Q. SJI, together with its Russian partners United Aircraft Corporation (UAC) and Sukhoi Civil Aircraft Company (SCAC) took part in Farnborough Aerospace International 2016. Was it a successful show for you?
Yes, I think it was a very good show for us, because having the CityJet aircraft on display at Farnborough was a very important achievement. We got a lot of visibility, and captured a lot of attention. Selling Sukhoi Superjet 100 (SSJ100) aircraft to CityJet means our entrance into the European market. Many people, and delegations, came to see the airplane so that we had many opportunities to share about the deal with CityJet and to show our aircraft. In the past we brought Interjet aircraft for probably three airshows at Farnborough and Le Bourget. So the year of 2016 was the first one for us when we came with a different customer. CityJet has the same interior design as per Interjet. There are some differences, though: more seats and different colors. So I think it was good to show this new look of the aircraft.
SJI CEO Nazario Cauceglia, CityJet CEO Patrick Byrne, Interjet (ABC Aerolineas) CEO Jose Luis Garza
Q. You said the SSJ100 has been exhibited at many airshows already. Do you think the attitude to the aircraft and apprehension of the aircraft by the aerospace community changes as time goes on?
Yes, I feel confident about that. Do you know what? I get more and more feeling that we have overcome the first obstacle, which was to convince the market that the Superjet represents a great product. I get more and more of the feeling that the market is convinced about the quality of the aircraft. Everybody finds that the Superjet is a very good airplane. Do not forget that today it is the only “new generation”advanced regional jet in service. More aircraft of the class will come in the next few years. Let them come! We are the innovation of these days. Of course, technology means performance, operating costs and so on. I am confident that the market has recognized the value of our product. Nevertheless, the challenges are not over. Now we have to convince the market that the aircraft is not only good but also reliable. With that, we would be able to have them stay on the side of the product. Airlines can count on us for the product support of their fleet. This is very important for the market, and we are conscious of that. Today, it is not enough to offer a good product; it is not enough any more. Years ago it was sufficient. But now the market is much more sophisticated and demanding. Aircraft operators want to be confident that they would get for the lifecycle of the product the support that they expect. We have amassed a lot of positive experience with Interjet. We will use that experience to support our European customer in the best way. We know very well that the market will watch us very carefully. Many airlines in Europe will follow very carefully operational experience of CityJet. That’s why it is important that we stay effective and responsive. To show this product works to the world and to the market. To show that airlines can rely on us, being a new player in the market for regional jets. And we know we can do it!
Q. Interjet says they have amassed over one hundred thousand flight hours on their Superjet fleet already. Can you confirm that?
Yes, you got the right figure, which I can confirm. The airline made one hundred thousand flight hours. They made tremendously intensive use of the aircraft: six-seven cycles per day and almost ten hours per day. And they reach the mark of one hundred thousand hours very fast. Again, it was a very good experience for us. We will use that for CityJet and for our future customers.
Q. During a press briefing at Farnborough’2016, UAC president Yuri Slyusar said a decision has been taken on the stretched version of the Superjet. He also spoke of the NG version, which is a 130 seater. Had these announcements been adjusted with SJI? Do you approve of this plan, to produce a stretch and then NG?
Yes. For sure, SCAC is working on the stretched version. We know that very well. We exchange information, share our visions and plans. This stretched version should come to the market in 2019. Let me say: we changed philosophy of the stretched version. The configuration now in development has, let me say, metal wing redesigned to improve aspect ratio and get more aerodynamic efficiency. In the past there were discussions about the future of the NG variant. That time it was supposed to be a completely new aircraft with a composite wing and a brand new engine. Now the stretch version for us is a new wing design as I said but that wing is still made of metal. The engine is the same, yet with a 5% more thrust. It will be a 120 seat aircraft, with the range of about 2000 nautical miles. Despite the stretch version, we want to remain a regional jet, strictly regional, not going close enough to the narrow body. We want to serve our distinct segment. The takeoff weight should be not more than 55 tons. So, the stretched version is going to be a good step forward, but strictly remaining in the regional jet segment. This is our goal. With this philosophy we also keep the price of the aircraft low. If you develop a completely new aircraft, someone has to pay the development costs. This means extra costs to airline customers. We will contain the development costs in check, and would be able to offer our customers a family of aircraft while maintaining the price at reasonably low level.
