By Vladimir Karnozov at Farnborough

Russia's efforts to streamline its industry are advancing

The thrust-vectoring MiG-29 twisting and turning in the skies over Farnborough was a showpiece of Russian technology. Now the country wants to create a national aerospace industry similarly able to react quickly to changes in the global aerospace environment.

Moscow has made some progress towards injecting private capital and Western management practices into its Cold War-era manufacturing plants and design houses. While some like MiG-29 manufacturer RSK MiG remain state-owned, others have been almost completely privatised - the government owns just 13% of Irkut, for instance.

Now Moscow has revealed more about its plans to consolidate at least eight major enterprises, no less than half the shares in which will eventually be privately owned. Russian economists estimate the combined company United Aviation (OAK in Russian) will have assets of $10 billion.

Merged organisation

The government says OAK's creation will take three steps. The first will be the merging of six so-called shareholder companies - Aviastar, Ilyushin, Irkut, Sukhoi, Tupolev and VASO. The second will involve turning state-owned RSK MiG and KAPO into joint stock companies and in turn merging them into the new organisation. At that stage - late 2007/early 2008 - OAK will formally come into being, with the state having no less than a 75% stake. In the third stage, OAK shares will be sold to investors, decreasing state share to 50%.

Balery Bezverhny, president of NP OAK, the interim body formed to manage the process, says it has been "proceeding well". However, one stumbling block remains the need to change Russian laws to allow the privatisation of defence companies andmake it possible for commercial investors to fund military programmes, he says.

OAK will be divided into several business units, including military aircraft, military transport and civil aviation. The civil aviation business unit will be founded around Ilyushin Finance and will also include the civil parts of the Ilyushin and Tupolev design houses, and three production plants: VASO, Aviastar and KAPO.

"The key point is to create a world-standard aftersale support system for the Il-96 and Tu-204/214", Bezverhny says. He expects that about 100 aircraft of these types will be sold to local and overseas customers in the next decade, before OAK shifts to next-generation aircraft like the narrowbody MS-21.

Where the new Sukhoi-led Superjet 100 (formerly Russian Regional Jet) fits in is unclear. In theory, it should be run by the civil aviation division, but there is scepticism among Ilyushin Finance management about whether the programme can be funded without government cash.

Source: Flight International