For complete information please contact authors at visti@unian.kiev.ua

    Since the year’s beginning, Ukrainian-Russian AN-70 aircraft has competed in a European tender for the supply of military cargo aircraft to NATO member nations. The case in itself is both unexampled, given NATO’s traditional orientation to its own weapons and equipment, and proving that former USSR’s defense technology could sometimes be a serious challenge to Western ones. There is no need to remind that AN-70 aircraft, precisely its AN-7X version meeting the Western standards, is the hope of both Ukrainian and Russian aircraft-building industries. Despite some scepticism of individual experts, predicting that the West would in the long run turn the AN-70 project down, the hope stems from the successful multinational projects involving Ukraine and Russia. Thus, for example, the recent successful liftoff of a commercial satellite for the Sea Launch project has proved that Ukraine and Russia could be equal partners to the West. While in Sea Launch the USA was a partner, then in the aircraft tender it is the strongest rival. The USA is fairly aggressive, advancing its S-17 and S-130 aircraft to the European market. Europe’s major lobbying country for US technology is Great Britain, who is strongly against the AN-7X project. Europe’s buying of US-made aircraft would entail a ground-based infrastructure replacement, which is to say that the nations choosing US airplanes will thus be “put on the American needle”. Europe itself has a project of its own – A400M, known earlier as FLA (Future Large Aircraft), which, however, only exists on the paper. The latter project is 5-7 years behind AN-7X, and demanding considerable investments, Ukrainian aircraft designers maintain.

    In June this year, AN-70 was for the first time presented to the international public during the Le Bourget aerospace show. A new line was thus added to AN-70’s history, which was recognized to be unique despite everything. NATO’s technological committee made a formal request for AN-70’s presentation, which is an evidence of the close attention the Alliance pays to the Ukrainian airplane. At the recent air show MAKS’99 in Russia, figures related to the program to upgrade AN-70 into an AN-7X version meeting Europe’s standards were made public. According to Leonid Terentyev, Medium-Payload Cargo Airplane international consortium director general, the program will take 850 million EUROs compared to 6.5 billion EUROs needed to create an equivalent aircraft in Europe.

    Decision on AN-7X mass production for western air forces is supposed to be made in the year 2000. The price of AN-7X will be approximately 50 million EUROs against American S-17’s 200 million, which is unlikely to be a source of enthusiasm for the Europeans. S-130 will be almost as expensive as AN-7X, but is only designed for tactical purposes. The figures were provided by Medium-Payload Cargo Airplane president and AN-70 general designer Petro Balabuyev. The calculations make allowance for the division of labor in aircraft construction. Ukraine and Russia will do 75% of the work, and Germany – the remaining 25 percent. Germany remains Europe’s only committed lobbyist for the AN-7X project. France and Italy are hesitating whose side to take, and Great Britain and Turkey are clearly against the Ukrainian project.

    Specialist have practically completed the review of the A400M project, developed by the Airbus Military Company in accordance with tactical requirements and specifications made by Western defense experts. Once design review is completed, Governments of seven European nations will have to make a decision by the year’s end on which of the three military cargo transport aircraft projects to prefer for their air forces. Which of the three projects will win the race has yet to be seen, but what is clear even today is that Europe is divided on the projects.

    Germany is a major player on the European scene. Both economic and political fruits of cooperation in the AN-70 (AN-7X) project would be advantageous for Europe’s biggest nation. It is in the best interests of FRG not to allow any superpower’s expansion in the region on the one hand, and on the other hand -- not to overpay if it is possible. Germany could also be the biggest customer. Of 304 aircraft needed to replace military cargo airplane fleet in Russia, Ukraine and Germany, the latter would take 75 machines compared to Russia’s 164 and Ukraine’s 65. On top of that, it will be needed 288 AN-7X aircraft more to totally replace Europe’s transport airсraft fleet. Germany has made the first step toward the AN-70 project, by setting up in May this year the financial-industrial group Airtruck GmbH. The new consortium consolidates around one and a half dozen aerospace firms supporting the AN-70 project.

