Publications in Media

Competing successfully means being able to adapt

19.05.2014 / Rossiyskaya Gazeta / Sergey Beloglazov

Russia’s helicopter industry is changing fast. Russian Helicopters is carrying out a thorough overhaul of its production facilities, introducing the latest technologies and materials, and creating production centres of competence that will serve the whole sector, as well as a global after-sales service system.

Russian Helicopters CEO Alexander Mikheev talked to us about what is going on in one of Russia’s most high-tech industries.

- Alexander, recently we celebrated the 69th anniversary of victory in World War II. One of the most memorable moments in the Victory Parade in Moscow was a fly-past led by military transport and combat helicopters.

- Victory Day is our country’s most important holiday. On 9 May we remember those who fought courageously for their country, and those who forged the victory in factories on the home front. We pay tribute to these heroes; it is thanks to their courage and steadfastness that today we live in a free country under peaceful skies. During the war virtually all of the plants that today make up Russian Helicopters worked on producing and servicing aircraft that were used in battle against the Nazi invaders. Strengthening our country’s defensive capabilities remains one of our key goals to this day . One of the company’s largest customers is the Defence Ministry, which we supply with a whole range of the latest military helicopters such as the Mi-28N Night Hunter, the Ka-52 Alligator, military versions of the Mi-8/17 series and the heavy Mi-26, among others. All the combat and military-transport helicopters that you saw in the skies over Red Square on Victory Day were produced at our plants. In addition, we were responsible for testing the technical readiness of the helicopters. Ahead of the event special service teams fr om Russian Helicopters inspected all the aircraft to confirm their full readiness for the Victory Parade.

- The helicopter industry has been making solid progress for a number of years now. How has Russian Helicopters started 2014?

- In the six years fr om 2007 to 2013, helicopter production increased threefold. Positive trends are continuing on all key indicators. In 2013 Russian Helicopters increased revenue and EBITDA; revenues grew by 10%, to close to our target of RUB 140 billion, while EBITDA rose by 27%, to RUB 26.3 billion, ahead of target. Last year we delivered 275 helicopters to customers, slightly down on the previous year, but this was not due to a reduction in our order book or a slowdown in production – rather, it was driven by changes in the delivery schedule to customers. Effectively our plants produced 303 helicopters in 2013.

Positive results are also being produced by our policy targeting improvements to operational efficiency. Last year the company had an EBITDA margin of 19%, the highest for several years.

- How do Russian Helicopters products compare on the global market? How does the company stack up against foreign helicopter builders?

- Globally there are not many companies that, like us, can design, produce, test and service modern commercial and military helicopters. Today we can say without any exaggeration that Russian Helicopters is a leading player on the global helicopter market. The company brings together five helicopter plants, two world-famous construction bureaux (Mil and Kamov), as well as companies involved in manufacturing, maintenance and repairs, and a service company that provides after-sales care for helicopters.

As a result, Russian Helicopters has about 80% of the Russian helicopter market. In terms of global sales we have about 14% market share in monetary terms. In 2013, Russian Helicopters produced 35% of the global fleet of military helicopters, 74% of the global fleet of super-heavy helicopters with a maximum take-off weight of more than 20 tonnes, and also 87% of super-heavy helicopters with a maximum take-off weight of 10-20 tonnes.

The company regularly features in authoritative international ratings of leading defence companies. For example, Russian Helicopters significantly improved its position in the SIPRI ranking of global defence producers by sales volumes in 2012, climbing to 25th place fr om 35th in 2011.

Russian Helicopters also substantially climbed up the Defense News Top-100 rating for 2012 by sales volumes of military products, to 24th from 39th the previous year. This was driven by higher deliveries of military helicopters to the Defence Ministry under the state defence order, as well as growth in demand for Russian military helicopters on the global marketplace.

Customers around the world see our helicopters as reliable, safe, efficient and simple to maintain and operate. They are unique in their load-carrying abilities and flight ceilings. Today more than 8,500 Russian-built helicopters operate in more than 100 countries worldwide.

- Which region do you see as the most interesting as a potential market?

- The highest demand for our products comes from the Middle East, from Africa, the Asia-Pacific Region, Latin America, Russia and the CIS. We also promote our helicopters in Europe and North America. These markets are relatively new for us, and we think they are very interesting. In the last few years the company has significantly strengthened its position in South America, and in particular in Brazil and Colombia.

