Nikolay Fedorovich, how can you describe the current financial condition of RSK "MiG"?
Our corporation's financial condition remains rather complicated. Because of the non-payments under the state defense order for many years the corporation receives financial resources only from export. The inherited old debts make the situation more complicated. In the end of 1999 the turnover of our corporation's economic activity made up around 3 billions rubles. Only about 10 millions rubles out of it come to the domestic order. These are the 4 million-ruble debt of the Defense Ministry for the MiG-31 modernization and 6 million rubles for the financing of the fifth generation light aircraft's draft project. It means that the export and the domestic order can be compared as USD 100 millions to 10 millions rubles.
The united balance sheet of the company has been composed for the first time this year, the profit made up about 800 millions rubles, accordingly, after the taxes had been paid the balance profit made up about 130 million rubles. A lot of debts from the previous years have been paid: to the federal budget, the local budget and other funds. Although the corporation finished the year with profit its financial condition remains complicated because of these very debts from the previous years. The liabilities from the previous years can't be cleared within one year.
The company's debt caused by the well-known credit has been restructured for nine years. At the same time we have large debtor liabilities which make up approximately USD 800 millions. In the result of the company's activity analysis and the audit lately last year - early this one we detected all our debtors. We found out that USD 800 millions have been taken from the company through different schemes in the last four years. Several programs could be finished with that money.
As you have mentioned the export made up about USD 100 millions in 1999. Has this money been received from the supplies to Bangladesh and Eritrea?
Not solely. We have fulfilled many obligations under the additional agreements for spare parts supply and technical support. This is India, Malaysia and Europe. In Europe after the long interruption in the activity that happened in 1997-1998 we are to sign contracts for DM 9 millions to supply spare parts, the contract with Hungary is signed for spare parts deliveries for more than USD 1 million. The modernization of the Hungarian fighters is being discussed now.
In 1997-1998 there was the recession in the relations with Europe because we had conflicts with the German side. At the certain moment we forgot that we had handed over the whole documentation for the MiG-29 modernization to Germany. And since Germany has its own developed aircraft construction industry while any restrictions to transfer the property rights weren't legally stated we could completely have lost the European market. Now we realize that Europe is self-sufficient, that no one is waiting for us there, and our task is to show that they can work with us and they shouldn't be afraid of us.
Can you confirm that DASA Corporation is withdrawing from the Sniper project?
Yes, before ILA-2000 exhibition DASA signed the document to pull out of the project. Now Romania renewed its request for assistance in the MiG-29 modernization program.
What part can RSK "MiG" take in the work for the MiG-29 modernization?
Considering for example presently discussed project of the Hungarian MiG-29 modernization our share will be within 50%. I think it's worth to fight for it. We realize that we can't pretend to the whole volume of the work for the MiG-29 modernization in Europe where there is a self-sufficient aircraft construction potential and rather watchful attitude to Russia now. It's clear that the countries that have joined NATO and wish to modernize MiG-29 don't want Russia to have access to some sensitive matters. These are the state identification, secret communication and radio countermeasure devices. Proceeding from the thesis that the client's wish is a law we accept these requirements but the rest of the work on the modernization is given to Russia. First of all it's the radar and the central processor modernization.
Thus, if the whole market of the European MiG-29 modernization is approximately estimated at USD 400 millions then Russia's share within 5 years will be about USD 200-250 millions.
RSK "MiG" actively cooperates with DASA Corporation on the European MiG-29 modernization market. Does DASA render any assistance to promote this aircraft on the Austrian market?
Yes, DASA actively works in Austria convincing the Austrian side of the MiG-29 attractiveness. But the major assistance form DASA side is that due to the cooperation with this corporation the German Air Forces excellently operate MiG-29. We reach the exploitation on condition. The whole logistics is on the top level, we have got the unique experience in this field in Germany. The aircraft has very good battle potential, it meets all requirements of the Austrian Air Forces, the purchase and the operation costs are much lower than the competitive offers have.
On what stage is the Austrian tender now?
The tender hasn't started yet but we are preparing the aircraft for tender tests taking into consideration the Austrian requirements. First of all, the Austrians don't need attack functions but the ones of the interceptor aircraft that can operate in the complicated flight situation against the background of mountains covered with ice and woods. Now we are preparing MiG-29 SMT aircraft with "Zhuk" radar for the tender. Since the tender hasn't been declared yet nobody knows the exact needs of the Austrian Air Forces. The amount from 24 till 30 units is mentioned.
What is the work schedule for the creation of MiG-29 SMT with "Zhuk-M" radar?
Under our plans the aircraft should be ready by the third quarter of 2001. Such limited term is explained by the fact that we continued the work that had been held as far back as in the USSR on the MiG-20M program. The fire control system of the aircraft is based on the same N-010 radar called "Zhuk" today but constructed on more modern elementary base. "Zhuk" has already worked in China on F-8-IIM fighter. Today we continue that very radar systems' line that we have invested in and that is the most advanced today. We must work fast, we have no other way or we will be late.
