By Vovick Karnozov
 An Interview With
The First Deputy General Director Of Aeroflot
Q. What
are Aeroflot plans on fleet renewal?
A. In fact almost all our fleet is, to some extent, getting outdated.
Many of our airliners are morally old and unable to satisfy the requirements
of modern passengers for comfort. Those aircraft should be withdrawn from
service in the next few years. We need new wide-body aircraft. In this field
we are concentrating our efforts on the Il-96 with Pratt and Whitney engines.
These are our new indigenous airliners with reliable American power plants.
The Il-96M/T project is the most important for Aeroflot.
We are now choosing a suitable mid-range airliner to replace our Tu-154s.
The Tupolev design bureau offers us its new promising design, the Tu-204.
Unfortunately, there are no new indigenous short-range airliners available
to replace Tu-134s. We are now in negotiations on the first ten Boeing 737-400s.
This deal is being worked out. I feel that the Boeing 737 will be a good
successor to the veneran Tu-134.
Q. How does Aeroflot use the Il-62Ms taken out of transatlantic flights?
A. The Il-62Ms are quitting active service. Some of them have been written
off, others are put on inner routes. Hopefully, we will sell some Il-62Ms
to those who could make use of them.
Q. Does Aeroflot intend to lease two DC-10s in addition to one currently
on lease?
Negotiations are on, but we have not signed a contract yet. And there
has been a reason for that - during 1996 Aeroflot was developing its new
strategy.
Q: At Farnborough '96 Aeroflot and Boeing signed a letter of intent
on 10 737-400s. It was reported that the deal is estimated at USD 400 m.
However, it is not clear whether those would be leased or purchased. Has
the appropriate contract been signed?
A. All I can say is that it is unlikely that anybody except for the Board
of Directors of Boeing and that of Aeroflot will ever know the exact sum
of the contract, as is the common practice for deals on deliveries of commercial
aircraft. Besides, we have not come to the final agreement on the price
yet. Now we are in negotiations on the subject, and the next meeting is
planned for February. Definitely, it will be a purchase of ten aircraft.
How the payment procedure would be arranged is quite another question. But
what is important is that this is a purchase of ten Boeing-737-400s, which
are meant to replace Tu- 134s on inner routes.
Q. Will it be in the form of financial leasing?
A. Yes, certainly.
Q. What are the banks involved in this deal? Will the European Bank
for Reconstruction and Development participate in it?
A. No, the EBRD will not participate because we did not ask it to. Our
adviser is Chase Manhattan Bank, which, probably (we have not signed the
contract yet), will also be a provider of financing for the deal. And, of
course, the US EXIMbank will be involved as well.
Q. Could you please clarify the recent deal with Airbus. It is reported
that Aeroflot pays USD 0.52 m a month per A-310. Is this right?
A. We have not disclosed financial figures regarding this deal to the
press. The final figures that we agreed upon are confidential ones. I can
only say that when we were signing the lease agreement for four additional
A-310s, we agreed to cut considerably the leasing rates set by previous
agreements.
Q. Was it a comprehensive pack of agreements?
A. We said that we were ready to conclude a new deal only if the previous
agreements would be revised, as well as the very attitude to our company.
Now we are a large, well-established customer for Airbus. So, we asked them
to reduce leasing payments. Airbus made steps towards this, including such
a serious matter as the political insurance, which used to be a considerable
part in our expenses. Moreover, Airbus Industrie helped us carry out the
first tender in Aeroflot history for technical servicing of our A-310s.
By the way, your publication, AeroWorldNet, wrote about it. It was a fair
fight, and Lufthansa Technic made the best offer and won the tender. Now
we have ten A-310, more than we used to, and this helps us reduce expenses
on maintenance of each airframe.
Q. In November Aeroflot placed a firm order on 20 Il-96M/Ts. At first
Aeroflot wanted to get 10 passenger (Il-96M) and ten cargo (Il-96T) aircraft.
Why was this ratio changed for 17 and 3 respectively?
