There have been changes in Bombardier corporate management recently. Have you talked to the newly appointed top managers?

Yes, we have talked to them. Fred Cromer, the new president at Bombardier Commercial Aircraft, is a well-known figure in the industry. He led ILFC, world’s largest aircraft lessor, after the crisis of 2008.  Just to remind you, Fred took the helm at ILFC after its founder - Steven Udvar-Házy – left the company, with intent to create another, competing structure. Today, these two companies are competing with each other.

Before coming to ILFC, Fred Cromer worked for Continental Airlines and North-West. So, during this career, he amassed experience with both airlines and lessors. Fred is a professional with a vast experience, we talk the same language. Besides, he came to Bombardier not alone, but with a team.

We have met few times before, and are to have meetings during Paris airshow 2015. I got a good first impression about the new team. But, it is little more to say, really. Hopefully, the advent of this new team of skilled professionals and experienced managers will help Bombardier to overcome the current difficulties and facilitate the process of introducing new aircraft types to the market. The main topic today is to complete the flight tests on the C Series, win type certificate and make the aircraft available to airlines, so that they can commence revenue passenger services on the new type.

Is there still a chance to come to terms with the Canadian manufacturer and save your contract for 39 CS300s?

The dialogue on this matter continues. We exchanged options on this matter during our recent trips to Canada. It is my hope that we find consensus during the Paris air show, regarding delivery times, sources and volume of the funding necessary to save the contract. The need to renegotiate the terms of our contract arises from the fact that the C Series program is delayed again. We do not like it, but… Negotiations continue, and, as of this time, I am not able to foretell the outcome. I can only repeat myself that we hope to find a consensus at Le Bourget.

If not the Canadian manufacturer, when who can provide Russian airlines with modern passenger airplanes?

Russia cultivates civil aviation projects of her own. The Kremlin supports the Sukhoi Superjet 100, giving this project increasing amount of support. Next in line is the MC-21.

Sooner or later, a suitable turboprop will emerge. Go-ahead is expected for either the Il-114 or the Il-212. Another possibility is a joint project with China. A turboprop selection is expected within a year or two. The selection is going to be made, I am most sure of it. Admittedly, chances for the Q400NextGen to penetrate into the Russian market will be lost once and for ever. A negative result may seal the destiny of that program. In the past few years, Bombardier has been lagging behind its main competitor ATR, with lesser production output and fewer sales. The order book might have increased substantially if not for the crisis in the Ukraine, and the chain of events that followed and affected relations between Russia and the West.

Whereas Russia-EU trade subsides, the Russia-US trade goes up. Cooperative projects with European and Canadian manufacturers tend to slow down. At the same time, Textron signs a deal on license production of the Bell 505 at the Urals Plant of Civil Aviation. Boeing buys more titanium, - this is what US ambassador Tefft confirmed when visiting VSMPO Avisma. Rostec’s Aviacapital-Service leasing company signed for 35 Boeing 737MAX aircraft. Perhaps, IFC would also consider Boeing aircraft?

There is little difference between Export Development Canada and U.S. Ex-Im Bank: they both do not provide funding for Russian programs. For its part, IFC will consider those aircraft types that look lost promising to us, technically. Should delays with the C Series persist, and the CS300 market entry slip towards 2018-2020, the process would overlap with the MC-21, which is a top priority for IFC.

May I interpret your words so as IFC does not exclude Boeing jetliners from consideration?

We do not exclude such a possibility. Let me remind you that IFC has a strategy. It has been worked out by the company’s management and approved by the executive board and the shareholders. In particular, the valid strategy determines the product range of our company. If, by any chance, certain aircraft types drop out – say, Bombardier airplanes – then we will look for suitable substitutes. This would bring Airbus and Boeing types into consideration. Respective offers are on my desk. First, we have to decide whether to consider these proposals. What to buy, and in which quantities, is another matter.

Sino-Russian relations are on the rise. Joint aircraft development projects have been initiated. Aeroflot takes Boeing 777s with financial support from Chinese banks. Can we expect something between IFC and China?

We are considering Chinese banks for funding our contracts on Bombardier aircraft. I cannot say that we were overjoyed when presented the terms of this Chinese funding. To us, it seems a bit expensive. At the same time, there is a real opportunity to use the Chinese funding for our programs. It is a workable alternative to western funding.

Today, Chinese funds are available to us at higher interest rates than those rates that the western export agencies offered us before the crisis. Should we accept it, the economic viability of our project would reduce, since the difference measured in pro cents are substantial for aircraft leasing business. However, Chinese finding is a workable alternative, and IFC considers it.

