MC-21-300 aircraft. IMAGE: Sputnik
The Russian civil aircraft industry has a wide range of problems. Most of these problems are related to the under-spending on this field. In own turn, the luck of spending has been related to the lack of successful projects, first of all domestic- built medium-range aircraft.
Leaders of the industry and the Russian top leadership understand this problem. This is why in 2006 the United Aircraft Corporation started working on an initial design of the Irkut MC-21 single-aisle twinjet airliner. By 2019, the plane has been finalized. It’s ready to enter into a serial production. However, if one wants to achieve a success with the MC-21 project, customers and funds are needed.
It has been expected that the government will contribute significant efforts to convince Russian companies to buy the MC-21 providing using both input subsidies and administrative measures. However, on April 2, Russian newspaper Izvestia reported that the government would not oblige low-cost airline Pobeda Airlines [a wholly owned subsidiary of Aeroflot – de facto national airline of Russia] to buy MC-21 planes instead of Boeing 737 MAX. The number of planes in the question is 30.
This decision, which was made during a meeting involving Deputy Minister for Industry and Trade Oleg Bocharov, Aeroflot CEO Vitaly Savelyev and UAC President Yuri Slyusar, was formally motivated by ‘lower costs’ of the Boeing 737 MAX exploitation. Even if the formally declared reason is true, the decision to allow a de-facto state-controlled entity to buy foreign planes instead of domestic ones goes contrary to actions of any government seeking to develop own economic and state. Such decision was impossible in the USSR. However, even in the modern “capitalistic” world, such decisions are barely made by any developed country. One of the most recent successful examples of protectionist measures designed to support domestic industry is the US. The Trump administration is not counting cents of particular economic entities. It’s supporting the US national industry in general pursuing a strategic goal.
As to the situation with MC-21, it would be also interesting to look closer at the numbers used as an explanation of Pobeda’s decision to buy Boeing 737 MAX planes. According to the report, the daily flying hours number by one Boeing 737 MAX is 13.2. At the same time one MC-21 has 5.8 daily flying hours in the first year of the exploitation, 7.8 – in the second year and 10.3 – in the third year. In the fourth year and further, one MC-21 would have the daily flying hours number similar to those one of the Boeing 737 MAX.
Let’s suppose that these numbers are right. So, we can count a possible difference in flying hours between 30 MC-21 planes and 30 Boeing 737 MAX in 3 years.
- First year: (13.2-5.8)*365*30 = 81,030 flying hours
- Second year: (13.2-7.8)*365*30 = 59,130 flying hours
- Third year: (13.2-10.3)*365*30 = 31,755 flying hours
- Total: 171,915 flying hours
One service hour of such aircraft costs approximately 8,000 USD. Taking into account this number we can get that the Russian government will need to provide 1,375,320,000 USD [$1bn 375m 320thousands] in subsidies in order to fill the created gap.
Now, let’s count the difference between the cost of the aircraft:
- One Boeing 737 MAX costs about 120,000,000 USD [$120 m]. 30 planes – 3,600,000,000 USD [$3bn 600m].
- One MC-21-300 costs 96,000,000 USD [$90m]. 30 planes – 2,700,000,000 USD [$2bn 700m].
Therefore, the cost of 30 MC-21-300 planes is 900,000,000 USD [$90m] lower that the cost of 30 Boeing 737 MAXs. It’s clear that depending on terms and conditions of the reached contract the cost of one plane [both MC-21-300 and Boeing 737 MAX] can be different, but these numbers allow to get a general perspective.
Taking into account the difference between the exploitation costs and the cost of the planes themselves, it’s possible to figure out that the real number of the subsidies, which the government would have to contribute to support the decision to buy MC-21 planes, will be 1,375,320,000 USD [$1bn 375m 320thousands] – 900,000,000 USD [$90m] = 475,320,000 USD [$475m 320thousands].
It is hard to suppose that the government, which is really aiming to develop the national industry, will not find this amount of money to support the key civil aviation project. Furthermore, $2bn 700m spent on 30 MC-21 planes will remain in the national economy and contribute to its further development.
Additional data in response to the asked questions:
This reasons of the decision to choose the Boeing Boeing 737 MAX mentioned and addressed in this article are those one provided by Russian state media and officials. Nobody pointed out the lack of production capabilities as the reason of the decision. If one wants to get details regarding this issue, it will be useful to request the MC-21 producer.
