing a billion. People should appear, real people that can work. People should develop the direction, form a re-serve, for it is a new theme. We have serious developments in this subject, it is easier for us to do it than for design bureaus which have nothing of the kind. They would have to do everything from scratch, making the mistakes that we have already passed,” said Mr. Vinokurov.

Experts estimate the backlog from lead-ing competitors in the field of heavy drones as 5-10 years — it is just the time, which, according to Lev Vinokourov, is necessary for the formation of own school develop-ers. It may be that during this time first company — integrator will appear in Uly-anovsk, which will launch a competitive drone at the market, using the design and capacity of aviation cluster enterprises and creating their own software.

Russian UAV Inspector 201. Small UAV`s compact control system requires high level of programming, but allows rapid deployment on any terrain

Experts believe that over time booming production and use of small UAVs will begin, but note that Russian legislation is not ready for it yet

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In late May at the International economic forum in St. Petersburg they announced the results of pilot project measuring the investment attractiveness of Russian re-gions. The project to create a national ranking of regions, which aims to identify the best practices of working with busi-ness and increasing motivation of regional authorities, was submitted in autumn of 2013 by the Agency for strategic initiatives (ASI) to the RF president Vladimir Putin (also the chairman of the ASI Supervisory board). It was noted that such areas should be evaluated, which the regional authori-ties can affect. 21 Russian regions were involved in a pilot study, among them the Ulyanovsk region, whose experience, as reported in ASI, was used by the agency in development of a regional investing stand-ard and creation of the rating methodol-ogy. Together with ASI the studies were performed by Boston Consulting Group (specializing in management consulting) and by All-Russian public opinion research Center. The evaluation was conducted on

54 parameters in four areas: the regulatory environment (duration and effectiveness of registrating and licensing procedures); business institutes (effectiveness of re-gional legislation, validity of inspections, business transparency, and efficiency of support mechanisms); business infrastruc-ture quality (road conditions, availability of land resources); support for small and medium businesses.

Unlike Doing Business (2012), national investment rating is based primarily on expert assessments and surveys of busi-ness participants, which excludes direct comparison. “In every region we inter-viewed 300 companies,” said the head of the working group on preparation of the rating, the Russian union of industrialists and entrepreneurs managing director on the economic policy and competitiveness Maria Glukhova. In her opinion, the ex-pert approach to the assessment allowed to interest not only regional and federal authorities, but also the business, “which has more objective sources of information, for it itself participates in formation of the rating.”

Maria Glukhova notes that for a federal government the rating is “an additional interesting tool for evaluating the activi-ties of governors,” and for the regional authorities it is an ability to obtain a clear roadmap and to understand what needs to be improved and how.

In the integral rating the Ulyanovsk re-gion has become one of the best for invest-ment attractiveness and business climate, taking second place in the ranking, and losing only to the Kaluga region. In two of the four rating directions the region came into the group of regions with the best performance. At the same time a serious lagging behind the leaders was mentioned in infrastructure and resources direction, and in regulatory environment direction the region ranked only seventh.

In polls the Ulyanovsk businessmen called bad roads and problems in obtain-

authorities have got the tool The ulyanovsk region has become one of the leaders of the first national rating

of investment attractiveness of regions. among its objectives is providing the regions

with a tool to improve mechanisms for development of business environment.

What should the region improve?

Climate is already improving, but environment remains its own for everyone. Local small business yet does not see such an attention from local power which large investors receive at the regional level

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44 open regionBusiness environment

ing approvals from authorities, especially in allocation of land, the main problems that hinder the development of business. At the same time the quality of business environment itself rated very highly by integral indicators.

However, a board member of the re-gional public organization Ulyanovsk regional association of entrepreneurs Hamza Yambaev believes that the rating is primarily aimed at assessing the work with large external investors and with medium-sized businesses, where things are really going not bad in the region. “And for the small business the climate in Ulyanovsk is different. It seems that the city authorities are fascinated by large projects, and small fry turns under their feet,” says Mr. Yambaev, lamenting the fact that the municipal government relations with small businesses do not stack.

First deputy chairman of the regional government Alexander Smekalin (in charge of development, economics, and finance unit), also admits the problem and indi-cates that the regional business support programs are often decelerated at the grass-roots level: “A number of performers at the municipal level are still opposed to busi-ness, or perhaps have some components of corruption.”

