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Clipped Wings

Aeroflot's order for 10 Boeing planes sent a message to Russia's aerospace companies: Modernize or else. Some say it's a wake-up call, others a death knell in a country whose financial woes have created an industry with


MOSCOW — Since Russia's flagship carrier Aeroflot committed the ultimate act of independence in September by ordering 10 new Boeing 737s, nationalists and aviation workers have been wailing at an endless wake for the country's aerospace industry.

But those whose pride and paychecks are less affected by the decision say the move--branded here as treasonous--could actually prove to be the best thing that ever happened to Russian aviation.

Confronted by competition for the first time in their lives, the builders of Tupolevs, Ilyushins and Antonovs are getting the message that not even their oldest customers will buy second-rate products.

"You cannot provide safe and efficient air travel on patriotism alone," declares Aeroflot Director General Yevgeny I. Shaposhnikov, bluntly challenging the domestic plane builders and the estimated 1.8 million aerospace workers in Russia.

But nationalist feelings have sharply intensified in this post-Cold War era of shrinking industrial output and federation-wide financing woes. Across the vastness of Russia, engineers and technologists from the once-vaunted Soviet military-industrial complex are becoming redundant because the country cannot afford to invest in research and development in the free-market age.

To the struggling and unemployed, decisions such as Aeroflot's order for Boeings are stinging reminders of Russia's lost superpower status and the rough road ahead for industries such as aircraft manufacturing.

The Boeing sale, the first of at least 30 new aircraft that Aeroflot plans to buy over the next five years, stunned the struggling Tupolev enterprise in the Volga city of Kazan, where the state-owned carrier's preference for its as-yet-uncertified TU-214 had virtually been taken for granted.

It has also set in motion a massive government-led effort to streamline Russia's aerospace industry before it collapses on the eve of what is expected to be a boom in commercial aircraft orders.

Passenger air travel in the former Soviet Union is projected to more than triple by 2015, according to forecasts by Boeing Commercial Airplane Group.

The huge growth in traffic will create strong demand for new aircraft, compounding an already pressing need to replace the aging and outmoded fleets currently in service in Russia--planes that guzzle fuel, violate Western noise and emissions standards and accommodate passengers as if they were so much cargo.

Russian airlines alone will have to buy 1,600 new planes costing upward of $75 billion during the next two decades. In addition, countries such as China are experiencing a boom in air travel and have traditionally bought Russian aircraft.

But the do-or-die demand for reform could not come at a worse time for Russia, which remains mired in a wrenching economic transition that has all but eliminated funding for state-owned manufacturers and threatened millions with the loss of their jobs.

"They're being asked to adapt to a whole new and much more difficult set of market demands at the same time that their resources and their ability to finance and invest have been overwhelmingly, I would even say ruthlessly, curtailed," says Wolfgang Demisch, an aerospace industry analyst with New York's BT Securities.

Demisch likened the restructuring pressures on the nearly bankrupt builders to a postoperative patient being forced to run a marathon. But he also warned that the Russian industry will be trampled by foreign competitors unless it learns to deliver planes to a more demanding market.

Tupolev's government managers loudly protested Aeroflot's Boeing purchase, saying they needed that $350-million order to resume production on four TU-214s that have been languishing on the assembly line for lack of money.

Aeroflot compromised with the strapped manufacturer by promising to buy the new jet once it is certified and up to international standards--a pledge that built a fire under some in the industry but left others disgruntled or in denial.

Aerospace workers turned out en masse last week for a one-day strike against government economic policies, including delayed paychecks and the new trend by state-owned airlines to buy their planes abroad. Only four of 80 airplanes ordered by Russian carriers so far this year are being made in Russia.

New international airlines such as Transaero and AJT are building their fleets around Western products and their clientele around promises of Western-style safety and comfort.

But it was the decision by Aeroflot, Russia's flagship international carrier, to buy planes from Seattle that drove the point home.

The preference for imported aircraft "threatens to completely ruin Russian aircraft manufacturing," warns the chairman of the Aircraft Manufacturing Industry Workers union, Anatoly Breusov. "The hundreds of millions of dollars spent on leasing or buying foreign-made craft is creating jobs abroad and cutting them in Russia."


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