Q. Who are this stretch for? Existing customers or new ones?
Both. Our idea is to capture more of the market with a family set around one product. But you cannot exclude that this might stimulate the existing customers to get more airplanes.
Q. Can low-fare airlines be interested in the stretched version?
I would put it into different way. We are conscious that we are entering a new market, which was dominated by the duopoly. This market has been owned by the two players only. Thanks God, there are some new comers, and we are one of them. The reason why other companies have decided to invest into that market segment is the following. This market segment seems rather promising for the future, for many different reasons. One reason is that the worldwide network of air routes is changing. There is a tremendous need for better connectivity in Europe, Africa and many other regions. The regional jet is an ideal platform to catch this need in connectivity. And to occupy the space that has been left empty by the big players. Now, coming to your point. Lifecycle cost is important for low-cost airlines. In some regions, they get the most of the market, we know that. At the same time, for a low cost company, their interests are the trunk routes. They do not care much for city pairs. So they leave a significant space empty. But since the society is growing, and more people want to travel, there is more and more of the need to connect city pairs. There is a lot of city pairs which are not connected today. There are many places with less than one connection (one flight) per day. This forms a significant part of the market, in which the low cost carrier is not interested. So, this is an idea that low-cost companies leave this space to us. We do not have to compete with low cost companies. On the contrary; we have to catch the opportunity that low-cost companies are leaving to us. This empty space of the market where the hundred seat regional jet is the ideal platform for this right-sizing. So, again, back to answering your question. Of course, we can offer our aircraft to whichever customer. But I do not see a low-cost company as our reference market.
Q. Embraer exhibited E2 for the first time at Farnborough’2016. Does not that worry you a bit?
Embraer is our direct competitor. Bombardier’s new aircraft, the C Series, is bigger than “regional”, so it is not our competitor. First of all, we are convinced that the get the sufficient number of seats on our aircraft. Besides, we have the level of technology that Embraer is going to put into its new aircraft. Do not forget that we have a brand new engine. The SaM.146 engine is the biggest contribute to the operating cost through the fuel burn. So we have the new engine designed by Safran with experience of CFM.56 and LEAP engines. What about Embraer? They had an old engine, and an old avionics set on current production aircraft. So, they need to get what we have already got in our aircraft. It is a mistake to think that when they come with the E2, we will not be able to compete. On the contrary! We are convinced that in terms of direct operating costs (DOC), we will remain slightly higher than the E2. Any way, we are fully confident that we will be able to compete with our machine against the E2 family. We already have the level of technology that they are going to have tomorrow. This is the fact. They have to do that because when Mitsubishi comes on board, and the Superjet versions with the new technology, you cannot stay in the market with an old-technology aircraft. So, they have to do that, but it will cost. It will cost! I do not know if the market be ready to pay that amount of money for a brand-new development. We’ll see. It is going to be an interesting challenge.
Q. At Farnborough’2016, Sukhoi made a presentation on the SportsJet. What do you think of that?
Frankly speaking, I do not know much about that. I knew of course that SCAC had been going to make such presentation, so that it was not a surprise for me, since we work together with Sukhoi. It seems there is a market for this kind of product. We will see. It is going to be interesting. Certainly, as Andrachnikov said, this would be the first one in the market. In any kind of business, being the first could be an attractive message for the market. Certainly, I am assured that it will be a good promotion for the product. Just imagine the time of the world games or world-wide championship. That airplane is meant to carry the team of sportsmen round the world (CityJet used its first SSJ100 to carry the national team aboard this brand-new aircraft). It would be a good promotion for the product. I also hope it will be a good business opportunity.