It should be noted that the rating is not taking into account financial and economic situation in the region, since the purpose

of the study is to assess actions of the au-thorities to improve the business climate. Meanwhile, observers note that forma-tion of the financial component of busi-ness environment is very important. “We need to talk about richness of the region, its abilities, financial opportunities, how many services and goods are bought in the region, on what, in fact, small businesses and developing. According to this indica-tor, we are not only the 2nd in Russia, but not the first even in the PFD, the 2nd or the 3rd and so on,” said Mr. Yambaev, justify-ing the fact that, excluding the volume of free cash in the economy, to address the issue of forming a business climate would be one-sided.

Lack of financial capacity of the region as the main reason for the entrepreneurs' low estimates of the region infrastructure was noted by director of the regional en-terprise development corporation Ruslan Gainetdinov. According to him, the region is experiencing problems in development of business environment only where mon-ey is needed. “But in all other remaining moments, shareware, we do not need gold, oil and gas, here we are smart,” says Mr. Gainetdinov with irony.

Can anything be done to solve the prob-lems that were clearly identified by the rating of investment attractiveness of regions, basing on the available resources? “Unsolvable problems do not happen,”

said Ruslan Gainetdinov. In his opinion, it is possible to improve the quality of infrastructure for entrepreneurs with the resources available, if we dispose them most effectively. As an example he cited the roads, the evaluation of which by en-trepreneurs has mainly pulled down the region rating for quality of infrastructure: “We should not just make a road in the village-such-and-such, but should direct it where there is economic development (to businesses that will give taxes, open jobs), and incidentally to capture the towns. That is to build roads not politically, but economically.” In turn, Mr. Smekalin sees the solution to limited resources invest-ments efficiency in building a society of like-minded managers at all levels, which will solve the problems comprehensively, taking into account both economy and politics.

According to all our interlocutors, al-most perfect conditions are created for foreign investors in the region. “They are exempt from taxes, they get all commu-nication free of charge, they are provided with preferences, any documents are ob-tained quickly. The plant is being built, it still not built, but all needed is already there,” said Mr. Yambaev, stating that from this point of view ASI rating fully reflects the realities of the region.

Mr. Gainetdinov indicates at specific achievements of regional development programs. According to him, the region managed to reduce at times the terms of connection to communication networks, to speed up maximally the process of ap-provals and permits, as well as to work out mechanisms of feedback with entre-preneurs.

“But local businesses do not enjoy these benefits, spending a fortune on summariz-ing communications,” Hamza Yambaev re-torts, pointing to the fact that the business climate for large enterprises and foreign investors is already close to the ideal, but the local small business still feels itself pitifully.

Maria Glukhova is sure that the prob-lems identified by the study will encourage the authorities to take effective measures to improve the business climate: “This is a good tool to be able to change quickly and to generate roadmaps efficiently.”

Chairman of the Enterprise Commit-tee of the Ulyanovsk region Commerce Chamber Konstantin Leontiev is sure that the direction of movement of the region to build the business climate is correct. In his opinion, “the general trend of de-velopment is selected correctly, and with systematic work the region has all chances to become a leader in creating a comfort-able environment for any business, from small to large.”

National rating of investment climate in the regions of Russia

№ region

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1 Kaluga region I 1 1 1 12 Ulyanovsk region I 2 1 4 13 Krasnoyarsk territory I 1 2 1 34 Tatarstan republic I 2 3 2 15 Kostroma region I 2 2 3 26 Tula region II 2 2 3 37 Krasnodar territory II 1 4 2 48 Tomsk region II 3 4 3 29 Altay territory II 3 1 4 510 Vladimir region III 4 3 3 411 Rostov region III 3 4 2 512 Chelyabinsk region III 4 4 3 213 Leningrad region III 5 1 2 514 Samara region IV 4 4 5 115 Khabarovsk territory IV 5 3 3 316 Moscow IV 5 3 2 417 Sakha republic (Yakutia) IV 5 4 3 118 Sverdlovsk region V 4 5 2 419 Stavropol territory V 4 5 4 220 Saint Petersburg V 5 5 2 321 Primorsky territory V 5 5 5 5

Agency for strategic initiatives data

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time of universalsCompetition among regions for invest-

ments was recently replaced by competi-tion for labor resources. According to the governor of the Ulyanovsk region Sergei Morozov, “the region has lost a pair of big potential investors, failing to convince them of the ability to provide the necessary quali-fied personnel.” The situation is typical for the majority of subjects of the Russian Fe-deration. As it was announced by president Vladimir Putin at a meeting of the Council for science and technology, in 2013 a survey of employers estimated the level of graduates in engineering professions by 3.76 points on a five-point system; according to employers, approximately 40% of newly hired require additional training.

