New appointment at RSK MiG could doom Tu-334 RJ project

 - January 31, 2007, 4:43 AM

Appointing a Sukhoi man to the top position at RSK MiG is becoming a tradition. On November 4 the Russian government named Valery Toryanin, deputy general director at Sukhoi, as RSK MiG general director and general designer. Toryanin, 53, is a graduate of the Moscow Aviation Institute and joined Sukhoi after a 20-year military career in various agencies involved with military exports. Toryanin replaced Nikolai Nikitin, who was chief designer on the Su-35 fighter program before taking the top spot at MiG in February 1999.

Observers assume that the new appointment is intended to speed up further integration of the Russian aviation industry through several powerful mergers. But it could cause cancellation or slowdown of the Tupolev Tu-334 regional jet effort led by RSK MiG in favor of its rival Sukhoi-led Russian Regional Jet.

Toryanin, however, said that “There will be revolutionary shake-ups at RSK MiG. The corporation has been developing dynamically. My task in the short term is to assess the internal situation in the company and find ways for further development so it can win new positions in the international and domestic markets. The MiG brand is famous and valuable, so there is no sense in speaking about its being removed from the market.” The new MiG boss is optimistic about MiG-29 fighter prospects on the international market, while saying “it would be premature” to speak about MiG’s withdrawing from the Tu-334 project. But he does not discount such a possibility.

No official explanation was given for Nikitin’s ouster. It is widely accepted it was initiated at a Rosaviacosmos board meeting in late October during which he was criticized for non-fulfillment of the government-approved Tu-334 program schedule. It is rumored that Nikitin was fired because certain circles in the Russian government were looking for a “more suitable” man to handle MiG’s growing cash-flow.

Appointed during the famed manufacturer’s worst ever economic times, when its firm-order portfolio was merely $80 million, Nikitin managed to sell MiG-29s to Bangladesh, Myanmar, Eritrea and Sudan and increase the number of countries holding long-term after-sales support contracts six times, to almost 20. New MiG-29 contracts, with India and Algeria, are in the final stages. Estimated at $2 billion in value, they would boost MiG’s order book to $3 billion. Nikitin also managed to put an end to the long-standing internal battle for power within the corporation and complete the process of its integration from dozens of smaller enterprises.

Days before Nikitin’s firing, Russian vice-premier Boris Alyeshin, responsible for the country’s military-industrial complex, said, “The situation at RSK MiG is far from good. While the military aircraft production business is more or less satisfactory, this is not the case with civil aircraft business development.” He further said that, so far, issues on cooperation with Ukraine on joint production of the Tu-334 had not been resolved. “Ukraine has a plant staying almost idle while we [in Russia] have laid a new assembly workshop in the field [at RSK MiG’s Lapik facility near Moscow].”

As such, the official government statement indicated clearly that Nikitin was fired for bad management of the Tu-334 program. Another possible reason was Nikitin’s public displeasure with last summer’s governmental order 1165r, which lists RSK MiG as a fully state-owned enterprise set for privatization this year.

State officials ignored a petition signed by the majority of 14,000 RSK MiG employees asking for Nikitin to be reinstated as leader of their company. This prompted a group of parliamentarians to demand the dismissal of Rosaviacosmos general director Yuri Loptev for “acts aimed at destabilizing RSK MiG.” Koptev was targeted following his election, at the end of October, as chairman of the board of directors at Sukhoi, an appointment that fueled rumors he had a personal interest in ditching the Tu-334 in favor of the RRJ and further weakening MiG management with a view toward MiG’s possible absorption by Sukhoi.

Another parliamentarian group filed a law proposal, “National priority regime for Tu-334 air vehicle.” Currently being evaluated by various government agencies, the law will be sent to parliament for hearings early this year. It calls for a temporary exemption from value added tax and property tax for RSK MiG (the taxes would be restored after assembly of 100 aircraft) and favorable customs treatment for imported parts such as Ukrainian-made ZMKB Progress/Motor-Sich D436T1 engines and airframe components. The Tu-334 production run is expected to amount to 250 airplanes, from which the state would receive $3 billion in various taxes; the state would be deprived of $890 million by the proposed temporary tax exemption. So far, RSK MiG and Tupolev have received letters of intent for 170 airplanes, provided the list price for a Tu-334-100 is reduced to $13 million from $18 million.

The proposed law is based on Nikitin’s pleas to the government last summer. He was trying to establish “National Project 334” (NP334), a company to organize nationwide support for the Tu-334 project and lobby for the project in Parliament. NP334 leaders warn that Nikitin’s dismissal “might be a considerable blow to the project.” They say Nikitin, as initiator of RSK MiG’s involvement in the Tu-334 project, is its strongest supporter. Under his command, RSK MiG invested $47 million in the project, in addition to state funding. The funds were used to build an all-new facility for Tu-334 and MiG-29 final assembly.

Launched in 1986, the 102-seat Tu-334 project was conceived to provide a replacement for the aging 76-seat Tu-134 twinjet. The new aircraft was to have been produced at the Aviant plant in Kiev, and by Tavia in Taganrog. In 2001, however, the Russian government handed leadership of the project to RSK MiG. Governmental order 1529r, dated Oct. 31, 2002, set milestones for the project, including completion of a third flying example at RSK MiG’s Voronin production center, which includes the “Znamya Truda” (Banner of Labor) plant in Moscow and Lapik in Lukhovitsy. This airframe was to make its first flight last summer. However, cash shortages at RSK MiG delayed its completion until September. The airplane is intended to serve as a conforming prototype. The first prototype, built by Tupolev’s experimental plant, has been flying since 1999. The second Tu-334, assembled by Aviant, finally rolled out last August and was flown to the Zhukovsky test center near Moscow for flight testing in late November.

Atlant-Soyuz and Aerofraht have placed firm orders for 10 Tu-334-100s in standard configuration, offering 102 seats and 1,700-nm range at a cruise speed of 440 knots, at $12.9 million apiece. First delivery, to Atlant-Soyuz, is scheduled for next year. Contractually, RSK MiG has to create a Tu-334 support system similar to that which the company established for its MiG-29 fighters operated in Europe. “This was one of our main conditions,” said Atlant-Soyuz chairman Valery Menitsky. “We demanded our Tu-334 be supported to the very same standards as Luftwaffe MiGs. Only then can a new Russian-built airliner be economic to operate.”