If the MC-21 producer is not capable to deliver 30 planes in 2019, this is not a reasonable reason to reject the plane. It is always possible to buy all MC-21s, which are produced and get the rest needed planes from a foreign manufacturer. However, we once again want to draw attention to the fact that the official named reason is the “daily flying hours” issue and its economic impact on the exploitation – the cash.
Boeing 737 MAXs have been recently grounded in multiple countries around the world because they officially recognized to be unsafe. Even the US, where Boeing is located, did this.
Funds, political willpower and adequate control are the core factors that would give the MC-21 project a chance to become successful. 30 planes, which Pobeda could buy, is an obvious source of the funds.
Another important factor is the customer. Pobeda is a wholly owned subsidiary of Aeroflot. This is a formally low-cost airline. However, its prices are higher than in similar ‘low-cost airlines’ in other countries, in particular in Turkey. Pobeda has repeatedly been in the center of various scandals related to its prices and approaches to clients. Aeroflot itself is formerly the Soviet national airline, which later was transformed from a state-run enterprise into a semi-privatized company by a very questionable way. Currently, 51% of Aeroflot is owned by the Russian government.
Aeroflot and Pobeda receive various government subsidies and preferences, which they use to generate income for own top management and affiliated circles. The general practice is that income of companies financed by the nation should be limited by law or be close to zero. However, as it’s possible to see the case of Aeroflot and Pobeda is different.
This state of affairs was established in the 1990s. The key question is why has the Russian government contributed little efforts to change it?
Dear Russia, get your fucking mind in gear or are you CHICKEN ?. China just went over to France and bought 300 x airbus.
JC, can you get any more stupid ?.
Personally , the Boeing 737 max is not an aircraft I would fly in , due to its safety/ crash issues and also being an American product.
As written before there are about 9.998 boing 737 flying and only max has big problems, which hopefully will be eliminated.
Have fun.
https://www.therichest.com/rich-list/most-shocking/top-10-most-dangerous-passenger-planes-currently-in-service/
A plane with a see-saw built in for safety – USA, USA, USA.
Unfortunately, Putin takes the capitalist BS seriously. He is an old fashioned liberal/conservative (no contradiction) capitalist leader.
No he is not. The article lacks serious reaserch. the ms21 does not have any certification to fly (even a russian certification) let’s not talk about production yet (read about the difficulties with the engine and wing parts) and Pobeda is growing fast and needs it’s planes now to keep it’s market share growing … the 737s will begin being delivered in 4th quarter of 2019 .. 3 to 4 years before any MS-21 could be sold to Pobeda… Waiting for it and canceling the 737 will be shooting yourself in the leg
In general Boeing 737 MAX are extremely unsafe. I though that everybody landed them already till investigation is made and the risk of loosing your life on it is zero to none.
yes they are grounded but other compagnies did not sell them and are not cancelling orders + the contract for 20 737 Max for pobeda was signed before the incidents. here the article discusses the lack of MS-21 orders not the safety of 737 Max. my point is if it wasn’t the 737 Max Pobeda would order the A320neo … waiting for the MS-21-300 is simply impossible
Next time You might write : “I You cant love the one You love, love the one You wish :)
“ms21 does not have any certification” Okay, didn’t know that. I thought it was in serial production already. Now I read it’s still in the flight testing phase, not yet certified.
the ms-21 story is long, very long and complex … it’s about russian politics economy and US sanctions. Russia is not willing to go in debt which makes the spending limited. plus Russia is growing it’s reserves and safety funds which makes spending less than the budget revenue… The MS-21 was on schedual to be ready by this year but then sanctions made a Japanese compagny halt exports of parts of the wings made from composite materials (stronger and lighter which gives the Plane advantage over it’s competitors in fuel consumption) this major step back made the Irkut company look for alternatives which were not available because of sanctions so Russia had to do it itself. which took a year and a half to make a product with similar characteristics and be read to mass produce it. now they are still testing the new parts. plus without foreign parts it will make getting certification in foreign countries hard… (airbus puts General Elecric or pratt and whitney engines in their planes to get certification in usa easier because the usa will have more production with the existance of these planes and boeing uses RollsRoyce engines too which are european). without certification in Europe and USA the airplane is useless because it can’t use these airspaces without local certifications so it will only fly in russia-china which will limit the numbers produced and increase costs per piece… so even after the end of tests and russian certification … the future will not be all laughs for irkut and MS-21 (it’s a shame that being a magnificent plane is less powerful than politics these days)
Well, never mind the plane issue, but in general, you want to deny that Putin is a (neo-)liberal capitalist (Dont confuse economic neoliberalism with liberalism in regard to society, they are 2 different things!)?