As the first deputy prime minister of the Ulyanovsk region Vildan Zinnurov said,

today both newly created and operating enterprises of aircraft industry are expe-riencing staff shortages. “In the first case we are mainly talking about the residents of the airport SEZ, for which in the com-ing years we need to attract up to 1,500 professionals in the field of maintenance of flight equipment, planes assembly, etc.” he said. “And if this problem can be solved by individual enterprises (workers can be retrained or “outbid”), then Aviastar-SP has a much more complicated situation: due to the increase in production prior to 2016 it requires about 3.5 thousand new workers.”

“This is not about a lack of workers, almost always there are applicants, but they usually do not satisfy employers in terms of competence and ability to work on the modern equipment, which is now used,” says acting director of public employment service Elena Altynbayeva.

“Current situation is the result of long-time skew between needs of the market and a contingent of graduates,” she said. “Of the 1727 people registered as unem-ployed (as of 11.07.2014 year) 60% have higher education (mostly humanitarian), while from 8390 vacancies 73%are for specialty workers, no less than 200 — for engineers.”

Employers criticize schools because they do not prepare such professionals, and educational institutions say they are willing to adjust the training program, but provided enterprises subject data on need of specialists in advance, in three to five years. But in unstable economy companies try not to make long term plans, and as a result universities an-

to create conditions close to combat

With a growing number of the ulyanovsk region aviacluster enterprises, and with download of existing air transport and aircraft construction companies, a new problem has appeared, a shortage of qualified personnel. it becomes one of the constraints to the growth of the country as a whole.

The state decided to reduce shortfall of flight personnel due to increased enrollment in educational institutions of civil aviation

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nounce enrollment for specialties that are in demand by students and their parents.

there is no such profession The education system is so behind the

rapidly modernizing production that there are no professional standards for many modern professions, said the ASI head of the working group in dual education Tatiana Kozhevnikova. “Today unversal workers are increasingly required who combine several specialties. Take, for example, mechatronics. There is no such specialty is the uniform tariff-qualifying reference, and in Europe there is such a profession, a symbiosis of mechanical, electrical, and IT-specialists. These are people who can work on very sophisticated equipment, servicing hydraulic, electric, and pneumatic actuators and program management of these drives. All opera-tions are performed by one specialist.” Today most of the new companies in the region are experiencing the need for such specialists.

In the opinion of Vildan Zinnurov, prepa-ration of specialists necessary for enterprises today is only possible through public — pri-vate partnership: “With such a dual system employer and school share responsibility: school is responsible for the general subjects: physics, mathematics, languages, etc., and the company — for training in the produc-tion specialty. This is an opportunity for a company to get ready professionals, for the state system of education — to get an access to the latest technologies, for teachers — to raise their level of competence.”

In 2013 United Aircraft Corporation (UAC) has determined Ulyanovsk State University (USU) as the basic institution for training, retraining and performing R & D for companies of aviation. “The task of joint structures, Aviation technology and aviation mobility competence Center (110 people involved in R & D with funding of 60 million rubles — OR), and USU base chair Digital aircraft production, is “to create conditions close to combat,” said Mr. Zinnurov. “To this end at the Center in USU were established CNC machine prototypes used in Aviastar, with real control units. The equipment allows to carry out training in close connection with production, when, let's say, theory is presented for three days, and two days are given to practical exercises. Experience shows that if a student does not visit the factory, “touching iron”, he won't become a high-class specialist.”

long and expensive Employers' claims concern not only

the quality but also the cost and time of training. In particular, sometimes educational institutions of civil aviation hear such accusations. According to the AVIA.RU portal editor Roman Gusarov, we need to cut costs at the stage of pilot training under the state program: “There is no use learning for five years in order to operate modern aircraft. In the US pilots are trained for three years and its costs about a half.” However, in Ulyanovsk high school of civil aviation (UVAU GA) they do not agree with such assessments. “I do not think these words are fair: there

have always been programs, different in terms of f light personnel training (higher, special, and additional train-ing). In addition, over the years thanks to government funding and Rosaviation the UVAU GA level of material and tech-nical equipment has seriously increased. This year alone, our aircraft fleet was filled with 100 new aircraft Diamond and Cessna, in 2012-2014 the latest simula-tors -737, A-320, SSJ-100, Tu-204 — were delivered. We eventually managed to reduce the cost of training a pilot due to reduced prices of flight hours, and it is one of the major expenses,” said UVAU GA vice-rector Alexei Olenev, stressing that due to deeper learning “the UVAU GA graduates are competitive in the global market specialists, capable of managing modern aircraft.”

