Our conference pursues a somewhat unusual goal - to analyze the initial operational performance of a new aircraft type. It is as yet early to speak about full-scale operation for the An-148, but we already can draw certain conclusions based on the results of this aircraft's initial operation. Our airline's proposal to hold this conference, made after an internal analysis of the first operational results, was due primarily by our desire to put all parties involved in the loop as early on as possible, and to provide timely feedback on the aircraft's initial entry into commercial service.

First off, I would like to say that GTK Rossiya's choice of the An-148 was by no means accidental. We first looked at it back in 2004, when Pulkovo [the airline that merged with Rossiya in 2006] was retiring its Tupolev Tu-134 regional fleet. It was at this point that the airline began studying available options in the 60- to 80-seat capacity segment to replace the mainstay fleet; at that time, we were operating Ilyushin Il-86s, Tupolev Tu-154s and Tu-134s. We were considering the technical characteristics of the Sukhoi Superjet 100, and also of Antonov's airliners - in fact, we looked at interim aircraft versions that preceded the An-148, such as the An-74TK-300, the An-74-68, and certain others.

Our airline thoroughly studied all proposals and opted for the An-148. In 2007, we signed a financial lease agreement with Ilyushin Finance Co. (IFC) for six such airliners. The original schedule called for deliveries to be made in 2008-2009. In reality, we received our first An-148 only in December 2009. The second and third aircraft followed in early 2010.

Although the initial schedule slipped, deliveries continue at a dynamic pace. Three of our four aircraft already are in operation, and we expect to take delivery of the aircraft bearing registration RA-61704 as our fourth in June, followed by #705 in August, and #706 in November of this year. There is an obvious pace to these deliveries, signifying that production is now set up and running.

By the end of the year, Rossiya will have a fleet of six An-148s. So we decided to share our initial operating experience with you. Six aircraft already represents a serious fleet, and we are planning to log quite a few flight hours with them. Our airline's approach is this: the aircraft we buy must pay back our investment in revenue operations; they must justify our costs beginning this year.

It was not an easy job for us to negotiate for a customized aircraft version that would suit us. IFC, Pulkovo, Rossiya and Antonov set up working groups; we held 12 meetings to develop additional specifications and agree on optional equipment. All this work was necessary to get what our airline needed.

We were not paying for a production aircraft in factory configuration; we were buying an airliner customized to our specifications, one that would meet our expectations as an airline. I am happy to say that in the end - thanks to an active participation of all parties involved - we got what we wanted.

This was followed by the production run and initial delivery. As it was the first production aircraft, we found a number of shortcomings, mainly those on the production side. We didn't blow them out of proportion, since we knew that the An-148 was a new-generation product for the Voronezh [VASO] plant, and that they had difficulties launching its production in contemporary Russia. But we also knew from our operational experience with VASO's other product, the Il-86, that the Voronezh plant was a top-class production site.

I would like to note that we were accepting our first An-148 for revenue services, not for operational tests. I think it is a target to be met by everyone present - to aim for delivering an aircraft in such a condition that would allow the airline to begin revenue operations immediately, within 48 hours. Because, you see, leasing payments start at the signing of the acceptance certificate. Although this is a performance conference, I am going to mention a number of economic parameters. After all, we fly to make a profit! And it is the An-148 that we pin our profit hopes on.

Our first An-148 has been used in scheduled service since December 21, 2009. Before the New Year, it completed several revenue flights from St Petersburg's Pulkovo to Moscow's Sheremetyevo and Domodedovo airports. But it would be correct to say that Rossiya began full-scale An-148 operation only in 2010.

All three aircraft we have now are serviceable. So far we have not been stretching them to the limit but they have accumulated quite some flight hours already. I think that 167 hours a month is a good figure for an aircraft that is just entering commercial operation. From December 21, 2009 to May 20, 2010, our An-148 fleet accumulated a total of 915 flight hours and performed 710 landings.

The current limited operation of our An-148 fleet is not related to the aircraft's performance. It is explained by the fact that Rossiya is short of An-148 type-rated pilots. The training system is not working fast enough in providing us with enough flight crew for all six aircraft we are to have received by the end of this year. Flight crew training today tops our agenda. An analysis of our An-148 fleet's effectiveness shows that even if each of the aircraft keeps flying 167 hours a month they will not provide a profitable payback.

In their operation, the new aircraft are experiencing certain malfunctions, which is only natural. I would like to make a special mention of this. During initial operation of the An-148, we did not find any defects that could ground it.

We cannot but compare the An-148's performance with that of Rossiya's other aircraft types. Take the Boeing 737-500, which we use on roughly the same routes. We now have five of this type, aged 15-19 years.

Our hands-on operational experience with Russian- and foreign- made aircraft tells us that it is possible to keep a mixed fleet airworthy, given appropriate maintenance. Now that the An-148 is a new aircraft type of the latest generation, we pay special attention to its operational safety and airworthiness, without sacrificing operational efficiency.

