Mikhail Barabanov ( MDB )
The Russian helicopter industry is in rude health, contrasting sharply with many other defense industry branches and the languishing civilian aircraft makers.
Many defense companies are still undergoing painful restructuring, and only seven civilian aircraft were delivered in 2010. Meanwhile, helicopter output hit a 15-year high in 2010. The JSC Vertolety Rossii (Russian Helicopters) holding company, formed as part of the Oboronprom corporation in 2006, delivered 214 helicopters of all types – three times the 2003 figure and a 150 per cent increase on 2006 (see Table 1). The company’s revenues reached U$ 2.2 bn, a 110 per cent rise on 2006. Its margins remain at a healthy 10-12 per cent.
Most of that growth had resulted from the long-awaited launch of mass production of new helicopter models for the MoD, as well as strong exports.
Vertolety Rossii owns the two leading Russian helicopter design bureaus (Mil and Kamov), the five biggest helicopter plants (in Kazan, Ulan-Ude, Rostov-on-Don, Arsenyev and Kumertau) and manufacturers of key components. The only independent Russian helicopter maker is Strela in Orenburg, which makes small numbers of the Ka-226 light helicopters.
In an effort to leverage all that growth, Vertolety Rossii had planned an IPO on the London and Moscow stock exchanges in 2011, hoping to attract some 500m dollars. The money was to be used to pay off debts and to finance the compulsory buy-out of the minority stakes in its subsidiaries still owned by other investors. But in May those plans were postponed indefinitely as the share offer was undersubscribed. Potential investors are wary since the company, which began operations as a single entity only as recently as 2007, is still very young. There is also a certain amount of caution about the future of the Russian aerospace industry as a whole.
Vertolety Rossii is clearly one of the most successful of the Russian defense industry corporations created over the past decade. But it has fallen foul of the general reputation of the Russian aerospace sector, which still requires serious reforms. Nevertheless, the company is one of the first Russian industrial groups to have begun reaping substantial dividends from the rapidly growing MoD spending and the ambitious new weapons procurement programs.
Russian MoD procurement
After almost a quarter of a century of testing and polishing, the new-generation Mi-28 and Ka-50/52 attack helicopters have finally begun to arrive en mass to the Russian armed forces. The scale of the Mi-28N production program is unprecedented for post-Soviet Russia. Essentially, this is the first new mass-produced Russian military helicopter since the 1980s. In 2005 the MoD signed a nine-year contract for 67 Mi-28N helicopters; 38 were made at the Rostvertol plant in Rostov-on-Don in the five years to 2010, including 15 helicopters in 2010 alone. In 2009 first deliveries of the Mi-28N were made to combat troops stationed in the North Caucasus. In the autumn of 2010 the MoD signed another contract for an additional 30 helicopters to be delivered by 2015, for a total of 97. This means that the production levels achieved in 2010 are set to remain unchanged or even increase. It is safe to expect that Rostvertol will be delivering 14-15 helicopters every year in 2011-2014. Meanwhile, the new 2011-2020 State Armament Program (GPV-2020) has set the target for Mi-28N procurement at 260 helicopters, so production is set to increase after 2014, once new contracts have been signed.
In 2010 the Progress company based in Arsenyev delivered the first four mass-produced Ka-52 helicopters to the Russian Air Force. Five pre-production helicopters and prototypes were made in 2008-2009. The four helicopters delivered in 2010 were built under a 2009 MoD contract for 36 helicopters. The target for 2011 is for Progress to deliver another 10 helicopters, and maintain that level in 2012-2013. The MoD is expected to buy a total of 120 Ka 52 helicopters under the GPV-2020 program. A modified Ka-52 version and a separate naval version are now in development; up to 30 naval helicopters could be made for the Russian Navy.
In 2009-2010 the Kazan helicopter plant delivered the first 10 Ansat-U light training helicopters to the Russian Air Force. Finally, production of the Mi-8 transports, the workhorse of the Russian Army Aviation, resumed in 2008 after a long pause at the plants in Kazan and Ulan-Ude. The modifications now in production are the Mi-8MTV and Mi-8AMTSh. Hundreds are expected to be delivered in the coming years, including more than 50 in 2011.