The state covered the deficit of flight personnel due to increased enrollment in educational institutions of civil aviation (if in 2008 a total of 495 people were enrolled for flight specialties, in 2013 — 940), but not only. From July 1, 2014 for a period of 5 years Russian airlines are allowed to hire foreign commanders of aircraft (FAC) for commercial flights, which, according to experts, is unlikely to help solve the prob-lem. “Today there are not enough FAC, at the same time there is a sufficient number of co-pilots. The growing FAC number is competence of airlines, and hiring for-eign pilots is not the solution. Probably for airlines it is a commercial move, but it is strategically wrong for the industry,” said Alexey Olenev.

Ulyanovsk region government, support-ing integration of educational institutions and industrial companies, aims to central-ize the training system. During 2014-2015 it is planned to create an international resource center of training for aviacluster and machinery industry on the basis of the Ulyanovsk aviation college. For these pur-poses the region managed to attract federal funds (17.3 million rubles). International resource center will also be the center of networking communities and the mutual use center for high schools.

Meanwhile, the first deputy chairman of the regional government Alexander Sme-kalin believes that “in terms of economic development against the background of de-mographic problems, the priority is human potential. People are leaving the region to go where they can develop, have a good salary, although in top management of world companies that came to Ulyanovsk, on the contrary, there are a lot of visitors, because here they are offered a good salary and an opportunity for development. Even an ultra-modern resource center will not help if the salary at the same Aviastar will be at the middle for the region.”

Today an employer needs not just workers, but educated professionals — generalists, able to work on complex programmable equipment

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technicians are in great demandGood manpower potential for aviation and aviation industry,

the basis for which was formed in the Soviet era, is drying out today. With the increase in production at the country's largest aircraft company (Aviastar-SP needs up to 3.5 thousand employees to 2016) and with the challenging demographics, with the need to fill shortage of flight personnel, the aviation industry is forced to engage in fierce competition for the “heads”.

Aviastar-SP deputy director of personnel Vadim Shestakevich sees main evil in universities, which “prepare the wrong profes-sionals. These schools not only spend considerable public funds for training unclaimed specialists, so more they attract a few of those guys who could become good designers or AMEs,” he said. “I was often faced with a situation when a young man, having studied five years on a lawyer specialty, begs us to take him for the position of an engineer.”

“No matter how hard we try to refocus our entrants on select-ing technical specialties, still the highest competition is for our humanitarian specialties: they come most readily to learn to become doctors, lawyers, psychologists, customs officials, though customs officials now are not necessary,” said director of the Center for employment assistance to Ulyanovsk State University gradu-ates Vera Yurina. “The situation does not change despite the fact that our graduates at the labor exchange are all humanitarians, while at the same time all the engineers are already employed at the 4th — 5th course, and up to 30 employers come to meetings with graduates and literally outbid specialists from each other, offering salary of 80-120 thousand rubles.”

According to the Ulyanovsk region department of employment, “in 2013 from 634 graduates of all types of educational institutions who have applied for work (on the whole there were 10 226 people aged 14 to 29 years), in the first days we were able to employ 309 people, 101 were sent for retraining, and 48 of those with a diploma still sit without work.”

“It became apparent for us that it is necessary to deal with employment of a young person at a time when he chooses a school for admission. And you need to work not only with him but with his parents, as in 80% of cases they decide who their native child will become,” said Shestakevich.

