Russia: Helicopter industry – a leading aerospace sector with international ambitions

2781

One week before the industry’s annual show in Moscow (HeliRussia May 22-24 2014), and given the current situation in Ukraine and its consequences for the Russian aerospace industry, it is a good time to have a look at the current state of the Russian helicopter industry and focus on its recent developments.

Over the past few years, Russian Helicopters, the national and public helicopter holding company has become one of the biggest OEMs. In 2013, it recorded annual revenue of RUB 138.3 billion ($4.2bn), vs. RUB125.75bn ($4.bn) in 2012 and RUB103.9bn ($3.23bn) in 2011. It is now slightly behind the number four in the industry in terms of revenue, Bell Helicopters ($4.5bn in 2013), while also registering high levels of operating margins between 12% and 15% per year during the past 3 years.

The company also delivered 275 helicopters in 2013, and the order book reached 808 helicopters in December 2013, worth $11.5bn and representing 3 years of production.

Russia has also very aggressive objectives as regards the future development of its helicopter industry. As the company’s CEO, Alexander Mikheev, said during a meeting of the company’s Collegium on 24 April in Kazan: “To attain 20% global market share we still have much to do – completing the restructuring and upgrades of our production capacities, continuing to expand our model range, growing our technological capabilities, increasing our intellectual and production potential, and rolling out our global after-sales care system, which will include some of the company’s maintenance facilities”.

In order to achieve those objectives, the company has recently taken various steps to improve the situation. As such, Russian Helicopters invested RUB8.8bn ($240mn) in 2013 to upgrade the company’s production capabilities, representing an increase of 8.5% over the year before. In the meantime, R&D spending increased 48.4% to RUB 7.9bn ($227mn) in 2013. Modernisation of production tools and R&D spending will remain a key focus of the Russian helicopter industry in the years to come. Indeed, the industry will receive a global investment of 7.5 billion rubles ($213mn) from both the government and state-owned Russian Helicopters which signed a co-financing agreement on this, in order to improve the situation in those two directions, Deputy Industry and Trade Minister Yury Slyusar announced earlier this month during a conference organized by Interfax.

Part of this fund will be used to develop a new high-speed helicopter by 2020. The Rostvertol facility, based near Rostov-on-Don in southern Russia, should play a key role in this field. New infrastructure will be created at this unit, where the new highspeed chopper “will eventually start rolling off the production line,” the Moscow Times wrote. According to Minister Yury Slyusar this site would also serve as a repair center for Russian helicopters, a training center for pilots and technical staff (some used the word Academy) along with a test center. According to Jane’s, based on a Kommersant article, this cluster “suggested by Deputy Prime Minister Dmitry Rogozin, and developed by Trade and Industry Minister Demis Manturov and the governor of Rostov Region, Vasily Golubev, will include five factories employing no fewer than 20,000 workers”.

But the situation in Ukraine could prove to become a hurdle for the ongoing development of this leading industry in Russia. Today, around 75% of the engines used on Russian helicopters are still built in the Ukraine, mainly by two manufacturers, Motor Sich and Klimov. But Russia has started a program to bring back engine production in Russian.

The objective is to produce around 350 helicopter engines per year inside Russia by 2016 (out of the 500 to 550 needed per year), Deputy Industry and Trade Minister Yuri Slyusar declared.

Outside Russia, Russian Helicopters knows also very well that one of its main weaknesses lies in its MRO capabilities worldwide. In the past few years, the company started increasing the network of service centers throughout the world. In this field, South America clearly is a key market as the Russian presence is very strong there. According to the company, Russian helicopters account for 42% of military helicopters in the region, where the total number of the Russian military and commercial helicopters reached 409 at the beginning of 2014.

As Jane’s notes, the company in 2013 signed a partnership agreement with local company Odebrecht to assemble and undertake maintenance, repair, and overhaul (MRO) operations on Russian Helicopter platforms in Brazil. Another MRO center is to be opened soon in Peru following the sale last December of 24 Mi-171 helicopters.

This month the company also emphasized its will to develop its service centers in Africa, a “keynote region for Russian Helicopters”, Alexander Mikheyev said, adding that Russian Helicopters is “developing a program of competencies and opening service centers for civilian and military helicopters delivered earlier under Rosoboronexport contracts”.



Republished with permission from ADIT -The Bulletin.