He had been groomed by the Yeltsin clique, and while his government had indeed made huge strides away from the 1990s, he still is a capitalist in nature.
His economy politics are more neoliberal than even many western countrys! Kudrin style.
IMHO one can be glad for Putins foreign policy mostly (with some big cons), but his economic policy is crony and oligarchic capitalism, with the people paying the price with neoliberal pseudo “reforms” like pension reform, while Oligarchs like Oleg Deripaska can get even fatter..
if the biggest example is problem of the pension reform then it is easy to explain. the pension system is easy: people who work now are paying for pensions of the people who are retired. you know that russia has a demographic crisis => less working power each year. each year the people who are reaching 18 are less and less but the number of retirees is encreasing (life expectancy is encreasing) so the result is the money that current workers pay is not enough to pay pensions. to that there are 4 solutions: -paying more from budget and going into debt: impossible and will not happen and this is a good thing. -making the working force pay more to cover the gap: workers will not accept. -making the retirees take less: they will not accept -encreasing the working force : chosen solution and that is done by keeping people work longer … increasing the retirement age. if you can think of any other solution tell me
There are seveal.
We see it here in Denmark and other places. We make more advanced products and by that gets more benefit pr working person.
We also reduce waste recycking things well, when it saves money. We also insolate our houses and the piplines with hot water for heating. Our powerplants for heating also in periods make a lot of electricity as a kind of Turbo prop system. They sell the electricity and lower the prices for heat by that.
Windows in insolation is very important. Velux is one of the largets window producers in the world, adn it any time is saving money changing to them or semilar.
I can tell about my own small house. When I took over, it used for 16.000 kroner and even its an old house made in 1943 we did, what we could, and it went down to 8.000 and not only that: All parts of the rooms were warm and comfortable. 37% saved for an old house. Thats a lot – unless of course You create Your own firewood. Thats cheeper.
And the last one is to live close to where You work. You might not even need a car and can rent one for vacation and transport a couple of tíme a year.
“people who work now are paying for pensions of the people who are retired” I always hear this. From the 80s, productivity doubled, so half as many workers produce the same (on average). Regarding debt, Russia has an enormous currency reserve in funds. Of course things aren’t simple but people more or less are aware of the above, so no wonder Putin’s ratings have suffered the first substantial and real decrease in a decade due to this “reform” which looks like a typical piece of liberal idiocy that served so “well” the “West” (like Hungary, my country).
yes productivity doubled but prices also doubled. compare prices in the in the 80’s and prices now I don’t know what you mean but if you mean that retirees now should be paid only the amount they produced when they worked well then they might as weel not get any money… the fact that popularity drops is not an arguement that he made a bad decision. I gave 3 solutions each one of them would have dropped his rates. when there is a crisis (sanctions) and lack of working power (demographic crisis) will limit your economic growth there aren’t many options left. either let the country drawn in debt waiting to go bankrupt in first 2008-like crisis or make the population work more. he chose the latter. if he chose the first option what happened to the USSR in 1990 will happen to the RF in the first crisis if they spend the reserves on pensions.
I have the feeling that you missed my point. The lack of working power is not a real problem, since (a) productivity is high (and getting higher) so less worker can produce the same or more, (b) there’s sizeable _unemployment_. Actually, there’s no demographic crisis at all, and I haven’t even mentioned immigration. Also, people understandably have a hard time understanding this threat of “debt” when currency reserves are at 0.4-0.5 trillion.
