| AEROSPACE AND DEFENSE INDUSTRY NEWS DIGEST – UKRAINE, 6 SEPTEMBER 2011 |
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Dear Readers, September 2011 marks one year since the Aerospace and Defense Industry News Digest –Ukraine began publication. Over the past twelve months, we have published 22 Digests with over 600 items of timely, relevant, accessible information regarding Ukraine’s aerospace and defense industry. We have also provided substantial coverage of the environment that drives aerospace and defense markets, including government policy, defense plans, operations and exercises, and of course acquisition programs. With this Labor Day edition of the Digest, which covers the whole month of August, our team of dedicated researches and editors in Ukraine, the Czech Republic, and the United States welcomes our readers back from their summer holidays. For us, the real measure of quality is how well the Digest provides you, the reader, with timely and accurate information that is relevant to your business. We appreciate the many constructive comments we have received from you all over the past year – please keep them coming! And we highly appreciate the partnership of the U.S.-Ukraine Business Council in delivering the Digest to interested readers. For the Digest’s second year, we are committed to continuing to produce a high-quality twice-monthly digest. At the same time, we are developing new products and services that provide real-time and on-demand information to help you, our readers, better understand the events and issues that matter for your business. Stay tuned to this space! Best wishes, HIGHLIGHTS
DEFENSE INDUSTRY NEWS NATIONAL SECURITY & DEFENSE POLICY These reforms will include continued reductions in personnel, starting with 8,000 in 2012 (bringing the total force to 184,000 personnel, of whom 139,000 are military) and continuing to create a 20% reduction over the next five years. Ukraine’s Defense Minister stated that the goal of these reforms is to raise the percentage of the budget spent on modernization from the current 10% to 40%. INTERNATIONAL CONSULTATIONS AND AGREEMENTS Ukraine’s Prime Minister and the Chief of the General Staff of the People's Liberation Army of China met on 12 August to discuss strengthening Ukraine-China military cooperation. Issues discussed included: Ukraine’s Cabinet of Ministers forwarded to parliament a draft law ratifying a Ukrainian-Brazilian defense cooperation agreement. The agreement address: Ukraine’s Foreign and Defense Ministries have insisted that the Russian Black Sea Fleet (BSF) return navigational lighthouses in Crimea to Ukrainian control. Tough statements by both ministries occur against the background of the two countries’ continuing negotiations on additional agreements regulating BSF activities on Ukrainian territory, including cooperation in the prevention of emergencies and fires and mitigating the impact of BSF operations on local settlements. [Several Ukrainian court decisions require the Russian BSF to transfer control of navigational installations to the Ukrainian government. The installations in question include six lighthouses, navigation marks and nine other installations located along the Crimean coast. Particularly sensitive are two RS-10 radionavigation stations in Yevpatoriya and in Tarkhankut lighthouse. –Eds.] OPERATIONS, EXERCISES, TRAINING, FORCE DEVELOPMENT Some units from Russia’s 108th Airborne-Assault Regiment will participate in a Ukraine-Russian-Belarus military exercises on Ukrainian territory in this October. The Commander of the Ukrainian Navy reported in an interview that in the past year operational training activities have increased by 10% for the Navy overall, with at-sea time for rapid reaction and main defense units increasing by 2 ½ times. This is in large part due to stable financing and support from the Defense Ministry leadership. As a result of the improved financial framework, by the end of the year the Navy will have nearly 20 seaworthy combat vessels and over 30 support vessels. Ukraine will call up 26,600 conscripts during October-November 2011: 20,000 for the Armed Forces; 5,500 to the Internal Troops of the Ministry of Internal Affairs and 1,100 to the State Special Transport Service. AIRCRAFT Motor Sich has placed orders for the repair of 10 Mi-2 helicopters at the Vinnytsa Aviation Plant. This implements an agreement from February of this year that will allow the plant to prepare new specialists and renew its helicopter production. [In addition to repair of Mi-2 helicopters, the February agreement called for production of Mi-8T helicopters and repair of An-3 light multipurpose aircraft and at the Vinnytsa plant, with Motor Sich providing management of the production process. In March, the Vinnytsa Aviation Plant began bankruptcy