Russia's Jumbo Jet Flies Into Uncertain Skies

LE BOURGET, France -- Displayed proudly above the reception desk of the Ilyushin Aviation Complex office at the recent Paris Air Show was a newly minted airworthiness certificate from the U.S. Federal Aviation Administration.


On June 2, the big, four-engine Russian Ilyushin IL-96T parked nearby became the first wide-body jet, other than ones made by Airbus Industrie and Boeing Co., to meet FAA safety standards.


It was not easy.


While Airbus and Boeing have the certification process for new models down to a science, often breezing through it in a year or less, Ilyushin struggled for five years to get approval. And even though it now has the coveted certificate, making it easier for leasing companies and banks to finance sales of the IL-96T, the success of the huge cargo plane, or of a sister passenger plane that is in the works, is by no means assured. Ilyushin - founded in 1933 by Sergei Vladimirovich Ilyushin, who won the Order of Lenin three times for designing some of the Soviet Union's most famous military and civilian airplanes - has built only one IL-96T so far. The company, which was partially privatized in 1994, has orders for 19 more from Aeroflot International Airlines. But it cannot even deliver the first one because an agreement for loans from the U.S. Export-Import Bank in Washington to pay for the airplanes has lapsed.


But the Ilyushin team, in the best Russian tradition, knows how to live with adversity.


"We have overcome so much,'' said Vladimir Belyakov, the company's deputy marketing director, ticking off the collapse of the Soviet Union, the introduction of a market-based economy that eliminated decades of fat government subsidies, and last summer's financial debacle.


"And we continue.''


The IL-96T was the inspiration of American industrialist Armand Hammer, who in 1989 suggested combining the best of the Soviet and U.S. aerospace industries. Hammer convinced wealthy friends, including publishing magnate Robert Maxwell and real estate mogul Paul Reichmann, to invest in the project.


But after Hammer and Maxwell died and Reichmann's Olympia & York went bankrupt, the deal fell apart. Belyakov said Ilyushin executives now joked that they should have taken $1 billion from Reichmann.


"What difference would it have made if he were $11 billion or $12 billion in debt?'' he asked.


Nevertheless, the idea of building a Russian-U.S. airplane survived. Eventually, Pratt & Whitney, a unit of United Technologies, agreed to supply the engines, while Rockwell-Collins, a unit of Rockwell International, furnished the cockpit instruments and controls. Other American suppliers also signed on. The result was the IL-96T.


It was - and remains - a bet on the future of the aviation market in Russia, a country that spans 11 time zones and desperately needs more airplanes.


Arthur Kelly, the Rockwell-Collins executive who oversaw the company's role in the project, was a believer, making his final presentation to Rockwell-Collins' board of directors in the early 1990s, dressed in the uniform of a Russian air force colonel.


"Arthur was passionate about getting Rockwell-Collins into international markets,'' said company spokeswoman Karen Tripp. "He would do things like that.''


Kelly, who died of cancer in 1996, got the board's approval. So far, Rockwell-Collins has invested $50 million in the airplane and Pratt & Whitney $80 million. Belyakov estimated that Ilyushin has spent $600 million.


Sergei Ilyushin joined the young Soviet military as an aircraft mecha nic in 1919 and began building gliders as a student at Russia's air force academy in the 1920s. During World War II, he developed the IL-2 attack airplane to support infantry.


For most of its history, Ilyushin was simply a design center, creating airplanes that were built by factories around the Soviet Union as ordered by the central authorities. The system may not have been efficient but it was certainly productive: More than 36,000 of the single-engine prop attack planes were built, making it a mainstay of the war and the most widely produced model in the world.


During the Cold War, the Ilyushin Design Bureau, as it was then called, continued to create bombers and fighters but also branched into civil aviation. Hundreds of Ilyushin airplanes were produced each year and "sold'' to Soviet allies in the East Bloc and elsewhere - the allies had little choice but to buy them.


The collapse of the Soviet Union in 1991 ended the cozy relations between the state and the aircraft industry. Government orders dried up. Designers like Ilyushin and the factories that produced its planes were told to make it on their own. Some airplanes, like the mighty Antonov, the world's largest cargo airplane, have found niche markets. The Antonov moved Rockefeller Center's 22-meter Norway spruce Christmas tree to New York from Cleveland last year. And, because it was being leased, it did not need FAA certification.


