Putin:Russia will not save plane builders

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(Agencies)
Updated: 2009-08-19 02:10

ZHUKOVSKY, Russia: Prime Minister Vladimir Putin berated plane builders at the opening of Russia's premier air show on Tuesday, warning aviation bosses that the state will not support loss-making firms or defend bad managers.

Putin gave the sector an October 1 deadline to propose recovery measures and singled out state-run United Aviation Corp -- created three years ago to spearhead the revival of Russia's domestic aviation industry -- for signing unprofitable deals.

"I would like to warn you against the illusion that the state will cover losses indefinitely, pull you out of debt and correct management's mistakes," Putin told a meeting of industry managers and government officials at the MAKS aerospace fair near Moscow.

"We will invest in the aviation industry, but we need results."

The aviation and aerospace sectors, which inherited the Soviet Union's production base and scientific resources, are viewed by many analysts as among Russia's best hopes for diversifying its economy from oil and gas, its main revenue earners.

Putin said the industries, which have enjoyed a twentyfold increase in state funding since 2004, were priorities for Russia, along with nuclear energy and shipbuilding.

"Through these sectors, we hope to increase the share of high-technology industries in domestic production and therefore increase stability and diversify exports," he said.

"We understand that the situation is difficult and your competitors are using their governments' support, but you should not repeat somebody else's stupid mistakes."

Modern planes

Putin, while president, created United Aviation Corp in 2006 by merging most state-run aviation industry assets into one company at the height of Russia's oil-fuelled economic boom.

The corporation, also known by its initials UAC, is developing a series of modern planes, such as the Sukhoi Superjet-100 and Antonov An-148 passenger liners, the Ilyushin Il-96-400 cargo plane and a 4+ generation of fighter jets.

UAC President Alexei Fyodorov said deliveries of the Superjet-100 should begin in the first half of 2010, later than the company's earlier target of end-2009.

Putin said UAC and its subsidiaries had debts totalling around 120 billion roubles, half of which are not backed. Managers had wanted to refinance debts at lower rates, as well as selling non-core assets and floating the company's shares.

"Today, these decisions will not work," Putin said.

Russia is seeking to turn MAKS, a biennial event attracting tens of thousands of spectators, into a leading international aviation show and a venue at which major deals can be struck.

Preparations for this year's event were marred, however, by a crash between two Su-27 jet fighters from an elite Russian aerobatic group, which killed a pilot.

Putin paid tribute to the pilot and proposed a minute's silence in his memory before touring the Zhukovsky airfield, while fighter jets and the Sukhoi Superjet-100 roared overhead.

He said Russia's Defence Ministry had signed a contract worth 80 billion roubles ($2.5 billion), a record for the Russian military, to buy fighters from Sukhoi, owned by UAC.

By 2015, Russia's armed forces will take delivery of 48 Su-35 jets, 12 Su-27s and four Su-30s under the contract.

In 2009 alone, Russia gave 80 billion roubles to the aviation industry.

Deputy Economy Minister Andrei Klepach said the sector's share of Russia's economy was growing. Though this was mainly a function of an overall drop in industrial output, he said the industry was showing some resilience to the economic downturn.