proceedings, which was seen as a step to shift management control of the plant to Motor Sich. The relationship with the Vinnytsa plant is seen as a move by Motor Sich to diversify its business beyond engine design and construction to include aircraft assembly and repair. –Eds.] Motor Sich’s net profit rose to 707,9 mln UAH ($88,5 mln) in first half of 2011. The company will soon sign a long-term (3-5 year) engine-supply contract with JSC Russian Helicopters. The value of the contract to the will depend on production volume. Ukraine will approve the program for the development of a national helicopter program this year, according to Ukraine’s Prime minister. He added that the national program is in response to high customer demand for helicopters. Ukraine’s Vice Prime Minister announced on 5 August that there are firm and likely orders for more than 90 An-148 regional jet and An-158 regional jet passenger aircraft from Antonov by Ukrainian and Russian aviation companies. Ukrainian companies have ordered 22 An-148 and 28 An-158 aircraft through 2015, and the Ilyushin Finance Co. (Moscow Region, Russia) has ordered 45 aircraft. This will provide Antonov with a stable production volume of 25 aircraft per year over a four-year term. On 3 August, Antonov transferred a new An-148-100 regional aircraft to Ukrainian International Airlines (UIA). [The purchase of an Antonov aircraft reflects a major move for UIA, which since the company’s founding in 1992 has operated exclusively using the Boeing 737. It is also a victory for efforts by the Ukrainian government to encourage a local market for the Ukrainian aerospace industry. –Ed.] Antonov used the occasion of the MAKS International Aviation and Space Salon, held 16-21 August in Zhukovsky, Russia, for a number of important announcements: - Presentation of its new An-158 regional jet passenger aircraft and the announcement that it had received certification from the CIS Interstate Aviation Committee and Ukraine's State Aviation Administration that the aircraft meets AP-25 Airworthiness Regulations (adapted to FAR-25 And CS-25). - Signing an agreement with Siemens PLM Software on integration of program management and design software (NX and Teamcenter) into the production of An-124 Ruslan heavy transport and An-70 medium transport aircraft. - Signing an agreement with Russia's JSC Aviation Industry on development and realization of long-term programs for cooperation in assembly, serial production and development of aftermarket aircraft systems, as well as strengthening cooperation on scientific and technical issues, documentation, and developing research and production capacity. Cooperation is expected to focus on An-148 and An-158 regional jet passenger aircraft and the An-70 medium transport aircraft. - Ukraine and Russia signed an agreement on serial production of the An-148-100 regional jet. The agreement also addressed modifications, including the use of variable-contour АІ-222-28 and D-36-МB engines, as well as issues related to supply of spare parts and components. Ukraine and the Russian Federation have agreed schedules for the serial production of the An-70 medium transport aircraft. The first aircraft is to be produced by the Antonov Plant in 2013, with the Ukrainian Ministry of Defense the customer. Antonov estimates world demand for the An-70 at more than 200 aircraft: more than 50 for Asia, 20 for African, and 10 for Latin America, as well as 70 - 100 aircraft for the Ukrainian and Russian defense ministries. The An-70 has now flown 628 test flights. Antonov has signed an agreement with Russia’s Volga-Dnepr Group on modernizing the An-124-100 Ruslan strategic heavy lift aircraft into the new version: the An-124-111VD. The upgraded aircraft will be equipped with upgraded D-18T Series 3M engines and the FADEC digital control system. It will have take-off weight of 402 tons, 150 tons cargo capacity, a flight range of at least 5000 km with 120 tons of cargo, and a minimum crew of three persons. Environmental characteristics will be improved to meet international emission standards. Engine life will be 50,000 hours; aircraft service life of 60,000 flight hours and up to 50 years, with 12,000 flight hours between major servicing. Antonov has signed an agreement with the Volga-Dnepr Group (Russia) to jointly move ahead on development of the An-178 military transport aircraft. The An-178 will be equipped with side doors and have a cargo capacity of 18 tons. Antonov and Russia’s United Aircraft Corporation (UAC) have jointly announced that serial production of new An-124 Ruslan heavy transport aircraft will be possible once they have orders for 30-50 aircraft. At the same time, Antonov has expressed displeasure in UAC plans to beginning production of An-124 Ruslan heavy transport aircraft and