Specifically, the argument that the “prices doubled” is a complete misunderstanding of the meaning of productivity. Of course the output per worker also increased and actually this increase is relatively bigger than the price increase (actually if prices double, output value is four times bigger if productivity doubles). Nowadays a computer is a bit more expensive in absolute terms but extremely cheap in relative terms compared to the 80s.
first of all there is a demographic crisis russian population went from nearly 150 millions to 140 millions from 1991 to 2005 now it is steady at 144 (with the two million added with Crimea) means naturalised + newborns are equal to the dead which means the working Class is getting less. https://www.populationpyramid.net/russian-federation/2017/ people between 30 and 34 are more than people between 25-29 and decreases for 20-24 and even more for 15-19. means that every year the number of workers will decrease. for example when thhose aged 50 to 54 (7% of population) retire those aged 15-19 will start working (only 4.5%) that’s a whopping 3.3 million workers less in the country (means also 3.3 million consumers less as retirees tend to spend less with less income)… now tell me that is not a problem… and also give me an example of a country with growing economy and decreasing population. People who do not understand the consept of debt are just dumb and should be denied the right to vote. the 500 billions in reserves is there for crisis years … when the economy crashes by 10-15% and the government has to keep compagnies alive just like in 2008. if they spend it on pensions now then in first crisis the country will go bankrupt
“also give me an example of a country with growing economy and decreasing population” Finland. Among others.
“should be denied the right to vote” Why do you want to exclude yourself from the next voting?
“the 500 billions in reserves is there for crisis years” The reserve has been growing in the last 4 years despite a quite serious crisis (still partly ongoing). This is idle money, should’ve been invested. Moreover it is in the end just a claim against (mostly Western) future production, and the Western financial system is extremely compromised, manipulated, and corrupt. Check Venezuela, and the fact that in a real crisis the West simply denied access to its reserves. Actually, the Russian economy is quite independent and autonomous, and it can survive much extreme crises as well.
-Get your facts right: Finland has Population Growth of over 2.5% in the last 10 years. they lost 10K people in the last 3 years but gained 150K in the 5 years before that… -I do not Vote Anyway … Do not concern yourself with me. -and again Get your facts right https://tradingeconomics.com/russia/foreign-exchange-reserves there is a scale just under the chart put it on Max and look at how much the reserves decreased in the 2008 and 2014 crisis and again in late 2016 when oil prices Dropped again. and foreign reserves are not calaim or whatever ther are more and more physical currencies and Gold (Russia has been selling it’s foreign bondsfor a year now). and to say they should invest all that money is just rediculous. there is no country (or person) who would use all teir money and not leave a safety cushion. that is what economies (reserves) are for. and again seeing how GDP and Reserves Dropped in 2008 and 2014 shows that Russian Economy is not that independent
“Finland has Population Growth” Please get the facts right. From 1985 to 2005 Finland registered a minuscule cumulative population growth, but this was the period of greatest economic increase. Hungary in the second half of the 90s had a decreasing population (significant decrease) with a substantial economic growth. Nigeria has a substantial population growth with decreasing economic output. There’s no mechanical relationship between the two. The are related of course.
“not leave a safety cushion” Libya had a safety cushion of 150 billion dollars (we are talking about a nation of 6 million people :) ), and it got stolen immediately by the West. The Russian gold buying campaign is probably a reflection on this, conversion to a more secure form. Actually, reserve is not exclusively money, wise investment is also a kinda reserve. The Chinese are buying up foreign companies for hundreds of billions of dollars per year. They are apparently in a kinda panic ‘cos their reserves are so high there’s a possibility that they will never be able to use them.
Actually, this “decreasing population, increasing output” is a bit irrelevant to your original claim. This is a stronger claim. You originally talked about the pension system where the time span would be cc. 30-50 years. In short term, population and economy can move quite independently. In the long term, technological progress can change the picture profoundly.
-Now you are making points I did not make. what I said is the working force is decreasing in russia by hundred of thousands every year. why ? because in the 90s people did not have much babies so now the people aged 20 to 30 (14 million) who are supposed to begin working are not enough to cover the jobs of the retirees aged 55-65 (between 19 and 20 million). the decreasein population does not hit immediately it hits when that generation reaches the labour age. -About your point with Nigeria it is not a stable country comparison is not possible. Russian economy is already established and it needs growth not building which brings us to your Finnish economy in 1950 post war ofcourse it was going to boom. -if we cannot agree that 5-6 million people less in the working force (working force decreased by 6-7%) is bad for an economy and pensions system let’s just stop discussing this. sinse you think russia is not facing a demographic crisis then we are not going to agree here ever. so let’s end it here.