Several other models will enter mass production in 2011, including the new Mi-35M attack helicopters, the Ka-226 light helicopters, and the Ka-31 AEW naval helicopters. The first six of the 22 Mi-35M helicopters under a 2009 contract will be delivered by Rostvertol in 2011. The Ka-31 (which was previously made only for exports) and the Ka-226 will be made in Kumertau. Also in 2011 Rostvertol is expected to resume production of the Mi-26 heavy military transports.
In 2009 the MoD took delivery of 33 military helicopters from the Russian defense industry. In 2010 the figure was 37, with a sharp rise to 109 expected in 2011, according to official statements (see Table 2).
Table 1. Deliveries by Vertolety Rossii subsidiaries in 2003-2012
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(projection)
delivered 72 75 83 94 104 169 183 214 260 300
Table 2. Helicopter deliveries to the Russian MoD in 2009-2011
Model 2009 2010 2011
Ansat-U 6 4 6
Ka-52 3 4 10
Mi-8 12 14 60
Mi-28N 12 15 15
Total 33 37 109
The growth reflects the beginning of deliveries under the GPV-2020 program. So far, there have been no problems with the program’s financing. Procurement of new helicopters is one of the top priorities of the program, which fully reflects global military trends. About a thousand helicopters should be delivered to the Russian Air Force by 2020, including 400 in 2011-2015. An additional 100 helicopters will be delivered by 2020 to the Russian Navy. The GPV-2020 also includes mass production of heavily modified versions of the existing helicopters, such as the Mi-28N (the Mi-28MN modification should be launched in 2015) and the Ka-52 attack helicopters, the naval Ka-27M and Ka-29M versions and a carrier-based version of the Ka-52. There are also plans to launch production of the multirole Ka-60 helicopter and the Mi-383 transport.
Vertolety Rossii already has preliminary commitments from the MoD for at least 100 military helicopters by 2012. Negotiations between the two on long-term contracts for delivery by 2018 are nearly completed. Several were signed in the first half of 2011. It has been reported that contracts for 100 new Ka-60 helicopters for the Army Aviation’s special task forces, for delivery by 2020, and a number of other deals are also in the pipeline.
The estimate of deliveries for the Russian Air Force in 2011-2020 includes 220 Mi-28N helicopters, 120 Ka-52, 40 Mi-35M, 26 Mi-26, 100 Ka-60 and 30 Ka-226 helicopters, up to 70 Ansat and up to 500 Mi-8 helicopters. Deliveries for the Russian Navy over the same period are expected to include 70 Ka-27M and Ka-29M helicopters, up to 30 Ka-52 and up to 20 Ka-226 units, plus a certain number of the Ka-31.
Exports, the second pillar underpinning the rapid growth of the Russian helicopter industry, still outstripped domestic deliveries in 2010. The situation is expected to change in 2011, once the large MoD contracts start to take effect. Nevertheless, Russian helicopter exports have also shown very respectable growth in recent years. In 2010 deliveries on export contracts were up 30 per cent, thanks largely to the continuing popularity of the industry’s best-selling Mi-8/Mi-17 series.
These powerful heavy-lifters are relatively cheap and easy to maintain, and still have a large military and civilian market in many parts of the globe. In recent years sales were boosted by the military campaigns in Iraq and Afghanistan. The Mi-8/Mi-17 series has earned itself an excellent reputation during operations in these two countries. As a result, the Mi-17 has been chosen as the core model for the fairly large Iraqi and Afghan air forces, which are now being restored to their former strength. The Afghan deliveries are financed by the Pentagon, which signed a contract for 21 Mi-17 units in early 2011. India has signed two large contracts for a total of 139 Mi-17s. China also remains a large customer. The Mi-17 is also entering new markets; contracts have recently been signed with Argentina, Bolivia, Thailand and Kenya.
Meanwhile, the venerable Mi-24/Mi-35 is having something of a renaissance on the world markets. Exports of the newly built Mi-35P and Mi-35M attack helicopters are on the rise. Brazil has bought 12; Azerbaijan signed a contract for 24 in 2010. Total exports could well reach 100 units. Russia has also begun to offer the Mi-28N and the Ka-52 to foreign customers. The first export contract for 12 Mi-28N helicopters was announced in early 2011. The buyer has not been named, but it may be Kazakhstan.