- Which of the company’s helicopters are in greatest demand?

- The star in terms of sales is a Russian best-seller – the medium multirole Mi-8/17 series. In recent years it has accounted for 60% to 70% of the company’s revenue. Various versions of the Mi-8/17 in commercial and military-transport configurations are operated around the globe. This helicopter has proved itself to be one of the most reliable and efficient in the world.

Also popular is the coaxial Ka-32A11BC built by Kumertau Aviation Production Enterprise. This is operated mainly as a unique firefighting and rescue helicopter, and operates in more than 30 countries including South Korea, China, Japan, various EU states, Canada and of course Russia. Last summer the helicopter proved to be indispensable in combating wildfires on the Indonesian island of Sumatra. And in January of this year the Ka-32A11BC was called into action to rescue passengers from the Akademik Shokalsky research vessel, which in late December 2013 had become stuck in Antarctic pack ice. A helicopter built by Russian Helicopters and based on the Chinese icebreaker Xue Long successfully completed the operation and evacuated 52 people.

Our helicopters regularly take part in UN missions. This work involves Russian-built Mi-8/17 helicopters produced by Kazan Helicopters and Ulan-Ude Aviation Plant; Ka-32s built by Kumertau Aviation Production Enterprise; and the Mi-26T – the world’s heaviest-lift helicopter in serial production, which is built by Rostvertol. In total this comes to more than 150 helicopters, which operate under contracts with commercial companies on behalf of the UN in South Sudan, Somalia and other African countries, as well as Afghanistan and East Timor. Our helicopters can work in the toughest climatic conditions, in a wide range of temperatures, in dust storms and torrential rain, and in mountainous terrain, and can land on unprepared sites. This is a quality that is highly valued by our partners and customers.

Military models of Russian-built helicopters today are in service with many countries’ armed forces. This primarily applies to Mi-8/17 attack and military-transport helicopters, military Mi-24s and the latest upd ated version, the Mi-35M. Numerous countries, such as India and China and several states in Latin America, have almost entirely equipped their armed forces with Russian helicopters.

- How has progress been on contract fulfilment this year? What new contracts have you signed?

- We are continuing to adhere to all our agreed timetables. In March we transferred a new Mi-8AMT to UTair, and in April we delivered a multirole Ka-32A11BC to the Shanghai Municipal Bureau of Public Security in China. In March Kazan Helicopters finished work on the landmark 3,500th Mi-17 series helicopter, which was delivered to the Indian Air Force. A contract for 80 Mi-17V-5 military-transport helicopters was signed in 2008, and today we have fulfilled all of our obligations. In 2012-13 we signed additional agreements with India to supply a further 71 helicopters, which again we will manufacture and deliver in strict compliance with the agreed schedule.

Early this year we also signed a contract to supply the government of Sakhalin region with two medium multirole Mi-8MTV-1s. Under the contract the customer will receive the helicopters in the first quarter of 2015.

- Obviously it is not enough to rely on currently popular models if you want to strengthen your position on the global market, as they can become obsolete. What new technologies are you developing?

- What do you mean by “obsolete”? Today’s Mi-8/17 series helicopters are radically different from their predecessors of 20 years ago, say. All global helicopter companies aim to maintain production of their most successful models and subject them to thorough updating. But at the same time of course new models are created. As part of the global helicopter industry, our company follows the same trend.

In the segment of helicopters with maximum take-off weight of 10-20 tons, we are betting big on the Mi-171A2. This has been developed by the Mil Moscow Helicopter Plant using the finest features of the legendary Mi-8/17 series. The latest technologies and solutions have been used, and we have also taken due account of feedback from potential customers and current operators of Mi-8/17 helicopters. The Mi-171A2 will get an improved power plant and gearbox, a new rotor system, and the latest glass-cockpit avionics. At present the first prototypes are undergoing factory testing. Flight testing is due to start in the second quarter of this year, and we hope to obtain IAC AR flight certification in the second quarter of 2015. At that point it will be possible to start serial production and deliveries to clients. To date we have had interest from major operating companies both at home and abroad.

