In this context the airshow was full of business meetings, which form the basis for future sales. For instance, Russian lessor Ilyushin Finance & Co. (IFC) held dozens of meetings with potential partners, first of all, potential customers for Sukhoi Superjet 100 aircraft. Russian companies did more than just sign a contract for delivery of 8 SSJ100s; in fact, IFC and Sukhoi Civil Aircraft Company (SCAC) offered a brand-new product to foreign SSJ 100 customers. Moreover, terms of a contract with Bombardier for deliveries of CSeries Family aircraft were improved and the parties also negotiated deliveries of Q400 airliners. According to participants of these meetings, the parties have come to interesting solutions, which will be implemented soon in the form of contracts.

First of all let’s talk about Bombardier CSeries. It is expected that the first CS300 jet will be delivered to IFC in April 2016. Initially the first aircraft of the type should have been delivered to the Russian lessor in November 2015, but problems with the engine prevented the Canadian airframer from showcasing the jet at the airshow and caused delays. However, four months delay is no big deal in the network of development of the brand-new airliner offering superior passenger comfort, low fuel consumption and outstanding economics. In this regard, the parties have agreed to improve the terms of the contract and signed corresponding documents at the airshow.

CEO of IFC, Alexander Rubtsov, commented on the situation: «Taking into account problems encountered during flight testing the airframer did us a favor. In general, we have significantly improved the contract terms and the deal became more attractive for us. In future IFC may consider placing a follow-on firm order for CSeries jets, but we need to analyze the program’s schedule first. We will need our shareholders to approve the deal for purchasing more aircraft of the type. I think the chances are pretty good that they will approve it taking into account the improved contract terms reached at Farnborough-2014».

Sukhoi Superjet 100

While CSeries program experiences delays once again, SSJ100 project gets another boost. This time the boost is provided by IFC. The lessor signed the contract at the airshow for delivery of eight SSJ 100LR (Long Range version) aircraft. The deliveries will be started in September 2015; the contract should be implemented in the first or second quarter of 2016. In other words IFC will take delivery of Russian-produced jets before the delivery of Canadian-produced ones. That’s good to know.

The words of the president of Sukhoi Civil Aircraft Company, Andrey Kalinovsky, about phasing out imports also pleased public-spirited visitors of the airshow. This refers to increasing the share of Superjet components manufactured in Russia.

We remind you that the French party reported at previous Farnborough airshow that the share of Superjet components produced in Europe and USA was “over 60%” in 2012. How much will it decrease? That’s what the president of SCAC said: «I’d rather not discuss the percent right now: this is a very difficult and serious process. We are all for increase of the share of Russian suppliers. But first of all we need to travel a long way connected with certification (including certification of production facilities). We must prove to certification authorities that Russian companies are able to manufacture high-quality products».

The airframer (SCAC) and its “major suppliers” obtained required EASA certification. But the second-tier suppliers are falling behind. However, efforts of the Russian government may help solve this problem. «There are a number of projects focused on launching production of the jet’s components in Russia. They require a long and serious process of certification and starting the production. Upon implementation of these projects it would be possible to increase the number of Russian-produced SSJ 100 components», - Kalinovsky stated.

European customers

IFC intrigued the community by signing the contract for 8 Superjets. But the statement of CEO of the company was even more intriguing, because he stated that the jets would be leased to European carriers. «Since we were able to offer a new product based on operational leasing of SSJ 100 aircraft, we decided to sign the new contract. This product is intended for European customers».

Rubtsov declined to name the potential customers making a reference to European rules and etiquette: usually European companies do not unveil their customers before signing a contract. Meanwhile, many parties were interested in IFC’s portfolio at Farnborough airshow. «Over the first three days we held meetings with ten European companies, - Rubtsov said. – Among them are British companies and the ones performing flights to Western and Eastern Europe. Many of them are replacing outdated aircraft with new state-of-the-art vehicles. We are focused on airlines operating really outdated airliners, like Fokker 100 and BAe-146. There are a lot of such carriers and their problems are rather severe. I think that Sukhoi Superjet 100 is the ideal replacement for the abovementioned vehicles».

We can succeed in Europe provided that Russian companies will be able to offer reliable and efficient aircraft as well as convenient financial instruments. «The vehicles, which are being replaced, are very cheap – their residual value tends to zero (occasionally it may reach $3 or $5 million per aircraft). In order to make an affordable offer and replace these liners we need to have the corresponding financial instrument», - Rubtsov said.

The high pegged rates of interest at Russian debt capital market make negative impact. Even in case of export credits the rates of interest in Russia are higher as compared to foreign rivals. «So we have to use all of our instruments in order to offer a competitive product. We are guided by the level approved by OSR countries and we would like to achieve it», - CEO of IFC continued. As you may know, for a state with «Double B» rating the current rate of interest varies from 3,7 to 4,2 percent per annum. «We are using competitive interest rates, guarantees and assessment of residual value. We are using this combination for the first time ever».