“Now you are making points I did not make” Actually I tried to help you. From pensions you arrived at populations, a much stronger claim.
“if we cannot agree that 5-6 million people less in the working force” It has already happened. Russia’s GDP has surpassed the USSR’s with much less people in the workforce. Technological progress in a generation’s time can be profound.
Its very often very difficult to admit something, You never has denied.
In my own oppinion Putin is a very bad and ineffective kapitalist or a strange version of a neocommunist.
If he was some of Your fine titulations, there would be created millions of jobs to pay for enough pension for the ones, which need it.
Putin is a failure. Unfortunatly I see no one better and those few even seemes to be forbidden.
The grabbers of today unfortunatly are the same we saw before USSR collapsed., Unfortunatly those also are same of a kind with a lot around the world.
Those dont care for anybody else and should be removed or seized down.
you seem to be forgetting two major things: the problem is not creating jobs because unemployment rate in russia is 4.5%. the problem is there are less and less people working every year. it is a demographic crisis. and the second point is this country used to be communist everybody was working for the government and everybody was getting pensions from the government now most people still get pensions from government but percentage of people working for it is less
Aeroflot itself has an order of 50 MS-21-300s. With other Russian Leasing Companies having 110 firm order and 90 optional … so the russian Government is doing it’s part. For Pobeda itself they need the 737 because their delivery is near and they need the planes for their development projections… they can’t wait for the certifications and production of the MS-21 … they will be waiting at least until 2022 without any planes.
They could go for Airbus instead of Boeing…
for a low cost company (Pobeda is lowcost) mixing origins on a 50-60 plane fleet is bad. paying a contract for maintenance of 60 aircraft with boeing costs much less than paying for 30 with boeing and 20 with Airbus. Pobeda already has 30 Boeing 737-800 (original planes from the start of the company in 2014 from mother airliner Aeroflot)
Dear Хасен Жасем Халфет, it will be nice if the logic behind this decision was the one, which you suggested. However, reports in the Russian state media include no info regarding the fact when the planes are needed. Additionally, our article does not address the issue with the Boeing 737 MAX itself. These planes are officially recognized to be unsafe by multiple countries around the world and have been grounded even in the US. You are right pointing out “110” ordered planes. The issue is that 30 planes are over 25% of 110. These funds are essential for the Russian aviation industry in the current complicated environment. Funds, political willpower and adequate control are the core factors that would give the MC-21 project a chance to become successful. Regarding “the certifications”, if there are funds, political willpower and adequate control, this issue will be solved in a short time. Anyway, many thanks to you for submitting additional information and your point of view toward the situation. Sincerely yours, SF Team
Reporters from the state media are not experts in Airlines (I am not an expert too but I am interested in planes it is my hobby and I know more than the average person). first of all the order from Pobeda is of 20 not 30 airliners (a simple reaserch was not made by the writers in the articles of the local media). Second the airliner needs more planes to grow it’s destinations and market share. if it does not get new planes it may lose market share to another compgny. that is why Pobeda requested the import of 50 Boeing 737Max (not airbus because they already have 30 737-800 and having mixed fleet will increase maintenance costs which is bad for a low cost company). the government gave permission to import only 20. and asked the company to buy MS-21 to replace the other 30. https://russiabusinesstoday.com/travel-and-tourism/pobeda-airlines-could-buy-russian-planes-instead-of-grounded-boeing-737s/
There is still many traitors in Russian elite. The biggest power of the west was always the money printers that gives the global oliarchy the ability to buy as many traitors to their nations as they need.
Read other Comments… the article is mistaken. the 737 is already in production. Pobeda will begin receiving Planes this year. MS-21 will not begin production before 2021 (still does not have any certification to fly even in russia let alone other countries because engines and wings parts are still in test)… are we asking the Airline to stop working for 3 or 4 years until they get the MS-21 ? even if they cancel 737 max orders for safety reasons they will most likely get A320neo from a leasing compagny.
that is possible. But that does not mean that there is not many traitors in russian elite…..
I believe you do not know its impossible to produce enough MC-21 to deliver them for current bookings until 2021 or 2022. So the airline would have to wait like forever?
exactly my point.