Russia also continues to export the Mi-26T, the world’s heaviest transport helicopter, and commercial modifications of the Ka-32. The industry is making Ka-28 ASW and the Ka 31 AEW naval helicopters for India and China. It is hoped that the Ka-226 and the Ansat light helicopters will also attract foreign buyers.
In an effort to keep the Russian helicopter industry competitive Vertolety Rossii has stepped up the development of new models and upgrade options. Its R&D program until 2020-2025 enjoys generous government support. In April the Russian Ministry of Industry and Trade submitted to the Prime Minister’s Office a draft of the state program for the Russian aerospace industry. The program includes the development of new helicopters, and sets an ambitions target for the wider industry to win 10 per cent of the world market in the civilian sector by 2025. The target for the defense sector is 14 per cent, and 15 per cent for the helicopter industry (the current figure is estimated by the ministry at 13 per cent). Some 5 trillion roubles (U$1.8bn) will be invested by the government into the aerospace sector by 2020 if the program is approved, a tenfold rise on the previous decade.
In the civilian segment Vertolety Rossii aims to launch by 2015 a deeply upgraded version of the Mi-17 helicopter (designated as the Mi-171M), a version of the Ka-226 helicopter fitted with French engines (Ka-226T), an upgraded version of the Mi-34 light helicopter with a turbine engine replacing the old piston engine (Mi-34S2), the new Ka-62 helicopter (a civilian version of the Ka-60) and the new Mi 38. The Ka-62 and the Mi-38 have already entered the trials program. There are also plans to launch the assembly of the AgustaWestland AW139 medium helicopter in Russia.
By 2020 the company is planning to develop and launch mass production of three new commercial models: the AHL heavy transport (based on the Mi-46 design), a medium helicopter weighting up to 4.5 tonnes (based on the Mi-54 design) and a light helicopter weighing under 2.5 tonnes.
In the military segment, by 2015 Vertolety Rossii will launch production of the modified versions of the Mi-28N (designated as Mi-28MN) and the Ka-52 attack helicopters; a carrier-based version of the Ka-52; revamped Ka-27M and Ka-29M naval helicopters; and the new Ka-60 multirole helicopter. By 2020 the company wants to develop and test the new Ka-65 future naval helicopter (with coaxial rotors); a deep upgrade of the Mi-26 heavy transport (designated as the Mi-26M); the Mi-383 transport (military version of the Mi-38); and an unmanned helicopter system.
A special priority is the program to develop a radically new advanced high-speed helicopter (Perspektivnyi Skorostnoi Vertolyot – PSV project) with a pusher-type propeller. Vertolety Rossii itself says the design will be a “breakthrough”. Similar designs are now being developed in the United States (the experimental X2 and the S-97 attack helicopter design by Sikorsky) and in Europe (the experimental X3 and the X4 design by Eurocopter). In Russia this new technology is viewed as a chance to achieve a major breakthrough in the helicopter industry. Early designs have already been proposed by both Mil (Mi-X1) and Kamov (Ka-92). One of them will be chosen by Vertolety Rossii for further development later in 2011. The Russian Ministry of Industry and Trade is expected to finance work on the early designs to the tune of 400m roubles (U$14m) this year. Later on spending on the program will be ramped up to about 4bn roubles (U$140m) over the next three years.
The PSV program envisages two types of commercial high-speed helicopters to be developed by 2020 (a medium and a light version), as well as a high-speed attack helicopter (“assault helicopter system” or “fifth-generation attack helicopter”).
There are doubts about the feasibility of some of Vertolety Rossii’s projects. The market for models such as the Ka-60/62, Mi-38 or Mi-34S2 may be far too small, so their commercial success is uncertain. The future light and medium helicopter projects also seem very difficult to pull off. The AHL heavy transport project may prove too costly, unless foreign partners are brought in. But the PSV project, which the company regards as one of its top priorities, looks quite promising.
The helicopter industry is one of the few Russian industries that are truly competitive internationally. Vertolety Rossii seems in a good position to retain its competitive edge thanks to its large sales and generous government support. Delivering the 2010 annual report to the Russian Duma, Prime Minister Vladimir Putin said that government financing of the Russian aerospace industry in 2009-2011 was over 270bn roubles (U$9bn), and that this financing had “facilitated progress in all the areas on which the future of our civilian and military aerospace industry depends”.
Compiled by CAST