We have been following the progress with the МА-700, a new regional turboprop from the Chinese industry. Even though this project is still at a definition phase, it looks attractive. In fact, the МА-700 will compete directly to the Q400, as they have comparable cabin size and flight performance. When does the Chinese aircraft pass flight tests, win certification? This is a big question. History of Chinese aerospace projects tells us that these projects tend to lag behind their original schedules. Can we rely on the Chinese aircraft in case Russia appears unable to get her own aircraft manufacturing industry working? Should China offer us a competitive aircraft in the size of Q400, we will consider it most closely.

Do you say that there is some sort of dialogue with Chinese partners going on?

Yes, the dialogue is on. We have been following the progress with development of the Chinese aerospace industry. We pay special attention to the Sino-Russian wide-body jetliner, and try to influence this project through our participation. So far, we do so at the level of experts, which take part in the process of product definition.

The wide-body aircraft is being shaped. What is your opinion to how this aircraft shall look like? Shall it have an intracontinental or intercontinental range? What about its passenger capacity, other key parameters?

There are various views on that. Our vision is that of an aircraft seating up to 450-500 passengers, and optimized for short and medium routes, up to five thousand kilometers. Perhaps, seven thousand, at maximum. The Chinese partners favor another vision, that of an intercontinental jetliner. The right decision has to be made by project participants, and it should be a well though-out one. Since United Aircraft Corporation (UAC) and its colleagues from AVIC and COMAC are those who will build this airplane, it is up to them to decide. IFC team takes part in the project at the level of experts.

Does UAC listen to you?

Whatever they do, IFC will continue to express its opinion and try to an active player. What if they do not listen? You see, the fact is such that IFC experts are widely recognized as top professionals in their area of specialization and responsibility. You may listen or not, but there are facts and opinions that are being put forward by our researchers. They are hard to ignore.

A big Russian delegation visited Egypt in June. During SSJ100 sale negotiations with Egypt Air, the sides discussed a trade-in deal which would see new Superjets replacing older E-175s. Can IFC help arrange such a deal?

IFC is a member in UAC. In fact, we are a sort of captive company. If need be, old aircraft can be purchased from the client as part of a larger deal on Superjet deliveries, and, subsequently, sold off. There is little doubt such a scheme can be arranged. Any airplane has a market value, with the latter’s starting point being the price of metal from which the aircraft is made of, which can be sold for scrap. How much an old aircraft costs is a matter to be discussed between those who sell this aircraft and those who want to buy it. In this particular case, the Egyptian airline and the Russian leasing company. Embraer makes some good aircraft, including the E-175. IFC may come up with solutions how Egypt Air could renew its fleet in a trade-in arrangement.

Do you mean that IFC will continue to be a member in UAC and focus on placing Russian-made aircraft with airlines?

Yes, that’s correct. We have been discussing our corporate strategy with the shareholders. At the same time, UAC has been showing a greater interest in IFC as its captive company, which is good for us. I believe IFC can continue doing some job for UAC, promoting new aircraft types, helping airlines form route networks for these new types to get most out of them, trying various arrangements and sales schemes. I believe UAC and IFC shall continue interact this way.

Please share your view of the MC-21 project. Do you think it is well on track?

The MC-21 matures as the project goes from one milestone to another. Right now, Irkut makes development prototypes for flight testing. I think that the next year will be a decisive one, as it will see completion of the prototypes and beginning of the flight test program. And then we will see how the trials are progressing, how flight and ground tests are being carried out. Surely, this is the most important period for any new aircraft type, when it takes shape as a product.

There are talks about an increase in the Russian content in the MC-21, the idea sometimes being referred to as the MC-21.RU. At HeliRussia’2015, KRET, a key Russian vendor, told journalists that its share in the onboard systems of such a version can rise to 50%, and further to 75% later on. What’s your attitude towards the MC-21.RU?

IFC has had some experience promoting the Superjet in the global marketplace. In the process, we put forward a few initiatives, including introduction of some new versions and modifications of the baseline aircraft. Unfortunately, we soon discovered that almost every such attempt is fruitless. The main reason has been the inflexibility of western suppliers. They prove inflexible and expensive when it comes to arranging details.

Meantime, any aircraft that stands in production for years needs upgrades and modernization, to be made from time to time. Any change to Superjet’s certified version comes at a high price. That is one of the reasons for rather poor financial performance of the Sukhoi Civil Aircraft Company (SCAC). Before the Superjet, IFC had some experience with the An-148 project. In some cases, the cost an update turned to be far lower [when the western vendors ask for], by the order of times!

We used to support the idea of having MC-21’s avionics set unified with that of the Bombardier C Series. Now, our view is different, since we saw how SCAC interacts with its avionics suppliers. The idea we used to cherish, now looks like the way to nowhere.