Competent kindergartners The Ulyanovsk region government believes that it is possible

to solve the problem of mismatch of supply and demand in the labor market through reviving the system of vocational guid-ance. “Up to a certain time many believed that this activity is for those who have nothing to do,” said first vice-premier of the regional government Vildan Zinnurov. “Now it is obvious that it is the youth career guidance that is a key point, because if we have not led to aviation from an early age, in adulthood few

people go there.” It is proposed to start at the stage of pre-school education. As they told us in the regional Ministry of science and education, in three kindergartens in Zavolzhye where the Aviastar-SP aircraft factory is situated, “preschoolers are introduced to aviation professions, there are classes on initial modeling and mini-museums with exhibitions dedicated to aviation and aircraft industry. This is the first stage in which the child gets acquainted with aviation specialties, forms a positive idea of the aircraft builders, because it is a profession of his parents,” says regional acting Minister of science and education Natalia Semenova.

staff comes from the skyshortage of personnel in the aviation industry forces the regional leadership together with employers to revive the system of vocational guidance in the whole chain, from kindergarten to higher education. However, all the work is yet reduced to a boring theory. only sky can really capture aviation students. and here the only hope is for the revival of the former power of dosaaf (volunteer society for cooperation with the army, aviation, and navy).

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To orient teenagers to receive an engineering specialty in future is the main task of the youth aviation Academy that was established in December, 2013 on the basis of the Ulyanovsk avia-tion college. “In a highly competitive market we need proactive work to prepare staff with new competencies, and this is only possible through integration of vocational education institutions and universities with aircraft manufacturing enterprises,” said Semenova.

As the aviation college director Anna Shuenkova told us, in early 2014 27 students from 4 Zavolzhye schools and 45 col-lege students began to study at the Academy. “Children get knowledge of the history of aviation, study technical English, entertaining math, study programming skills, design, 3D-modeling, and research and experimental activities. Upon completion of training they will be given certificates,” she said. Academy students regularly attend Aviastar-SP, which organizes professional events “Aviastar invites” and supports the most active schools with money certificates (25 thousand rubles) and valuable gifts. However, that is the only financial support for the Academy. “Until now there are no rates for the Academy head and for a methodist, and the activities are not financed,” complains the director.

dosAAF: from hand to mouth Building a system of vocational guidance of youth, we don t

need to reinvent the wheel, as the chief of the Ulyanovsk DOSAAF aviation club Vladimir Dvoryaninov believes. “If we talk about bringing youth in aviation, this is best done through the de-velopment of aviation sports,” he said. “In Soviet times exactly DOSAAF flying clubs were considered a forge of aviation personnel, and many outstanding aircraft constructors, famous pilots got fascinated by the sky in the flying clubs and airplane modeling hobby groups.”

Since the early 1990s DOSAAF drags a miserable existence. Of the 37 aircraft and helicopters, which are now available in Ulyanovsk DOSAAF flying club, only An-2 and Wilga-135 (four-seater glider towing), several gliders and two jet sports aircraft L-29 are still flying. “We are financed nowhere,” said Mr. Dvoryaninov. “We earn money ourselves: arrange paid skydiving. But this money is not enough for flight training, we do not do it now. One hour flight on Wilga-135 costs 15 thousand rubles, and for training you need to bump at least 30 hours. Imagine how much one pilot s training costs! Support from regional authorities was allocated in 2012 — 5 million rubles. We bought 25 parachutes on this money. Another five

parachutes were received through DOSAAF, which has not happened, probably, for 20 years.”

Vildan Zinnurov finds Aeroclub saving in the region a great success. “We have all the infrastructure, the runway, the flight control systems. There is technique, even if mostly in a static position, it allows young people to “twist the screws”. Creating all this from scratch today would have been impossible,” he said. “The club quietly climbs out, but without serious finan-cial support it is very difficult.” He considers support from the region ineffective. “We cannot make direct investment in DOSAAF material and technical base (and this is a priority measure) because all the equipment belongs to the Defense Ministry. Shallow trench would not solve the problems. Sus-tainable development is only possible when flying clubs are allocated tens of millions of rubles annually. And I believe that the state should turn its face to DOSAAF. Nothing new is created and is unlikely to be, so we need to support what we have. It is necessary to revive what worked successfully during the Soviet era.”

However, Vladimir Dvoryaninov does not consider reference to the impossibility of regional support an excuse. “There are a lot of ways, if there is a wish,” he said. “Aeroclubs in Samara, Penza, Tatarstan are getting support.”