Q. What is the current situation with VIP versions of the airplane?
In July, there was a delivery ceremony in Venice, two business jet went to the Royal Thai Air Force. These airplanes were developed and outfitted in Russia. Sukhoi and UAC are still working and thinking about the future of Sukhoi Business Jet (SBJ) strategy. Of course, the intent is to develop an SBJ that can meet the worldwide market standard and expectation. By the way, something that has not been decided yet is where these world-wide (acceptable) SBJ would be developed, produced and delivered. Of course, Venice is one of the candidates for SBJ completion and delivery centers in the future. But it is a strategy where UAC is still working on. It has not been decided yet. It is very important to notice that, meanwhile, we are amassing VIP jet experience with the Thai Air Force and some other Russian government customers, so that we have the background for SBJ, we know what we are talking about. On this basis, I am assured that the best strategy for the future will be chosen.
Q. What was SJI’s involvement into these aircraft for the Royal Thai Air Force?
As I said, these Thai Air Force aircraft have been done in Russia. We have trained Thai pilots in Venice, using full-flight simulator and other facilities. In the future SJI may be more involved into the SBJ and VIP aircraft. We will provide spares and logistics, field representative, all the logistic support for this customer. Our hope is that the deal on these two aircraft will open the way for other sales in Thailand and neighboring countries.
Q. Please give us your market estimate for SSJ100. How many sales SJI should make?
Our estimate is that, in the segment we are directly involved, which is aircraft with passenger capacity between 90 and 120 seats, the solvent demand for the next 20 years is a little bit less than four thousand airplanes. Our goal is to capture at least 20% of this market. That would be around 600 aircraft. The share of sales that SJI shall contribute to the grand total is almost 50%. In plain words, SJI is supposed to sell about three hundred aircraft.
Q. The share of the Italian side in the Superjet program used to be 25%. Today, it is much less. Why?
I am not supposed to be discussing this, because I am the object of negotiations, not the subject. It is clear that the sides are discussing a new arrangement and, I believe, that they are close to an agreement. Whatever it is going to be, I feel confident that the new model, the new structure of the partnership would have - as main objective to improve - to increase the efficiency of the overall product. They will seek to improve and increase the integration between the Russian and the Italian part of the program. This has been our common goal. And I feel confident that the right decision will be made.
Believe me, the market does not care how many shares which side has. Customers for Superjet aircraft want to see in front of them a team able to support them. “I do not care if you are Italian or Russian, should I rely on you and other experienced people in your team”, that’s what airlines have been saying.
We need to convince the market that we have a unique, solid and effective team to support our customers. That’s the point. Shares, financial issues, - these are not important for the market. The market want to see a team, a solid team they can rely on. That’s it. And I feel confident that end of this process, this restructuring process, will give to the program a new, more integrated configuration.
Q. What is the main challenge for SJI, and for the whole of the Superjet effort now?
As I told you, it is, of course, to sell. That’s for sure. There is another real challenge today. That is to put all our best effort to cooperate with the highest level of effectivity on the market. We cannot fail. And so we must be very concentrated, and put the best effort on providing services to our western customer, proving all the support they need in terms of training, logistic, spares, technical support, - whatever! They must feel us on their side day by day, hour by hour, aircraft per aircraft. I think that today thus is the most important point. It is more important that all the rest.
Of course, production and delivery on schedule is important, to get new orders is very important. And yet the real challenge now is this. We must stay very close to the customer, and to have them operate the aircraft very effectively. As I said before, I think that we do not have to demonstrate to the customer that the Superjet is a nice aircraft, not any more. The customers know that. But we have to demonstrate to the customers that they can use that aircraft intensively day by day, as Interjet has done and is doing.
Q. The figures Interjet provided, like 99% readiness and flight punctuality, are unbelievable for a Russian passenger jet!