An-70 medium transport aircraft at the Ulyanovsk Aviation Industrial Complex Aviastar (Russia) only in 2016. Antonov believes that An-70 production at the plant could technically start in 2014, allowing for 19 An-124 Ruslan heavy transport aircraft and 63 An-70 medium transport aircraft to be produced by 2020. The delay will result in halving that estimate. A similar situation has been unfolding concerning An-148 regional jet aircraft production at Russia's Voronezh Aviation Plant, where only 4 aircraft have been assembled of the 28 planned for this year. Russia's Defense Ministry has asked Antonov to prepare proposals on finishing the An-225 Mriya Strategic airlifter. In 2009 Antonov experts estimated that this process would cost $100 mln, of which $25 mln would be dedicated to work on the engines. Antonov has announced production of a new light multipurpose turboprop aircraft, the Аn-3-300, which is an update of the An-2 light agricultural and civil transport aircraft. The aircraft will have new Motor Sich engines. Flight test are to begin this year. Antonov, working with the Ministry of Infrastructure of Ukraine, is seeking to purchase an international service network that could provide service, warranty and post warranty service abroad. Antonov currently has no such network. Antonov currently spends 2-3 bln UAH ($250-350 mln) annually on design and development of aircraft, according to the company’s CEO, Dmytro Kiva. Since 2009, Antonov has invested more than 1 bln UAH ($125 mln) into Kyiv's Aviant State Aircraft Plant, despite that factory's very low production rate: roughly six aircraft a year against the capacity of 24-30. In the first half of 2011 net losses at the Kharkov Aviation Factory increased by 50. 5% to 168. 36 mln UAH ($21 mln), as compared to the same period in 2010. SE Ivchenko-Progress (Zaporizhya) is developing a new aircraft engine, designated the AI-28. The new engine will be designed for aircraft with a passenger capacity of 80-130 seats. Development is anticipated to take up to six years. Ivchenko-Progress is negotiating with the Oboronprom Corporation (Moscow) on joint development of D-18T engines for An-124 Ruslan heavy transport aircraft. According to Ivchenko-Progress, the project will not be commercially viable without Ukrainian and/or Russian state support. Russia’s Beriev Aircraft Company has signed an agreement with Motor Sich for the supply of 12 engines for 6 Be-200 multipurpose amphibious aircraft. SATELLITES & LAUNCH VEHICLES Ukraine plans to create an international center for space research based on the National Center for Testing and Controlling Space Vehicles in Yevpatoriya, Crimea. The Russian Federation has shown interest in the technical capabilities of the Center. Ukraine estimates the total cost of the ground-based complex in the "Investment Project Cyclone-4" to be $488 mln, to be funded on a parity basis with Brazil. To date, Ukraine has spent more than $130 mln on the project. A Ukrainian-Russian Dnepr carrier rocket put a Ukrainian Sich-2 earth observation satellite into a geostationary orbit on 17 August, along with six more satellites: the Aprizesat-5 and Aprizesat-6 (USA), Edusat (Italy), Nigeriasat-X and Nigeriasat-2 (Nigeria) and Rasat (Turkey). The Sich-2 is will scan the Earth surface in the visible and infrared ranges. The launch of Ukraine’s Lybid communications satellite is scheduled for 2012. Development of Lybid National Satellite System is an important element of Ukraine’s strategy for the development of the country’s space industry over the next twenty years. Russia’s S.P. Korolev Rocket and Space Corporation “Energia” plans to launch more than five Ukrainian-built Zenit-3SL launch vehicles annually from its Sea Launch platform in the Pacific Ocean beginning in 2013. One launch is scheduled for 2011 and four in 2012. The Orbital Sciences Corporation (USA) with launch the Taurus II launch vehicle in December 2012. The Taurus has been built with extensive support from Ukrainian companies: Pivdenmash (Dnipropetrovsk), Pivdenne (Dnipropetrovsk), and Hartron (Kharkiv) have supplied the first stage of the rocket, participated in the development of the engine, and provided equipment for the launch site. Pivdenne has also sent Orbital proposals for the further modernization of the second stage of the rocket. The launch of a Zenit-3SLB carrier rocket from Baikonur spaceport is scheduled on 3 October. Zenit-3SLB will bring the Intelsat 18 satellite into orbit. SHIPBUILDING The Sorіus Ship-Repair Enterprise in Sevastopol has finished the dry-dock (floating dock) overhaul of the Khmelnytsky corvette. System testing and sea trials have begun in preparation of for Khmelnytsky’s participation in Exercise Adequate Response 2011 in September. ARMOR DISPOSAL OF MUNITIONS AND HAZARDOUS MATERIALS |