A. When we started to look carefully at the Il-96 program last year,
we began to think of not only how to obtain requisite financing, but how
to arrange return payments to our financiers. We made some calculations
and understood that the price for the passenger version was affordable,
whereas the price for the cargo version was too high. Our company with only
116 aircraft is not big enough to buy new wide-body cargo aircraft in large
numbers. This is a hard task even for big operators with hundreds of aircraft
in their fleet. Admittedly, the volume of our cargo traffic is relatively
high, but we have found our niche in the market. Wanting to be a highly-effective
company we decided to buy a small number of Il-96Ts. To be precise, we decided
to order only those airframes that were already under construction at the
Voronezh factory.
Q. Who are Aeroflot financial advisers for the Il-96M/T deal?
A. Citibank and Ernst and Young. Besides, Citibank, or, better, Citicorp.,
is also an organiser of financing for this program.
Q. It is reported that the Savings Bank of the Russian Federation
is participating in the program, giving money on certification of the Il-
96M/T. Could you confirm this?
A. Money on certification of the Il-96M comes from the Russian Government.
The Savings Bank gave money on production of the Il-96-300.
Q. Do any other Russian banks participate? Are interest rates they
charge affordable?
A. At the moment there are no Russian banks working with us in the sphere
of investment projects. This is so due to a number of reasons, not only
high interest rates. We, in Russia, do not have banks that would be in a
position to grant credits for 10 - 12 years. Our banks offer credits for
one or two years at maximum, which is too short a time for the aviation
business.
Q. It is reported that Aeroflot has expressed an intention to obtain
ten Tupolev Tu-204 airliners with Rolls-Royce engines from Egypt's Kato
Aromatic. Is that true?
A. We are very interested in the Tu-204 with Rolls-Royce engines. There
is no other such aircraft now on our market. In December Tupolev and Kato
Aromatic made the first presentation of the Tu-204 at the Aerostar hotel
in Moscow. According to the specifications announced there, the Tu-204 is
a very good machine. However, the financial figures on leasing payments
offered to us are serious, and should be a subject for further discussions.
At the same time, the plane has not obtained its certificate yet, therefore
now it is very difficult to say how many and what aircraft we will take.
As soon as there will be a certified product, we will look at the prices
more closely. Then we will decide whether to take those in lease from a
Western leasing company or to organise leasing of those vehicles with help
of our own resources, or, rather, financiers that we would find ourselves.
Q. What about the cargo version of the Tu-204 then?
A. One Tu-204C was undergoing trials at our company in 1995 and early
1996. We do not have the plane in our fleet now, because, according to the
mutual agreement, Aeroflot is the launch customer for the Il-96M/T, whereas
Vnukovo Airlines undertakes initial operations on the Tu-204. Whether we
accept this aircraft or not will depend on engines and on-board equipment
of the plane. The key question is the Tu-204's economic figures. So far
we have not seen any commercial calculations.
Q. In other words, Aeroflot is now at the stage of assessment of this
aircraft?
A. Yes, certainly. The first serious presentation of the Tu-204 was in
December. If you do not know much about a plane, it is difficult to draw
up procurement plans. However, we have expressed a strong interest in the
Tu-204. Beyond any doubt, it is a very promising design.
Q. Once we speak about cargo aircraft, what are your plans on the
Il-76 freighter? The aircraft is now offered with new engines - PS-90 or
CFM- 56 - and new avionics. What is your attitude about the updated aircraft?
A. Our attitude is that we are looking very carefully at everything that
appears on the market. However, at this moment the Il-76 with CFM-56 engines
does not exist. Maybe it will. We need to know economic figures on this
aircraft. Genrikh Novozhilov, the Ilyushin General Designer, has just returned
from a business trip to France. I think we will soon get together - Aeroflot
and Ilyushin - to see how economically-viable this aircraft could be.
Q. General Electric, CFMI and Rybinsk Motors agreed to set up licence
production of the CFM-56 in Russia. Rybinsk says its engines will be offered
in lease. Will Aeroflot be interested in leasing those?
A. Yes, certainly. But, first an aircraft with those engines should be
certified. We need to know how economically viable this aircraft would be.
It would be wise to re-engine all the existing fleet [Il-86s and Il-76s].