It was unexpected by them, Interjet people told me some time ago. They said that the level of reliability they are enjoying with our aircraft is higher than what the airline had with Airbus A320 at the same stage of the program. So it was unexpected. But we must not relax, because we are still at the beginning. We are to consolidate this capacity. The more aircraft enter service, the more difficult it becomes to support them. We must not think “we have a 99%, so we made it!” No! This is a challenge, an everyday challenge. We must always be conscious that there are areas where we need to improve. A big mistake that we can make is to think that “Ok, we are fine because Interjet has been flying well”. If we put ourselves in this kind of attitude, then tomorrow we will fail. We must be very careful about that, and improving day by day.
Q. Financial package for the aircraft. Interjet CEO said he is happy with their financial package. Cityjet is a new customer, they signed the deal because they were happy with their package, too. These financial packages SJI arranged for these airlines, do they set a sort of standard for next customers?
The first customer - the launch customer - takes the risk of the new product, so to speak. That’s why he is compensated with the price and economic conditions. What we offered to our first customers – Interjet and CityJet (and maybe some other that come shortly) will not be offered to late customers. This is obvious. This is what every other manufacturer does. When you penetrate the market, you need to stimulate that market, not only with innovation, but also with the economics. That is what we have been doing. We entered the market with some innovation, like Japanese are doing now with the MRJ and the Canadians with the C Series. Innovation is very good for everybody. Heating competition is good for the market. Innovation stimulates the demand. We are offering very good economic conditions to our early customers. That’s the way to penetrate the market and that is what everybody does. The problem is that they do it at the beginning of their adventure. Once they had consolidated, they forget and then they start criticizing others for doing the same. That’s the trick. And that is what I told one of our competitors once during a recent conference. “Once you have consolidated, it’s easy for you to say “Hey, you are not supposed to do that because so and so”. But did you forget what you did at the beginning? You did exactly the same”. That’s life and that’s the story. But at the end of the story, I think that everybody should be happy for the fact of extended competition. Having duopoly market is not good for the market, and not good for the industry. If you are an airline, I am sure you feel much better to have a choice of six products instead of two, right? In that situation, you can select a product that is a better match for your need.
In many ways, the market for jets is like the market for cars. When do people buy a new car? When they know that the market has brought something new for them! A fascinating car that comes with a new engine, innovative controls and other new technologies. “Oh, I fancy that new car, and I going to buy it”, this what most people have been saying when making decisions on car replacement. As for the aircraft market, there is not only Superjet out there; there are some other new airplanes also. Let’s say: welcome to the new! Not only to the Superjet, wellcome to all the new players!
As per Interjet and CitiJet, we applied two different financial models. Both airlines brought new experience for us, including in that respect. When a new customer comes, we can tell him this. “Look! Interjet has got an export credit. Cityjet wanted to get leasing, and it got it, too!” Believe me, it was not easy for us to arrange that financial package for Interjet with three export agencies involved. Can you image what it took us to get to terms with three export agencies?! It was not easy, but we made it. Now Interjet has a good package. Cityjet wanted to get leasing, and we found a way to offer them aircraft in operating lease.
Q. Russian airlines that operate SSJ100s continue to be surprised with the high utilization rates for Interjet aircraft. They want the same package of support. What is your secret for support of Interjet aircraft?
There is no secret. For us, very honestly, Aeroflot and Interjet are the two big customers and we do not make any difference between them. Perhaps the only difference is the following. When the contract with Aeroflot was signed (in December 2005) we (SJI) were not on the program yet. I do not know what the terms of the original agreement between the airline and the manufacturer were like. It was the early period of the Superjet program, which is now a thing of the past. The result is that we [SJI] are not so deeply involved with Aeroflot as we are with Interjet. Let’s make it clear: with Interjet, we [SJI] made a direct contract. Today, we are going what we are supposed to be doing under that contact. Aeroflot is not like this. If you asked me the reason why Aeroflot is using their aircraft in such a way that the intensity of flight s is much lower than for the Interjet aircraft, I cannot answer. I cannot answer because it is a different story. But believe me, I wish I could do the same or even better for Aeroflot what we do for Interjet. Aeroflot is a big customer, and they want more aircraft!