During our work on promotion of the Superjet in the global market place, we have had to reconsider our principles. Some used to look very solid, but now we find them misleading. Let me remind you that, when the Sukhoi Superjet 100 project commenced, its developers tried to maximize the share of U.S. and European vendors. The same can be said about the MC-21. That looked fine then, but it does not look like fine now.

What, in your opinion, is the right way forward?

I think that the following approach might make sense. First, is to shape and perfect a new package for the MC-21. Second, to produce the Superjet 100 Next Generation (SSJ100 NG) equipped with that same package. Our experience with the An-148/158 demonstrates that everything was done rather quickly and efficiently, and, not least importantly, at a reasonable cost. This was possible thanks to the fact that the relations between us, the aircraft manufacturer and the vendors were markedly different. There were no issues like “pay me millions of dollars for this short, one-off work even if entails no changes to hardware, but software only”. There were no such issues on the An-148/158. Nothing of the sort!

Never did the local OEMs and vendors disagree on such a topic. Bearing in mind the experience we have had with the An-148/158 and the Sukhoi Superjet 100, I say: there is a lot we must learn from it!  One of the lessons learnt is that you need to develop your own brain first, and only then that of your neighbor. That is especially true in the case of avionics packages, power plant and onboard systems. It’s an important lesson we have learnt the hard way.

The president of Russia is going to pay a visit to Tehran this summer. Do you think there is still a chance for some cooperative projects with the Iranian aerospace and airline industries?

The whole world awaits the regime of sanctions to be lifted. We await that, too. As of today, there are still some trade restrictions to do with this country. After these are lifted, IFC will resume active work in that market, too. IFC never terminated our contacts with the Iranian colleagues. At one time we worked together rather actively, trying to structure some aircraft acquisition programs. Unfortunately, due to the well-known reasons, these programs did not proceed to deliveries.

In our view, the Iranian market was and is a promising one, very promising. We are going to offer local airlines everything we have in our portfolio, including the Superjet, the MC-21, Tupolev and Ilyushin aircraft.

Could you please tell us about the An-158 contract with Antonov. What is the current situation with shipments?

Both sides have been working hard on materialization of this contract. IFC takes newly assembled aircraft from the manufacturer and places them with the airline customer. We have already placed five aircraft. Sixth is being added; it has been ferried to Cuba already.

Prospects for further deliveries of Ukrainian-made aircraft depend on whether the Russian government will continue its export-encouragement policy, taking account of a large Russian content in the newly assembled An-158s. As of today, this policy is still valid, but its practical implementation becomes increasingly difficult with regard to the economic situation. Surely, much will depend on whether the aftersales support program provided by the Ukrainian airframe and engine manufacturers, be workable one, within the guarantee term and afterwards.

So far, the Cuban customer has been happy with its An-158s. Still, there are some questions remaining. The Ukrainian manufacturers should try harder with their aftersales support efforts. 

The issue yet to be decided is whether IFC order for the An-158 would be further increased. Much will depend on what the Ukrainian manufacturers can offer us in terms of price, delivery dates, aftersales support etc.

The experience we have had with the An-158s already in operation is generally positive. Delivery dates were more or less up to the manufacturer’s promise. At the same time, there have been some problems. For instance, the landing gear shipments from the Yuzhmash plant in Dnepropetrovsk. This enterprise is now in a very difficult financial situation. In order to keep the production going, we had to order landing gears from a Russian supplier, Gidromash. Problems such as this one tend to come up, making us search for solutions so as to keep the production of An-148/158 family aircraft going at the plants in Kiev and Voronezh.

The Russian government is deciding whether to give GTLK a leading role on placing Superjets with airlines. If so, what will IFC do? Will you give up your efforts on placing Superjets with your airline customers?

IFC continues working with the Superjet. Our understanding is that the governmental support for this project can take various forms. The government may choose to use such a tool as making investment into base capital of a leasing company. This is just one of the possible ways to go. There are other forms of governmental support, such as issuing governmental guarantees and through financial participation as a shareholder. Why should these other forms be excluded from consideration?

As per GTLK, this company has its own strategy, which is different to our own. They chose to work with one relatively big regional carrier, so as to place most of their Superjets with the selected airline. Our view is that aircraft deliveries should be to a number of airlines, so that the client base gets diversified. We also believe that newly built aircraft should go to both domestic and international markets.

Let us see which decisions the Russian government makes. Until these decisions are made, IFC will continue working with the Superjet. We have a valid contract. Its terms are going to be re-arranged so as to better reflect the current situation with SCAC, namely an increase in its capitalization.