    France as well has always played an important role on Europe’s political scene, despite Germany’s recognized leadership in the region. As far as the military cargo airplane is concerned, the interested parties should keep in mind that, when it comes to weapons and military technology, it is neither the product quality, nor even economic advantages, that often determine buyer’s preferences. The more so in cases when the buyer is represented by a group of nations, who are unlikely to be divided over which of the transport airplanes to choose. Way back in 1993, Germany, France, Italy and Spain reached understanding on common requirements (European Staff Requirement) made on prospective military cargo aircraft for the Alliance, to which Belgium, Great Britain and Turkey later acceded. But it is France, who is going to say decisive, if not the key word.

    Today, French standpoint on the AN-70 project remains undecided, despite the fact that it is exactly France, with whom Ukraine’s military-technological cooperation develops at the best rate (which is seen from the T-72 tank upgrade project). However, the French generals, whose view of the project is going to be decisive, have thus far been unfriendly to AN-70. Last year, chief of staff, air force, general Jean Renau, addressed the commission for national defense, to explicitly emphasize that AN-70’s advancement to Europe would go against the national employment strategy. French Chief of General Staff general Jean-Pierre Quelches, who paid a visit to Ukraine in mid-1999, was fairly moderate, appraising the AN-70 project. While practically uninterested German DASA (Daimler-Chrysler Aerospace) made an AN-70 project review to German Defense Ministry’s order, to come to conclusion that the Ukrainian aircraft fully meets NATO standards. To do France justice, it has changed a bit its view of the project recently. While in the past French officials were skeptical about the Ukrainian plane, then at Le Bourget, France was alongside Germany, taking part in negotiations on military cargo airplane. In mid-October, rumors were afloat in circles close to the Ukrainian defense industry that France would have joined in the project even before the year’s end. Opening Ukraine’s first international aerospace show AviaSvit-XXI this month, Antonov aircraft general designer Petro Balabuyev said French Aerospatiale had practically come in support of AN-70. This statement, however, goes against reports published in Aviation Week and Space Technology magazine saying that French industry is planning to commence the purely European military cargo aircraft program as early as next year, even before Germany’s decision, who, France maintains, supports the Ukrainian project out of purely political reasons.

    “We have polarized Europe into two extremes,” Antonov aircraft general designer acknowledges. “The one is clearly supporting AN-7X, the other is clearly against.” But it is clear even today that the decision on AN-70 will be made at the highest political level, because nobody doubts that the Ukrainian aircraft meets all NATO standards. What is going on today is a big policy game and big trade in jobs. Therefore it was not accidental that Ukrainian aircraft builders had initiated an “assault operation”, calling on presidents and defense ministers of Ukraine and Russia to address a message to their French counterparts in support of the AN-70 project. On top of this, they are planning to present AN-70’s capabilities to German lawmakers and the Arab world in UAE’s Dubai.

    But let’s be objective. West’s final decision on the Ukrainian project may be adversely affected by the worsening of Russia-NATO relations amid Kosovo crisis, situation in the burning Caucasus, a lack of stability in Russia and the outcome of October 31’s presidential election in Ukraine. It stands to reason that AN-70 project is going to be frozen should a left-wing president come to power. It stands to reason as well that the Alliance may not pay heed to Russian aircraft designers should Russian policy makers remain that radical. An unpredictable approach to big business of both Ukraine and Russia may repel a favorable decision on AN-7X on the part of any American politician. And, lastly, the distribution of labor, in which Ukraine and Russia would make 75% of the plane, does not suit the West at all. Should an acceptable political decision be made, the West is likely to make its east partners give away 20-25 percent of that share.

WHAT SHALL WE DO IF THE WEST TURNS AN-70 DOWN?

    These days, some trends unfavorable to AN-70 are clearly visible.

    Such, in particular, as negotiations currently going on in Europe to consolidate Germany’s Daimler Benz Aerospace (DASA) with French-British Matra-Marconi Space into aerospace concern Astrium. This move is viewed in Ukraine as detrimental to Europe’s decision on the destiny of AN-7X, and set Ukraine thinking whether the AN-70 project remains viable in the absence of Western support.

