Quote: Putin Laments Condition of Aircraft Industry

    President Vladimir Putin criticized domestic aircraft producers Tuesday for being uncompetitive and plagued by vested interests, and urged them to depend less on state support.

    S"Alarming and negative trends are obvious," Putin was quoted by the Itar-Tass news agency as telling officials at Zhukovsky, a town outside Moscow that has been the main center of Russian aviation since Soviet times.

    "It's clear that civil aircraft are becoming increasingly uncompetitive, that their attractiveness is falling and that they don't meet international levels of comfort," Putin said, adding that "group interests are contradicting national interests.

    "That is doing nothing to strengthen our position on the global market."

    In Soviet times, domestic aircraft manufacturers such as Tupolev, Ilyushin and Yakovlev accounted for more than a quarter of global aerospace production and were a force that Western producers like Boeing had to reckon with.

    Now production and research levels are only a fraction of what they used to be during the Cold War years.

    Unlike civil producers, warplane makers such as Sukhoi and MiG have staged a remarkable comeback on the global market in recent years, exporting two-thirds of Russia's total arms sales and fetching more than $3 billion in revenue per year.

    Domestic airlines like Aeroflot have already started to replace their aging fleets with Western-built planes, raising fears in the government that domestic aircraft manufacturers will cease to exist altogether.

    Putin said that opening up the sector, still tightly regulated by the state, to private investment should help avoid that.

    Although he did not specify whether he was talking specifically about domestic or foreign investment, Western companies are watching reform in the aviation industry very closely.

    He added that he also fully supported the idea of merging the big names of Russia's aircraft industry into a monopoly in the next two years, a move aimed at strengthening the ailing sector.

    The merger of the country's most famous brands -- Sukhoi, MiG, Tupolev and Ilyushin -- will take place at the end of 2006, Interfax reported, citing Industry and Energy Minister Viktor Khristenko.

    After the new company is set up, it will be registered on Dec. 31, 2006, he said.

    The government initially will hold between 60 percent and 70 percent of the corporation, Interfax quoted Khristenko as saying.

    Source:The Moscow Times