UAC will receive 100 billion rubles. from the state

The state will additionally capitalize the United Aircraft Corporation (UAC) by 100 billion rubles. As Kommersant learned, the money is mainly intended for Sukhoi Civil Aircraft CJSC (SCAC), the manufacturer of the SSJ-100 aircraft. The company's debt already reaches $1.75 billion, and problems with SSJ became one of the reasons for the resignation of UAC head Mikhail Pogosyan. But, according to Kommersant, not all of the project’s problems can be solved through government support: French concerns have had problems with American components for the SSJ-100.

Next photo 1 / 2

Photo: Kommersant / Vyacheslav Reutov

Photo: Kommersant / Dmitry Azarov

On Friday, Vladimir Putin said that following the results of a meeting held the day before to support the civil aviation industry, it was decided to recapitalize the UAC by 100 billion rubles. The President emphasized that in the USSR, civil aviation was a lower priority than military aviation, “and we need to open up the civilian part - they must develop together.”

A source at UAC clarified to Kommersant that, in particular, the high credit burden of the SSJ-100 manufacturer, GSS CJSC (debt of about $1.75 billion), was discussed, reducing which would increase “the reliability and stability of the supplier in the eyes of buyers.” SCAC also needs to “significantly reduce the load on the final cost of the aircraft,” which is “especially important at the start of sales, when deals are concluded at a low cost to conquer new markets.” In parallel, the State Aircraft System is required to “increase the efficiency of import substitution” (as of 2013, the share of foreign components is about 60%). A high-ranking Kommersant source in the aviation industry confirmed that 100 billion rubles. mainly intended for GSS. The UAC says that “work on a mechanism for implementing the president’s decision” has already begun. The Ministry of Economy clarifies that “the issue is being studied.” A corresponding order from the president following the meeting is expected within a week.

The net loss of SSS under IFRS for the first half of 2014 decreased by 25.4%, to $144.1 million, revenue doubled, to $180 million. Gross loss decreased by 21%, to $23 million, loss from operating activities - by 9. 3%, up to $68.3 million.

The financial position of the SCSU has long been questionable. The company's losses and low aircraft sales were one of the main reasons for the resignation of UAC President Mikhail Pogosyan (see Kommersant on January 14), who was replaced by Deputy Head of the Ministry of Industry and Trade Yuri Slyusar. Since the start of production, GSS has assembled 100 SSJ-100s, but only 45 aircraft are in service, the majority from Aeroflot (18) and Mexico's Interjet (operates 13 of the 20 purchased). The President already approved the state support plan for the State Air Force in 2013: he assumed that VEB would use €692 million, received from the sale of a 5% stake in the European aerospace concern EADS (now Airbus Group), to buy out the additional share issue of OJSC Sukhoi Company. Sukhoi had to repay the debt of SSS to VEB in the amount of $600 million and buy out the company's additional issue. As a result, VEB bought 10 million shares of Sukhoi for 25 billion rubles, Sukhoi increased its share in GSS to 94.1%, the Italian shareholder Finmeccanica reduced its share from 25% to 5.9%, but retained a blocking vote. The agreement is valid until the end of 2017, when the Italian group must invest at least $390 million in the authorized capital of the manufacturer.

Kommersant's interlocutor, close to the State Aircraft, claims that the money promised by the president will be used primarily to support export financing for SSJ sales. Kommersant's source at UAC adds that the meeting also discussed a mechanism for ensuring attractive operational leasing of the aircraft, which would be available to small airlines.

But, according to Kommersant, the project has problems not only with financing. French suppliers Snecma and Thales are having difficulty procuring American components for the SSJ-100's engine and avionics, respectively. “In the United States, these parts are considered dual-use products, while the UAC mainly produces military equipment,” explains a Kommersant source familiar with the situation. The GSS and UAC declined to comment.

Aviation Explorer analyst Vladimir Karnozov agrees that additional capitalization of the UAC could help sales of the SSJ-100. The manufacturer provides various guarantees, the expert explains, which buyers “are more willing to accept from a seller who is not burdened with debt.”

Elizaveta Kuznetsova

SSJ hit financial turbulence