Aviation Industry to Go Private.

(From The Moscow Times)

The government is prepared to take unprecedented steps in turning over the country's aviation industry to private hands, according to a reform concept under discussion by Rosaviakosmos, the Russian Aviation and Space Agency.

The draft concept, obtained by The Moscow Times, outlines radical steps to create a giant aviation consortium along the lines of the European Aeronautic Defense and Space Co., or EADS. Without restructuring, the draft says, the nation will face a "threat to lose its status as one of the global aircraft manufacturing centers in the mid-term future."

The overhaul of the aviation sector could set the pace and pattern for the long-delayed restructuring of the entire domestic defense industry, experts said.

The consortium, dubbed the Unified Aircraft Building Co., or OAK, would fully emerge as a single-share entity by 2007 and include such brand names as, Sukhoi, MiG, Irkut, Ilyushin and Tupolev. In a development that would change the face of the defense industry, traditionally run by the government, OAK would be controlled by private capital, with the state holding a stake of 25.5 percent. The corporation would streamline producers, concentrate cash flows and drop unfeasible programs. According to the concept, the industry's focus on niche products would help the country shed excess facilities and eventually claim at least 10 percent of the global aerospace market.

International cooperation would be encouraged in all stages of the production cycle, from research and development to post-sale servicing.

The concept, discussed last week at Rosaviakosmos, is the brainchild of a working group that brings together government aerospace regulators with managers of state and private aviation companies. The group was set up following the call by Deputy Prime Minister Boris Alyoshin at the Paris Air Show in June to create a unified national aircraft building corporation. The concept was to be drawn up by year's end.