The prices of Russian-made passenger planes intended to substitute for Boeing and Airbus aircraft have soared, presenting a significant obstacle in Moscow’s ambition to establish an independent civil aviation industry.
Minutes from a Transportation Ministry meeting, acquired by the pro-Kremlin newspaper Izvestia, reveal that the costs of domestically manufactured planes have surged by 45 to 70% over the last two years, primarily due to increased production expenses and Russia’s continued reliance on foreign components.
The MS-21, a medium-haul, narrow-body aircraft that serves as Russia’s main competitor to Boeing’s 737 and Airbus’s A320, now carries a price tag of 7.6 billion rubles (approximately $96 million), a jump from its earlier cost of 4.3 to 4.6 billion rubles ($55-58 million) just a year ago.
The Il-114-300 turboprop, designed for regional travel, has seen its price nearly double to 2.6 billion rubles (around $33 million).
Additionally, the LMS-901 Baikal has experienced a price increase from 178 million rubles ($2.3 million) to between 315 and 320 million rubles ($4-4.1 million).
Rostec, the state-owned defense and aviation group, informed Izvestia that the original cost projections for these Russian aircraft were overly optimistic and did not take into account the current economic climate. The company pointed to escalating material and electronic costs as major contributors to the price increases.
A representative from Rostec mentioned that initial production phases are typically more costly and that costs are anticipated to decrease as production ramps up.
“We are formulating a program aimed at reducing aircraft production expenses in partnership with relevant agencies and airlines,” the spokesperson stated, adding that they expect this initiative to yield results by 2030.
Viktor Anoshkin, a spokesperson for the budget airline Smartavia, indicated to Izvestia that while maintenance constitutes one of the largest expenditures for airlines, the conditions surrounding aircraft leases play a more pivotal role in determining profitability.
Following the meeting noted by Izvestia, the Transportation Ministry instructed the State Transport Leasing Company (GTLK) to devise new financial and operational leasing models specifically for domestically produced aircraft.
According to GTLK, these leasing arrangements can only be made financially viable if the entire purchase price is funded by the National Welfare Fund (NWF), which is Russia’s sovereign wealth fund.
To alleviate the financial pressures on airlines, GTLK has suggested extending lease durations to seven or ten years, with an additional optional year for re-marketing the aircraft. This plan entails a 20-year commitment of NWF resources, requiring a two-year upfront payment.
The meeting minutes referenced by Izvestia highlight the necessity for “aircraft prices to align with those of foreign counterparts, and the financial framework must provide similar returns to the NWF.”
These price hikes highlight the difficulties Russia faces as it strives to revitalize its aviation sector amidst sweeping international sanctions imposed after its incursion into Ukraine, which cut off access to Western aircraft, spare parts, and maintenance services, compelling the country to seek alternatives.
Nonetheless, despite public commitments to diminish dependency on Western technology, reports indicate that Russia has imported over $1 billion worth of components from Boeing and Airbus since the onset of the conflict, frequently through intermediary nations or gray-market vendors.