We compared the operating costs for the An-148 and the Boeing 737-500, and concluded that in terms of per-flight costs, the An-148 was unconditionally cheaper to operate. For example, total costs for a round-trip service between St. Petersburg and Samara amount to 26,116 rubles [$840 at current exchange rates] for the An-148, against 48,402 rubles for the Boeing 737-500. For a roundtrip routing between St Petersburg and Moscow's Domodedovo, it is 24,336 rubles for the An-148 compared to the 737-500's 30,018 rubles. Of course, in terms of seat-kilometers the economy will not be that impressive (384 rubles compared to 425 rubles for St. Petersburg- Samara, and 358 compared to 263 for Domodedovo). This is because of the An-148's smaller seating capacity (68 seats on the An- 148 vs. 114 seats on the 737). But here, again, we have to look at the passenger load factors. On the routes currently serviced by Rossiya, the load factors for the An-148 exceed 80 percent. This means that the An-148 is not only in demand today, it is essential to increasing frequencies.

To date, we are operating our new aircraft type on relatively short routes, such as St. Petersburg-Moscow. As the initial operational phase continues, we place the greatest emphasis on ensuring the aircraft's reliability. The reason why our An-148s fly to Domodedovo, Sheremetyevo and Vnukovo [in the Moscow region] is not because these are the most cost-efficient destinations for Rossiya, but because we have four daily flights, say, to Sheremetyevo, in addition to Aeroflot's 16. So [in case we have a problem with an An- 148 at one of the Moscow airports], we can always send a replacement over, or ask Aeroflot to pick up our passengers. The same with Domodedovo: we have nine daily flights there, so we can reach that airport at all times.

We have arrived at the conclusion that the An-148's highest operational effectiveness begins from 1,200-km.-long routes. With a full passenger load, the aircraft has a range of 4,000 km. We are currently forced to use it on the St. Petersburg- Moscow route because we need to closely monitor its airworthiness. In the future, we will start putting the airliner on longer routes in order to increase its operational effectiveness. All the teething problems must be rectified to result in a commercial success.

The aircraft has demonstrated a potential for intensive use on Rossiya's routes. On certain days, some of our An-148s would perform up to three flights. But in order for the aircraft to pay back the leasing payments airworthiness expenses, we must operate each of them between 10 and 12 hours a day. There are aviation specialists in this room who understand that for a short-haul aircraft to accumulate so many flight hours is not an easy task. Logging 12 hours a day is in fact quite a feat, but we must achieve this target.

What are we hoping for? The aircraft is still manufactured in small batches. But we expect the production rate to grow, leading to a decrease in production costs and lower spares prices. And we are interested in cheaper parts: we operate these aircraft on a financial lease, and have further fleet expansion plans.

We also hope that the production ramp-up, and a subsequent increase in the number of An-148s in global operation, will eventually bring the lease payments down. More parts will be produced, and changes will be made to certain processes that will make maintenance easier.

We are now readying the An-148s and their crews for international operations. Back when we negotiated with the manufacturer, we insisted that the aircraft must be equipped for flights to Western Europe. We are, after all, part of the international community, and we compete against foreign carriers. We have yet to integrate into the European air transport system with our An-148 fleet to fit into the global airport infrastructure. This is why, whether we like it or not, we are preparing the An-148 for international services.

Rossiya's task is to regain a leading position in the Russian air transport system, including through the increase of frequencies and the use of aircraft with just the right capacity. In this regard, we very much rely on the An-148.

Passengers are satisfied with the aircraft, which is great. Customer satisfaction is indeed paramount. But we should not forget that an aircraft is a commercial product. Several manufacturers now offer similarly-sized airliners. The An-148 is coming of age in a cutthroat competitive environment.

We all have to face competition. People keep asking me: why don't you increase revenues by increasing airfares? But how can I raise them if there are five or six other airlines out there, working the same routes and competing with us in the same price niche? It often happens that we putting an An-148 on a route that is already serviced by our competitors' Boeing 737s and Airbus A320s, as well as by new regional aircraft types. In essence, we have found our An-148s pitted against the larger Boeing 737s, even in the domestic market. Well, as compared with the 737-500, the Antonov indeed offers lower operating costs on a per-flight basis. But we also see the burden our airline carries by operating of this new aircraft type.

For us, there is no question of whether this aircraft is good or bad. Let me put it straight: the An-148 is very much a good aircraft. It has proved worthy of airline service. But we, together with the manufacturers, have yet much work to do to improve it and make it into a good commercial product able to unseat the competition.

We have visitors from various airlines, including from foreign carriers, who ask us about our experience operating this type and the labor costs involved. We tell them that the An-148 is a very good aircraft. We do have certain issues, but we seek to resolve them together with the industry.