The Mi-38 programme deserves separate mention. This is a new medium transport and passenger helicopter that can carry up to 6 tonnes inside the cabin and up to 7 tonnes on an external sling. It will be deployed to carry cargo and passengers, and can be used as a flying hospital and to fly a whole range of other missions. Thanks to the technological solutions used in its construction the Mi-38 exceeds other helicopters in its class by cargo carrying and passenger capacity and on key flight indicators. Its indisputable advantages include a high cruising speed and range, as well as the ability to operate in varied climatic conditions. Currently the Mi-38 is undergoing certification testing with TV7-117V engines produced by Klimov.

In the light segment we are offering our clients the Ansat developed by the construction bureau of Kazan Helicopters. In August 2013 we obtained type certification for the cargo version of this helicopter with hydraulic controls. We are also working on obtaining additions to the certificate, in particular for a resilience improvement system and the option to install passenger transport equipment and medical facilities. We plan to complete this work late this year or early next, after which in 2015-16 we will start serial production and the first deliveries of the Ansat to customers.

Finally, we have high hopes for the new military models that we are supplying to the Defence Ministry. These are the Mi-28N Night Hunter attack helicopter, the Ka-52 Alligator and the Mi-35M.

- In addition to new developments and technologies, what else do you consider important to improve the competitiveness of Russian-built helicopters on the global market?

- Today’s customers, when deciding to buy helicopters, look not only at technical and flight capabilities, cost and potential uses, but also at after-sales service. For many years this issue was a sore spot for the industry. Russia produced high-quality helicopters, but service and maintenance options left much to be desired. Naturally, it is difficult to be competitive in this situation. So for us a key priority today is to establish a service offering. Our task is not only to provide repairs to the helicopters that we supply our customers, but to supply a complete maintenance service throughout the product life-cycle.

We are building a modern after-sales service offering for our products, and expanding our network of service centres. Russian Helicopters includes Helicopter Service Company, which has been tasked with implementing our strategy in this area. In addition, we recently took over the management of five aviation repair factories in various regions of Russia. They will be actively engaged in building a high-tech system of service support.

- Active promotion on the global market also implies greater integration into that market. How is Russian Helicopters involved in international collaborative efforts?

- We work with companies including AgustaWestland, Turbomeca and other global sector leaders. For example, with Turbomeca we have a programme to produce engines for the Ka-226T. In addition, we are creating the medium multi-role Ka-62 in collaboration with European partners – the plan is to fit it with Turbomeca’s Ardiden 3G engines, and a gearbox built by Zoerkler of Austria.

With AgustaWestland we are already running a project to assemble the AW139 helicopter at our HeliVert joint venture, which is located at the National Helicopter Development Centre in the town of Tomilino, near Moscow. Russian Helicopters and AgustaWestland are also working on a project to create a new helicopter in the 2.5-tonne take-off weight class.

- How do individual plants fit in to the Russian Helicopters holding as a whole? Are you having to make many changes?

- The sector is developing. Even today, seven years after the creation of Russian Helicopters, it looks like new. But all of these changes are happening on firm foundations of the unique experience that our enterprises have built up over many years. They have acquired a rich body of knowledge and some renowned traditions have been formed. We are trying to preserve all of this.

However, without extensive changes, modernisation and reorganisation, the sector as a whole will not be able to achieve the goals that we have set for ourselves. Above all we want to create modern, efficient, dynamic and competitive company. Historically Russian helicopter-building enterprises were created to be self-sufficient throughout the production cycle. This approach was driven by security considerations at the time. However in today’s conditions, given the significant advances in technology that have taken place in the meantime, that approach is no longer effective, because it leads to loss-making production and more expensive products.

Today the sector has entered a phase of restructuring. We are changing the functional face of the Russian helicopter industry and focusing on creating what are known as centres of technical excellence (CTE). Individual sites are starting work at all enterprises. For example, at Reductor-PM in Perm we are creating a CTE for producing helicopter gearboxes. At Progress Arsenyev Aviation Company in the Far East a new casting complex has been established, along with a CTE for machining at Kazan Helicopters, while at Rostvertol in Rostov-on-Don the technical equipment has been overhauled and a new dynamic testing lab and anodising facility have been brought online. We plan to create a separate CTE for modern materials at Kumertau in Bashkortostan. These centres serve the interests not of individual plants, but the whole sector. This is another new trend in what we are doing.