Until 1995 MiG-29 sales weren't bad, 72 units have been exported in all. But since 1996 at first the sales stopped at all then resumed at rather low level. What do you think is the reason of it, internal conflicts?
By the middle of the 90's the market of the MiG-29 simple cheap versions has been temporary saturated. On the one hand, such relatively well-to-do countries like India, Malaysia, Hungary had already purchased these aircraft and were waiting for the release of more advanced modernized versions that hadn't been constructed yet. The works on the modernization livened up only in 1998. But developing countries still needed 9-12 and 9-13 versions. There was a temporary gap on the market. Now we will be able to offer on the market soon the modernized MiG-29SMT for pretentious clients and on the other side we see growing demand for the cheaper versions on the market what is proved by the contracts with Bangladesh and Eritrea. Now we have come to the final agreement with the Ministry of Trade of Russia on the normal free price formation with regard to the region and the importer states. So I think that we should succeed in Africa, South East Asia and South America within two years.
On what stage is the MiG-AT program, will RSK "MiG" continue to invest money to this project since India has chosen the British Hawk-100 as a basic training aircraft for its Air Forces?
Yes, we will continue to finance the program. Now we are seriously engaged in the aerodynamics of this aircraft, actively work with France, the Government's decree has been issued recently to open the French credit line for 400 millions franks for the French components purchase. We have two flying aircraft: one - with the French components, another one - with the Russian ones. One of these aircraft will be completely finished approximately in three month what will allow us to show the stock to full advantage. This aircraft will have completely finished avionics, information and control field.
The aircraft with the Russian avionics will have the information and computing system unified with MiG-29 but of smaller size because the MiG-AT cockpit has no space for two 6x8-inch indicators. Speaking about the radar, firstly "Osa" was supposed to be installed, we even invested about USD 1 million in this radar in 1999. Now we, however, reappraise our attitude to this problem and think that either "Zhuk" with reduced aerial grid or "Kopie" should be installed on the training aircraft. We think that the usage of already developed radar is economically more expedient. We as the aircraft construction company can't finance the design of one more radar they didn't do even in the rich countries. The "Zhuk" design was financed by the Soviet Union and Russia, today we continue to invest money in it. The Indian side financed "Kopie". We shouldn't start new projects but finish both devices.
How could it happen that India, which is our market, had chosen the British training aircraft?
Nothing is finally agreed. The tender isn't finished, we together with France continue to participate in this competition. The Indian side prefers to have the new generation RD-1700 engine on MiG-AT. The federal budget and, to less degree, RSK "MiG" finance the finishing of this engine. In this year our corporation transferred USD 500 thousands to "Chernyshev" plant. This is the big money for us and for the program. The work on the engine is a little bit delayed but late in summer it will be put on the test bench. Taking into account the wish of the Indian side to have the Russian engine that they would like to produce on license then we have prepared the appropriate commercial offers and continue the negotiations. The British, of course, have the advantage because they have the serial plane. But it's out-of-date, large and expensive. So we will finish the MiG-AT program. We even wish to supply this training aircraft to the Air Forces at our expense on condition that proper commitments will be taken by the Air Forces. We can't just present the aircraft as a gift but we can construct a lot on account of the next supplies.
Has RSK "MiG" already restored the MiG-29K program or should the contract with India be signed first?
The work on MiG-29K has already started. The financing of this program was planned in the corporation's budget in order to be in progress when the contract is signed. Since the facilities are limited the MiG-29K image is as much as possible unified with MiG-29SMT: standard interface, "Zhuk-M" basic radar, unified fire control channel. What the computing system and the information and control field concern than they can be different. In the Russian version these are the Russian components, in the export version - it is under the request by, in this case, the Indian side. The request of any customer will also be satisfied in the MiG-29SMT version. The information field in the cockpit - two indicators or one.
Are you sure that RSK "MiG" has enough financial resources to finish MiG-29K for India?
Yes, our corporation together with the subcontractors and "Rosvoorouzhenie" has determined all price parameters. We are 100% ready for the final negotiating process, R&D and the production. Today the design bureau is for 70% engaged with the ship subjects, approximately for 20-25% - with MiG-29SMT, and the rest - it's MiG-110.
Do you work on the MiG-31 modernization?
The corporation's budget can't afford MiG-31. It should be the federal budget's program. We offered the Air Forces to reconsider the budget, to transfer the money planned for MiG-20SMT in the draft budget for 2000 to MiG-31. Since MiG-29SMT is an export machine we can finish it at our own money without taking a single cent from the state either now or finishing off the aircraft at service in the future. This is the very concept to use export facilities in the interests of the Russian Defense Ministry.
What are the relations between RSK "MiG" and the Nizhniy Novgorod "Sokol" aircraft construction plant?