Experts are divided over answers to that question. But facts first. Funding for the program (exactly the lack of funding) naturally presents the main trouble, because, instead of giving the money, both defense departments [of Ukraine and Russia] only provide unpaid bills for aircraft builders. Russian defense ministry, for example, owes Antonov design bureau $51 million. Decision has been reached that Russia would supply an equivalent amount of natural gas to Ukraine, revenues from whose sale would return to Antonov in cash, deputy industrial policy minister Valeri Kazakov says. The saying “He who hesitates is lost” is right for the AN-70 project, whose rivals are both wealthier and more decisive.

    The Industrial Policy Ministry made calculations for the AN-70 and AN-140 projects, saying that the effort would require 59 million Hryvnias for the period up to the year’s end, which accouts for 18.9% of the total figure for the year of 1999. The money would make it possible to tool-up Kyiv-based Aviant factory for mass production of AN-70 military cargo aircraft, and make the first serial plane even before the end of 1999. Another 14 million Hryvnyas is needed for Zaporizhya’s Motor-Sich engine works to tool-up for quantity production of D-27 engines for AN-70 and TV3-117SBM1 engines for AN-140. But the Government, totally absorbed in election campaign, is not hasty to provide funds for the project.

    By Antonov concern’s calculations, the company needs $29 million to organize AN-70 mass production with an annual output of 3-5 machines. General designer Petro Balabuyev estimates aggregate demand for AN-70 at 1,500 aircraft at the minimum for rapid deployment forces across the world. Balabuyev is confident that AN-70 could well enter the markets in Latin America and South-East Asia. But such a turn of evens would only be possible if the governments of Ukraine and Russia came from declaring the priority place for AN-70 to actually providing funds for the project. To date, the two governments have allocated a mere seven percent of the project funds. If such a trend continues, industrialized nations will leave AN-70 far behind soon, putting a stronger competitor into the field. As was the case with once high-promising TU-334 project, which found itself in a limbo because of poor funding. Now that the model is three years behind its foreign equivalents, considerable funds and efforts will be needed to revive the project. Thus far, Antonov bureau itself has provided funds for the AN-70 project via its own air company Antonov Airlines, running five AN-124 (Ruslan) cargo carriers. The latter provides up to 90% funds needed for the project, company director Vyacheslav Mikhailov says.

    It would be unfair to maintain that Ukrainian and Russian aircraft builders are improvident, and that the beginning of the manufacture of AN-70 at Kyiv’s Aviant was a pure declaration. In fact, the assembly of five aircraft in Kyiv for the Ukrainian defense department, and five airplanes in Russia’s Samara for the Russian defense department has not got underway thus far, despite all official assurances. But it cannot get underway in the absence of adequate funding. Tooling-up for AN-70 mass production has been practically completed at the factories. They even launched the manufacture of individual parts and assemblies for the aircraft, such, for example, as center-sections, lights and the like. Aviant is planning to supply some assembly parts to Samara in exchange for other assembly parts. The cooperation is advantageous to both sides, but the plan to put out the airplanes in the year 2003 may prove belated, even if the effort proceeded on schedule. Speeding-up the manufacture is impossible either because of above-mentioned financial reasons. That is why aircraft builders grasp at Western back-up like a straw. Some of them have already begun searching for potential clients in Latin America, South-East Asia and Middle East, UkrAviaProm Association of Aviation Enterprises president Valeri Shmarov says. But this effort is also impeded by poor funding for the AN-70 serial production project, he complained, speaking in an interview with the author.

    The destiny of the tremendous multinational project AN-70 rests with political leaderships in Ukraine and Russia. For the time being, the aircraft builders provide 93 percent of project funds, both governments giving only seven percent of what they should have had to give. The two governments proved unable even to secure funding for the project through loans. According to Petro Balabuyev, an interest rate of 10-12 percent per annum could be acceptable. But the National Bank’s 52% or a private bank’s 72-85% would stand for company’s death. Therefore, not only the destiny of AN-70, but competitiveness of Ukrainian and Russian aircraft building industries in the upcoming century depend on whether the politicians are able to take a firm crucial decision on the AN-70 project. What is clear even today is that the longer procrastination of AN-70 project, the more the two nations are going to loose in competition with the West.

  Last modified: 25.05.00                                                 mailto:visti@unian.kiev.ua