Looking for discounts

Russian aircraft designer Tupolev is looking at options to cut down production costs for its Tu-204SM narrowbody airliner. These efforts are aimed at rescuing the program, which continues to be suffering from the absence of customers. Such a situation is typical for the Russian aircraft industry, which is often unable to compete with foreign manufacturers as it builds just a handful of commercial airliners a year.
In October, Tupolev started negotiations with suppliers in order to persuade them to reduce the prices for the components and assembly parts of the Tu-204SM, an improved version of the Tu-204 baseline. This step was taken after the Tu-204SM program faced a risk of being suspended due to the lack of orders. The only existing customer for the type, Moscow-based Atlant-Soyuz air carrier, reportedly threatened in September to cancel its order for 15 SMs because of the high price and insufficient quality of the aircraft. The Atlant-Soyuz contract had been facilitated through the Ilyushin Finance Co. (IFC) leasing company.
Deliveries to another customer — Iran Air Tour — are also under threat because of the US sanctions against Iran. As distinct from the baseline version, the Tu-204SM is powered by improved PS-90A2 turbofans developed by Russia’s Perm Motor company in cooperation with the US engine specialist Pratt & Whitney. As the US law bans any technology transfer to Iran, Pratt & Whitney cannot give its permission to export PS-90A2s to that country. IFC representatives told Russia & CIS Observer that the lesssor had offered to supply to Iran Tu-204SMs re-engined with the baseline’s Russian-made PS-90A powerplants, but this would reduce the Iranian aircraft’s operational efficiency.
Tupolev’s suppliers eventually agreed to charge less for Tu-204 components, enabling the manufacturer to cut the price tag on the aircraft by 27-30%. In exchange, however, they asked Tupolev and IFC to secure a firm order for 44 Tu-204SM aircraft through to 2016. According to IFC director general Alexander Rubtsov, such a deal is being discussed with a customer and may be finalized by the end of this year. Although Rubtsov didn’t name the customer, it is likely to be the Russian charter carrier Red Wings.
The intention to place such an order for Tupolev airliners was earlier voiced by the Red Wings owner, businessman Alexander Lebedev, who also has a stake in IFC. According to sources in the Russian aircraft industry, Lebedev needs this deal to back the sale of his stake in IFC to the government-controlled VEB bank. Under the VEB deal, Lebedev is to invest the money gained from the sale in the purchase of Tu-204SM aircraft, thus supporting both the Tupolev program and the Ulyanovsk-based Aviastar-SP production facility. Red Wings currently operates a nine-ship all-Tu-204 fleet, including six of the -100 version purchased through IFC in 2008-09.
The Tu-204SM modification is called to prolong the life of this narrowbody family. Besides improved engines the aircraft features a new avionics suite, similar to the one installed on another IFC-supported product — the Antonov An-148 regional aircraft. The new Tupolev airliner also has a two-man crew, a new auxiliary power unit, air-conditioning and cabin pressure control system. "This aircraft is designed to eradicate the defects detected during the operation of the Tu-204-100 version," Rubtsov says, adding that it will have better operational efficiency. The Tu-204SM’s payload capacity is increased from 21 to 23 tons, and its higher take-off weight will enable the aircraft to be operated on commercial routes up to 4,000-4,600 km long. According to Rubtsov, the increased commercial range will make this aircraft more attractive for Russian carriers involved in tourist charter operations. Another advertised improvement is a new maintenance program with prolonged service intervals, which will additionally reduce operational costs.
The first Tu-204SM prototype is expected to enter flight testing in November 2010, another one will join the program in 2011. Aviastar-SP is already assembling three more aircraft of this type. The first deliveries to Atlant-Soyuz, which hasn’t officially cancelled the contract, are scheduled for 2011, say IFC representatives.
However, if the contract with Red Wings is secured, IFC and United Aircraft Corporation (Tupolev’s parent company) will have to rapidly ramp up output rates in order to reduce production costs. Until now Tu-204 family airliners have been assembled at Aviastar-SP at an average rate of three airframes per year. The highest rate of six aircraft was reached in 2008, but in 2009 Aviastar-SP built only five Tu-204s. This year the facility has assembled just four aircraft: one Tu-204-100V was delivered to North Korea’s Air Koryo, two Tu-204-100C cargo modifications were handed over to the Russian cargo operator Aviastar-TU, and one Tu-204-300 corporate jet went to the VTB-leasing company.
At present, apart from Red Wings Tu-204 airliners are operated by several more Russian air carriers, including Vladivostok Air, KMV Avia, and Aviastar-TU. The head of Russia’s Federal Air Transport Agency, Alexander Neradko, has recently noted that Russian airlines are prepared to purchase Tu-204 airliners, whose performance and fuel efficiency are competitive in their class. However, Neradko continued, the high price of these aircraft and poor organization of parts support make their operation difficult and costly. All this makes airlines operating Tu-204 aircraft less attractive to passengers than those which are switching to foreign-made narrowbodies. "The industry often unloads its problems on to airlines, but the latter are the last link of the chain in relations with passengers," Neradko said.