Dear Xeloss, This mentioned in our article issue is widely circulated in the Russian state-run media. Nobody pointed out the lack of production capabilities as the reason of the decision. If one wants to get details regarding this issue, it will be useful to request the MC-21 producer. However, even if your version is true, and there are no capabilities to produce 30 MC-21 planes in 2019, this does not mean that this is a reasonable reason to reject this plane. It is always possible to buy as much MC-21s as they can and get the rest from a foreign manufacturer. Furthermore, Boeing 737 MAXs have been recently grounded in multiple countries around the world because they officially recognized to be unsafe. Even the US, where Boeing is located, did this. We once again want to draw your attention that the official reasons named by Russian officials are the “daily flying hours” issue and its economic impact on the exploitation – the cash. Sincerely yours, SF Team
Well the planes to be delivered in 2019 are probably not ready before 2020 and Aeroflot will get the first 50 or so. It means if they booked 30 more they would be delivered in 2022 what will fly in the mean time?
As for the 737 MAX I believe you think they should rather choose Airbus if they need planes right now or what? As for political reasons as long as Trump is president I believe the eastern European culture and vision of state differs much more from the French (Macron) or European Union one than the American one today. I choose USA with Trump 10 times before the European Union with all the socialism, degeneration, taxes etc. itd.
Russia differ in culture much more from the European Parliament and the EU idea of removing sovereign states in Europe than from the US in fact. We want to be free not be controlled by the state in every aspect of life even the cars. If I could choose EU falls apart vs US falls apart. I would choose EU every day before US. And not only for the reason that then Poland would be free and could come closer to other Slavic nations.
the problem is the writers of the articles are thinking less logically and more chauvinisme … the fact that Pobeda is buying 20 737Max (to be delivered between 2019 and 2021) does not mean it will not buy MS-21 later. it is true that new airplanes are not exploited at max capacity from the beginning that is why low cost Airlines do not buy new jets. they only use planes with well known parameters and well established after sales services etc. to maximise profit low cost compagnies have a small fleet and exploit planes to the max and can’t afford having grounded planes. that is why Pobeda can’t be the first customer of MS-21. the first customer must be big buyer (aeroflot 50 planes). the intention of the writers is good but their limited knowledge about Airlines had them make some mistakes. on economic level Pobeda can’t afford to buy MS-21 now. it’s up to Irkut to make a plane with characteristics as good as they say. when it is delivered to Aeroflot and Redwings and passed it’s 1st year Pobeda will know about it’s efficiency and after the end of 737max deliveries will buy the MS-21
The strategic task of procuring independently strategic gear should also take into consideration human nature.
If you say to Ivan, or to Chang, or to…. (you name him) that the project is so strategical that no matter what then Ivan, or Chang or.. (you name him).. will get the contract
He will ask the government 100, so allocated: 50 to produce the project 50 to distribute between friends, relatives etc..
On the other hand if you keep open the possibility to source externally at, say, 60 then magically Ivan or Chang (or you name him) will source the item to the government at 59.
So is human nature. So I find logical behaviour of Russia and China.
I agree. Fredrick Bastiat already in 1800s explained in lucid detail the ignorant thinking that to use tax allocations to support domestic industry is a wise thing to do (in “What is seen and what is not seen”). Of course if a project is of a 100% strategic nature there is no choice but to use tax money, but the economic argument does not hold water, partly for the reasons you mention, and other reasons too.
I think something is missing. The reasons for the new 737 is long range relative cheep, and it do it -Apart from the 2 which has crashed :)
I only can wish Russia good luck. As we see for other companies very big investments are needed and there are no guarenty for succes.
Big insnt always beautifull. How many planes is needed in the air, if people wish for alittle smaller and more flexible ones.
Simple, boycott Pobeda airlines and force them to change theis treasonous (yes, treasonous) practices. As for the Kremlin, it is sadly still infested with many 90s kremlins.
Also, Boeing MAX?!? Who on their right mind will fly on that plane?!?
Possible scenario – what happens if Pobeda is the next to go bankrupt? Boeing gets back all their used, unwanted planes. No skin off Russia’s back.
In any case, the MC-21 will no doubt have some small issues that need to be rectified along the way. And in the aviation game I imagine the downtime would be very costly. So perhaps it’s better to phase it in gradually?