Joint efforts

IFC has been working on the “European package” for 9 months. IFC is working closely with SCAC, United Aircraft Corporation (UAC), financial institutions, Ministry of Industry and Trade. More business meetings were held at Farnborough-2014. Despite the fact that IFC placed an order for 20 aircraft earlier, the parties decided to sign another contract for delivery of 8 SSJ 100 jets. They said that this contract differs in terms of “structure, geography and product”. It will be implemented with the support of UAC and Russian Ministry of Industry and Trade. In fact, Russian companies introduced the new product at the Europe’s largest airshow – “long-term operational leasing on favorable terms”.

The latest contract for 8 SSJ 100 airliners assumes “another price, another delivery dates and another configuration of the aircraft”. Now everything is set up for European market. «Since MAKS-2013 we have carried out market studies and now we understand what we need to do to sell this aircraft, - Rubtsov said. – It is not that easy for Sukhoi Company. We are working as a part of commission headed by Dmitry Rogozin and we are also working closely with suppliers. We have made a conclusion that we need to change the offered financial product dramatically in order to meet the needs of European airlines. Attempts to sell the jet for $30 million “head-on” can hardly be successful since new programs have been announced  (Brazilian Embraer E-2, Japanese MRJ, Canadian Bombardier as well as Chinese aircraft). You may sell a number of airliners, but not 60 ones per year as SCAC plans”.

High output is essential for efficient work of the production chain. If the country wants to transform the political project into a commercial one, it must make efforts using its agencies, industry, banking system and leasing companies. «I believe that we need a new financial product and different well-defined state support measures», - Rubtsov said.

In other words, the companies are attempting to “breach the European defenses” using the abovementioned eight Superjets. Having held a number of meetings with local carriers on the eve of Farnborough-2014 and during the airshow, IFC “felt” that they were interested in operational leasing of the Russian aircraft. «Our offer includes new instruments that we have right now. These are subsidies based on assessment of rates in accordance with OSR level, guarantees, provided by Russian government in terms of export, new approaches to assessment of residual value. Moreover, there is an «entry into service support». At present it is provided by UAC, but since 2016 it will be provided by the Ministry of Industry and Trade”.

While matters are settled in the ministry, UAC took responsibility to provide «entry into service support» for its products. The corporation provided IFC with “serious” guarantees in terms of residual value of SSJ 100 jets and after-sales support. «We believe that such package allows SCAC to enter market with a very competitive product. It will be much more attractive for our customers in terms of lease rates and support package», - CEO of IFC explained.

What is included in the package provided by the manufacturer? First of all, training of flight crews. Secondly, warehousing services. The main spare parts storage will be located at the base airport of the customer. Access to the central spare parts storage in Frankfurt will be granted. Thirdly, minimum kit of ground equipment required to operate the aircraft. Fourthly, additional support program for engines. Thus Russian companies offer the integrated product including financial instruments as well as the package provided by the manufacturer. «We have been working together – analyzed and compared our offer with the products offered by our rivals. The current package looks very attractive», - Alexander Ivanovich Rubtsov added.

Southeast Asia

The contract signed at Farnborough airshow “complements” the previously signed ones. A contract clause that specifies differences between them is related to “geography”. Rubtsov explained that the contract signed at MAKS-2013 airshow was focused on Asia-Pacific Region. «At that time by two-thirds we focused on customers SCAC already had in the region. We planned to deliver more airliners to Sky Aviation and LAO Central. We agreed to finance these deals under certain conditions. However, for various reasons both carriers are unable to purchase additional Superjets – the negotiations got stuck. Now IFC has completely changed its focus and it is ready to promote the vehicles at different market - Europe. We have changed everything we have done before in the network of the contract for 8 SSJ 100s. Actually, we have remade everything».

Meanwhile, work with customers from Southeast Asia continues. IFC and Sukhoi are elaborating plans for increasing the number of Superjets operated in the Asia-Pacific Region. Most likely the additional aircraft will be delivered to the region later than planned. «We hope that the new product developed in cooperation with SCAC, UAC, governmental agencies and ministries will be in demand at different markets (including Europe)», - Rubtsov said.

Optimistic expectations are also connected with the start of operation of new Sukhoi Superjet 100 versions. Today most SSJ 100 operators are operating SSJ 100B version. At Farnborough airshow IFC signed the contract for delivery of SSJ 100LR jets. «We have placed the order for jets with maximum takeoff weight, but they may be “customized” later to meet the requirements of certain customers. Some of them operate aircraft from airfields located near cities. They need to have maximum thrust-to-weight ratio with a defined weight, while the number of seats may be reduced», - CEO of the leasing company noted.

Signing contracts with optimism

So the contract for 20 aircraft of the type remains. Possibly so much Superjets are a serious load for a “not so big” Russian leasing company (as compared to the world’s leading lessors). «Two years ago when we discussed the terms and conditions of the deal we were “newcomers” and we knew little about the aircraft. Now we decided not to terminate that contract – it will remain in force. If we lease the eight aircraft delivered under the contract signed at Farnborough-2014 successfully, then we will order more jets. We will add 20 to these eight vehicles and restructure the old contract. Unfortunately, I cannot imagine how to implement the old contract in its current form. Looks like we had too much optimism two years ago. Now we have studied the requirements of the carriers and changed our offer together with Sukhoi Company. If we lease these eight SSJ 100 aircraft successfully, then IFC may increase the number of ordered jets to 30 ones», - Alexander Rubtsov added.