As planned by the leadership of the country, DOSAAF should be all-federal basic system of pre-conscription training for young people. DOSAAF deputy chairman Andrei Golovatyuk believes that “it is hampered by weaknesses in tax and land codes. Today we have no more rights and benefits than, for example, parrots fans club. DOSAAF even has no benefits, including tax. For ex-ample, in 2011, when receiving a subsidy from the budget in the amount of 1.9 billion rubles for the execution of state problems we paid taxes amounting to more than 1.4 billion rubles. That is, what we got from the state treasury, we then brought back.” According to the DOSAAF chairman Sergei Maev, in 2009 by the government decree the defense society was transformed from social organization into a public-private association, but it did not solve its main problems. Chief among them is the legal status of the organization, which must be regulated by the Act on DOSAAF. The state Duma pulls its adoption for several years.

In absence of federal and regional support the aeroclub, a forge of aviation personnel, keeps only through the efforts of enthusiasts

In aircraft manufacturers' district they begin to introduce children to aviation careers at the kindergarten

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Personnel potential

20.9 thousand of students53.7 thousand of students

System of science and education in Ulyanovsk region:

Scientific research and development in the sphere of new technologies, materials and spare parts.

System of personnel training for enterprises of military industrial complex, automobile production, aircraft production, etc.

17 higher educational institutions,

35 secondary specialized educational institutions

including 5 state universities

THE ULYANOVSK REGION IN NUMBERS

Personnel potential

20.9 thousand of students53.7 thousand of students

System of science and education in Ulyanovsk region:

Scientific research and development in the sphere of new technologies, materials and spare parts.

System of personnel training for enterprises of military industrial complex, automobile production, aircraft production, etc.

17 higher educational institutions,

35 secondary specialized educational institutions

including 5 state universities Labour resources

Employed in economy

Workers of science

807.2

602.6

thousand people

thousand people

9000 people

250 doctors of science

1400 candidates of science

Economically active population according to the level of education, %

Personnel potential

4% 18% 24% 25% 29% Secondary

professional Higher

Primary professional

Secondary unfinished

Secondary general

ulYAnovsK region is Among tHe:— top five of Russian regions in the share

of scientific research and experimental design works in gross regional product, more than 7 thousand employees are engaged in research and design;

— top ten of the most innovative Russian regions (2012 Rating of RF advanced regions).

engAged in tHe Field oF innovAtion:— 24 companies — in technological innovations;— 11 companies — in organizational innovations;— 11 companies — in marketing innovations.

According to Rospatent, the Ulyanovsk region belongs to the group of regions with high inventive activity, its index is 3.46.

leAding sCientiFiC orgAniZAtions:

— RF State scientific center Scientific research institute of atomic reactors (NIIAR).

— Ulyanovsk engineering research and design institute (UNIPTIMASH).

— Ulyanovsk state university (formerly branch of Lomonosov MSU).

— Ulyanovsk state technical university. Technology transfer center.

— Ulyanovsk center for technology transfer.

— Ulyanovsk state agricultural academy.

— Research institute of aviation technology and production organization.

— Ulyanovsk science and technology center All-Russian research institute of aviation materials (VIAM).

— Branch of National research nuclear university MIFI.

— Experimental design bureau Iskra.

— Scientific production association Mars.

— Ulyanovsk agricultural research institute of Russian agricultural academy.

— Ulyanovsk instrument design bureau.

— Ulyanovsk branch of Radioelectrical equipment institute of Russian academy of sciences.

Developed industrial base and high consumption potential

The Ulyanovsk region is situated in the south-east of the European part of Russia, in the centre of Privolzhsky Federal District

Distance to other cities Kazan 210 km (130 mi) Nizhny Novgorod 440 km (273 mi) St. Petersburg 1 575 km (978 mi)

Samara 260 km (161 mi) Moscow 875 km (543 mi)

193 thousand

> 50%

> 44 million

47 thousand

15%

> 22 million

Industrial enterprises

Part in industrial production of Russia

Number of potential clients

within a radius of 1000 km (620 miles)

Within a radius of 500 km (310 miles)

Economic-geographical position

Moscow

Ulyanovsk

eConomiC And geogrApHiCAl position

stAFF potentiAl

innovAtion potentiAl

50 open region

open region. Ulyanovsk. economic magazine. august 2014, № 7.

On the front cover: deeply modernized transport aircraft Il-76MD-90A, assembled at Ulyanovsk Aviastar-SP, has fulfilled its first demonstration flight on October 4, 2012. The same day the contract was signed for supply of 39 such type aircraft to the Ministry of Defence. The order value amounted to almost 140 billion rubles. Aviastar-SP press service photo.

On the 4th cover page: Landing of the future promising MS-21 aircraft will look like this. Irkut corporation photo.