In 2014-16, we are preparing to launch another set of specialist centres producing fuel tanks, metal blades, polymeric and composite blades, and casting. This will help us to significantly reduce costs and also make production more flexible.

- Recently media reported the creation of a so-called “helicopter cluster” in Rostov-on-Don. What can you tell us about this project? How is it different from the National Helicopter Development Centre near Moscow?

- The National Helicopter Development Centre in Tomilino is a cluster wh ere we have concentrated the company’s intellectual resources. It focuses mainly on R&D and design work, and building up scientific, technological and innovation inventory.

The helicopter cluster in Rostov-on-Don will be an industrial technopark. It will be based at one of our largest production sites, Rostvertol. The principal goal is to create secure conditions for helicopter testing. To take flights out of the city lim its of Rostov. By nature this is an infrastructure project. It is being financed through a federal target programme, with a significant chunk of investment from Rostvertol. The terms of reference for drafting the project and budgetary documentation for the flight testing station has already been completed. In 2015 we plan to complete design work and an expert assessment, and to start construction. Work is scheduled for completion and the flight testing station is planned for launch at the end of 2019.

Other elements of the cluster will be the Helicopter Service and Repair Centre of the Defence Ministry for the Southern Federal District, and potentially the Russian Advanced Commercial Helicopter (RACHEL) production facility, a composites components production facility and a branch of the Russian Helicopters Helicopter Academy. The terms of reference will be drafted in 2015.

The cluster is planned to be built at the former Bataisk military airbase, which is currently disused. It will cover a total area of about 800 hectares. The facilities being created will significantly increase revenues and consequently our tax contributions to the budget.

The partial move of production to Bataisk will also bring benefits to the residents of Rostov who live near the current flight-testing station, as helicopter flights take place at various times of day and night and can cause disturbance for local people. The city in turn will get additional infrastructure and transport development opportunities thanks to the territory that will be freed up.

- It is hard to conceive of today’s high-tech production facilities without highly qualified staff. Do you have enough trained staff, or is the sector experiencing a shortage?

- I would say that we have a good appetite for staff. And we are making considerable efforts to satisfy it. Today many sectors of Russian industry face a shortage of workers and engineers, and there is high demand for qualified, successful and creative people. Our main goal here is to attract young people into the helicopter industry and to transfer our unique design and engineering experience to those who are just starting out. We want to create the image of Russian Helicopters as a positive employer.

Today around 12,000 young people work at Russian Helicopters enterprises. We are implementing a programme of working closely with relevant higher and intermediate educational institutions, which means we can monitor and maintain the necessary level of specialist training for the helicopter industry. For example, this year Ulan-Ude Aviation Plant established an Aviation Technical School that will train engineers and designers and offers the prospect of potential employment at the plant later on.

Meanwhile, a Kazan Helicopters initiative has se t up “helicopter classes” at High School No. 8 that offer advanced studies in mathematics and physics. Some 85 pupils are currently studying in these classes. Graduates produce very good exam results and as a rule are prepared to carry on to specialist higher-educational institutions and in future to continue working with the helicopter industry. Similar programmes to develop a talent pool and increase the professional qualifications of our employees are being successfully implemented at Progress Arsenyev Aviation Company, Rostvertol, Reductor-PM – which in 2013 won a prestigious regional award for its achievements in staff development – and other Russian Helicopters companies. The HE institutions that we work with help us to boost our employees’ qualifications and conduct targeted student recruitment. Inflows of young people are also supported by the provision of social benefits to new staff, including allowances, paid tuition, provision of sporting facilities, subsidies for rent and paid meals.

- What are Russian Helicopters’ strategic goals? What targets is the Russian helicopter industry working towards?

- We are growing rapidly, and that gives us some confidence. In the next few years our strategic goals are to strengthen the company’s position as a leading player in the global aerospace industry, to expand our model range, streamline production and develop our after-sales service offering.

We plan to increase Russian Helicopters’ global market share from 14% to 20% in monetary terms by growing our presence in markets wh ere we have traditionally been strong and also making a push into new markets. Our achievements will also make a significant contribution to supporting Russia’s image as one of the few countries that is successfully developing high-tech helicopter production.

Russian helicopters magazine
Issue #1 (36) 2019
2019 year