Without this work there is no reason for us to lease CFM-56 engines. It
should be stressed that Aeroflot has not leased engines before. The "power-by-hour"
agreement with Perm Motors on the PS-90 is different, we in fact buy time
of the engines, paying hourly rates. It is a very specific type of work
with engine-makers. Broadly speaking, anything could be a subject for negotiations,
but in this case we need something to mount engines on. After we have got
it, we will think how we could get appropriate engines.
Q. The Il-86 is also a candidate for being fitted with CFM-56s...
A. The situation with the Il-86 passenger airliner is more difficult
than with the Il- 76 freighter. The Il-86 has been in service for a long
time, and, I must say, we are considering not only replacement of engines.
For the aircraft to remain in service it is necessary to get up to the level
of modern requirements for passenger comfort. In other words, the Il-86
needs a thorough modernisation. As well as the installation of new engines,
we should improve its passenger cabin, and replace the avionics and navigation
equipment. All this demands serious investments. We made rough calculations
and understood that should the work be done, the Il-86 will be a "heavy"
aircraft. Now we're trying to figure out what is better, to invest in modernisation
of the Il-86 or buy more Il-96Ms.
Q. May I say that the idea to upgrade old Ilyushins is still alive?
A. Offers on those aircraft are being prepared. Please do not think that
the idea is dead. The Ilyushin design bureau continues to work on modernisation
plans for the Il-86 and the Il-76. Sadly, but we have not seen economic
calculations on both types yet. The document compiled at Ilyushin earlier
revealed to us that both projects promised to be "heavy." However,
we are keen to study any ideas on modernisation of our existing fleet.
If the modernisation of the Il-86 receives a "go-ahead," then
it would be wise to upgrade all of the existing fleet, not just the airframes
in service with Aeroflot. If we choose to upgrade only our airplanes, it
would be very costly because we have only 18 Il-86s [totally, 100 airframes
were built].
Q. GE people say that modernisation of the Il-76 looks more attractive
than that of the Il-86. Do you agree?
A. Yes, it is true that the Il-76 project is more realistic than the
Il-86. The majority of Il-86 operators are not in a position to afford modernisation.
The Il-86 exists in smaller quantities, and, therefore, the cost of modernisation
per one airframe will be higher.
Q. According to Rockwell Collins, Aeroflot has purchased 27 TCAS sets.
Do you plan to continue modernisation of your aircraft with up-to-date avionics?
A. Of course, we do. Our fleet shall meet modern requirements. The Tu-134
does not. The key question here is the economics of operation. Without modern
collision-avoidance systems Russian aircraft can not use international airspace,
which means losses to our company. Or fines, in case of noisy engines. That
is why we have to ensure that our aircraft flying abroad meet international
requirements.
Q. AeroWorldNet is published in the USA. What would you like to tell
its readers - your potential passengers - about the difference between the
"old" Aeroflot and the "new" Aeroflot?
A. The new Aeroflot showed its face in 1996 over the Atlantic. In terms
of quality of services, we made real progress over the last year. First,
now we fly only modern aircraft like Boeing 767, Airbus A-310 and Ilyushin
Il-96-300. Those types are much more advanced than the Il-62M we used over
the Atlantic earlier.
Secondly, the new Aeroflot means a new attitude to passengers. We try
to provide passengers with the same level of comfort that they are used
to enjoying when flying Western airlines. We will, of course, develop further
the trend of improvement in passenger comfort in order to bring the quality
of services to a higher level.
Thirdly, our partnership with Continental. Today American passengers
have a real choice which company to fly to Russia. Nowadays we offer flights
from any point in the US to any destination in Russia. The old Aeroflot
did not offer such services. Our partnership with Continental has nothing
in common with that of the old Aeroflot with Delta, when we simply sold
each other's tickets and that was it.
And about flight safety. It is wrong to judge us by other Russian operators.
Aeroflot - Russian International Airlines is not one of those; we are a
specific company specialising in international flights. We have successfully
passed numerous checks, including ones for flight safety. We have powerful
maintenance facilities able to keep our fleet in air worthy condition. And
that is why Continental has made its decision to co-operate with us.
I would like to say to our American passengers that in 1997 they will
meet smiling stewardess and stewards speaking two languages, and pilots
able to say not only "Dobry vetcher," but also "Good evening"
and "You are welcome."
Aeroflot 1995 Annual Report
Ask Vovick
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