However, most Russian airplane makers have fallen on hard times, as newly liberated East European countries dumped Russian planes, opting for more modern and cost-efficient Airbus and Boeing jets. Even Aeroflot decided to buy Boeing 737s and leases Airbus A310s and two wide-body Boeing 777s. Moscow-based Ilyushin teamed up with its factories in Voronezh and Tashkent to form a joint-stock company. (The Tashkent deal was delayed because the governments of Russia and Uzbekistan first had to work out a two-way agreement.) In addition to the new IL-96, Ilyushin now makes the IL-114, a regional two-engine prop, the four-engine IL-76 cargo jet, and the IL-103, a small, single-engine private plane that in December was actually the first Russian airplane to receive FAA certification.


So far, business has not been good. A decade ago, 60 IL-76s were made each year; last year just 15 were produced. And while China bought three wide-body IL-86 passenger jets and one IL-76 freighter three years ago, most of the new Ilyushins now coming off the assembly line are flown by Russian airlines that lack the money to pay for them.


Belyakov estimated that around 1,500 Ilyushins, ranging from the four-engine prop IL-18s of the 1950s to the wide-body 350-passenger IL-86s of the 1970s, remain in service in Russia and places like China, Cuba, India and Vietnam.


The new, Westernized version of the IL-96 is based on the all-Russian IL-96-300, which went into service in 1993. It is currently flown only by Russian airlines and serves as the official plane of President Boris Yeltsin. The IL-96M, which is the soon-to-be-introduced passenger version of the new airplane, can carry up to 436 passengers.


The company says the IL-96T, which is the cargo version and the first of the planes to come off the assembly line, can carry as much as 92 tons more than 11,000 kilometers.


That makes it smaller than the biggest Boeing 747 freighter, which can carry up to 140 tons. But Genrikh Novozhilov, Ilyushin's chief airplane designer since 1970, said the IL-96T's 4.8-meter-wide and 2.85-meter-high side cargo door, which is bigger than any competitor's, gave it a competitive edge.


And at an asking price of $75 million, the plane is less than half the list price of a new 747, even though it has the latest high-tech American cockpit instruments and fuel-efficient American engines. Thus, its backers claim, the IL-96T could find a ready market, even a huge one, from cash-strapped customers that need cheap hauling capacity.


"It's not a bad airplane,'' said Edwin Laird, the publisher of Cargo Facts, a monthly magazine that focuses on freight airplanes, as he watched the IL-96T lumber along the runway into takeoff position for its demonstration flight here. But that is a just a small part of the equation, he explained.


"The airlines are not worried about the engines or the avionics, which are all made in America,'' he said. "They are worried about everything else. What do you do if it breaks down? Do you go out in the back yard and make a part?'' He said he doubted there would be much of a market for the plane outside Russia until it had proven itself.


Belyakov said Ilyushin was prepared to offer airlines a global support network with the help of Pratt & Whitney and others. The real problem, he said, is that Ilyushin lacks the money to help customers finance the purchase of its planes.


The FAA certification will help with that. Uncertified planes like the IL-96-300 are allowed to fly back and forth between the United States and Russia but it is very difficult to sell airplanes in third countries without a stamp of approval from U.S. or European safety authorities. Few banks and other financial institutions will lend money to finance the sale of an uncertified airplane.


Belyakov said that Ilyushin was now looking for alternative ways to finance the Aeroflot sale to make up for the $1 billion Export-Import Bank loan, which was to pay for 85 percent of the Western content of the first 20 airplanes. Ilyushin's plan is to deliver the planes to the Russian airline as soon as it can so it can show the world how well the IL-96 can perform in commercial service. But Ilyushin executives were busy entertaining prospective customers at the air show here and were said to have some interest from airlines in Europe and Asia.


"There is a lot of opportunity for it in the CIS,'' said Louis Chenevert, the president of Pratt & Whitney, referring to the Commonwealth of Independent States, the loose confederation comprised of most of the former Soviet republics. "But as the airplane builds credibility for itself, it will gain customers all over the world. The airplane will do well over the next couple of years.''


Not that Airbus and Boeing should lose any sleep. Together, they will deliver more than 900 new airplanes this year, while Ilyushin will be lucky to deliver one of its IL-96s.


"The FAA certification will ease access to international capital for us and for our customers,'' Belyakov said. "We are rising to the same level of competitiveness with the Western-made aircraft.''