We have normal working relations with "Sokol". We think that RSK "MiG" and "Sokol" work together on the MiG-31 and MiG-29UB modernization. "MiG' corporation conducts R&D, "Sokol" produces the serial aircraft and finishes off MiG-31 and MiG-29Ub at service. To our mind, the program of the double-seat and single-seat aircraft modernization should be united, R&D should be unified, the state and the particular plant can't carry out several programs. We also informed Vasiliy Pankov, "Sokol" director, about this point of view. RSK and "Sokol" signed a general agreement on cooperation based on these very principles I have just mentioned. We have very good relations with the owners of this plant who realize the economy should dictate everything. I think that today "Sokol" has the perfect owners who realize what to do. They have good experience; they worked with Irkutsk, with other aircraft construction plants. They are normal pragmatic people. So I think that we will finally join efforts, the united MiG-29 modernization basis will be created. That's the most important.
Don't you think that MiG-31 that is still very underestimated by the foreign market, has a lot of prospects to be promoted in China, India, South East Asia and Middle East?
Iknow that until we came there had been some offers on MiG-31 but the corporation had been refused. We will evidently have to study much to lobby our interests in the power bodies. Now we are working properly on Vietnam. We explain, show analytic researches that the mixed fleet of MiG-31, Su-27 and Su-30 is optimal for this country. Now the five-year purchase plan is being conducted in Vietnam, within which they provide their Air Forces with the Su-27 family fighters. This plan will be conducted for one more year.
The Vietnamese market is small but the sales in China could make up dozens of units.
Such decisions should be taken with great caution. On the one hand, it could be good to sell, on the other hand, MiG-31 is a high-technological machine but the Chinese people is so diligent…
Does RSK "MiG" work on the fifth generation light fighter?
Yes, RSK "MiG" takes part in the program of the fifth generation light fighter's creation. Today we have a chance to start the real competition among the three design bureaus on the stage of the avant-projects and the draft designing. At that we are ready to work at our own expense on the stage of the paper designing. Every company participating in the program should do it at own expenses, help its subcontractors not for 100% but for some part. Good work can be done through it. On such stage within 3-4 years we can do without the money from the federal budget at all. Accordingly, in 4 years we will even economically show who is viable and who is not.
We support the idea of holding a tender on the stage of as the paper designing as the avant-project and the draft designing. After the draft designing is finished the Defense Ministry can choose one prime contractor and one supporting company that will become a subcontractor then. By the way, the avant-projects have never been made under the normative documents earlier. The avant-project was presented, the remarks were made but the affirmative resolution was signed at that. Then the work on the draft project started, the project was finished and simultaneously the remarks on the avant-project were eliminated. The elimination of the remarks was presented first and since it was accepted the unfinished draft project was presented again. Today in the conditions of competition there is a chance to work out this part till the draft designing under the normative documents.
What engine do you plan to use in your work? Russia doesn't have the fifth generation 10-tonn engine project but only AL-41, does it?
We consider the avant-project with two engines - AL-41 and RD-33 with 11-tonn traction. We think it is still early to determine if the aircraft should be single or double -engine. This decision will be taken on the stage of the draft designing. And then the decision will be taken to start the full-scale works and to choose who will be a leader and who - a subcontractor. On these later stages R&D will be financed not from the corporations' budgets but from the federal budget. To our mind, within the left 7-8 years the state should spend about USD 200 millions a year on the fifth generation program. All together it includes R&D, serial production preparation, flying tests. We realize that Russia won't finish this program alone. Partners should be attracted to join our resources with their finances. In general the light fighter program costs about USD 2 billions. Within the first 3-4 years while we are preparing the avant-project and the draft-project we don't spend the budget money. The decision will be taken, let's say, in 2003. Since 2003 till 2008 these two billions should start working. Will we have such money? If we won't than we shouldn't start. Because if 100% is required but we pay 50% then it doesn't mean that we will double the term of the project's realization. In reality we will spend the money but won't make the product.
We must confess that we alone can't afford the program. If we confess it then the whole approach to the project will become more sober. To attract partners is a very serious problem we have never dealt with. We have seen how Europe started the Eurofighter project with France then Paris withdrew form the project and launched own Rafale program. And it was in Europe where there was a great experience to conduct joint works. But we will start for the first time to combine the requests of the Defense Ministry, to regulate security matters, to create confident atmosphere. We aren't ready for it yet. But such work should be started.
How the structure of RSK "MiG' will evolve? Will the engine specialists, the instrument constructors and the helicopter constructors stay in the corporation's structure?
In general there is the understanding that we must live together. Another thing is particular legal regulations of the unification. For the last year we looked over many particular versions of the corporation and now its structure starts looming. The engine specialists stay in the structure of RSK "MiG". Moreover, Alexander Sarkisov, General Director of "Klimov" DB, and Nusberg, Chief designer of "Soyuz" machine-building design bureau, entered RSK's Board of Directors.
It's not completely clear with the instrument constructors. They will either work separately headed by a new governing company or stay in the corporation's structure but will keep their legal persons. Under the plans we have now RSK "MiG" together with Sergey Bodrunov will become co-owners of "Elektroavtomatika" in ratio as 51% by Bodrunov to 49% - by RSK.
The helicopter constructors will most likely found their own corporation.
As far as half a year ago the principal decision was taken to turn the corporation into a joint-stock venture. Together with RAKA and the Ministry of Property Relations we should present specific proposals. At first the state will have 100% of the shares but then it will depend on the economic and political situation.
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