The helicopter industry is one of Russia’s most promising economic sectors, whose annual exports of both military and civilian rotorcraft has exceeded USD 600 million for the last couple of years. Despite the dramatic fall in production in the early 1990s associated with the collapse of the Soviet Union, Russia’s helicopter industry continued making advances and is now modernizing and resuming the serial production of helicopters that proved to be export-potential. In 2006, Russian helicopter manufacturers produced a total of 110 helicopters, an increase of about 20% compared to 2005.

Exports of helicopters to foreignmarkets are emphasized in current production models over the needs of the domestic economy since such revenues can be used to upgrade and to further develop the Russian helicopter industry overall. In 2006, OBORONPROM, a division of the government-controlled arms export company ROSOBORONEXPORT, identified that 95% of revenues from its sale of helicopters resulted from exports abroad, while only 5% came from domestic sales to both civilian and military end-users. Major export markets include countries of South and South-East Asia, Africa, and Latin America. Market opportunities are also available in Spain and Portugal, primarily, in local fire-fighting sectors.

Despite the growth of local production, domestic market needs still remain unfulfilled, which creates business opportunities for U.S. helicopter companies. The estimated size of the Russian fleet is 2 000 rotorcrafts. The majority of the Russian fleet (90%) has been in service for 15-20 years and is in dire need of modernization.

Russian helicopter operators seek to upgrade their aging Soviet-built helicopter fleets with more state-of-the-art, reliable, and safe rotorcrafts.

Market demand

General market outlook remains positive, as the Russian helicopter fleet ages. Experts predict further growth in demand for both military and civilian helicopters, as the existing fleet will have to be replaced with new machines.

Private helicopter demand is strong with a growing number of affluent individuals wishing to buy helicopters. Helicopters in this market niche are treated as a sign of prestige rather than a timesaving business tool.

Economic growth boosts corporate sales. The majority of commercial operators’ clientele are located in the north regions of Russia, Siberia, and the Russian Far East, where the oil and gas industry flourishes, and where mineral and timber resources are concentrated. The transport infrastructure in these regions is very poor and helicopter services are essential for effective business operations.

Western helicopters are secured not only by private companies, but also by government institutions. The Ministry of Emergency Situations has pioneered procurement of western light rotorcrafts in the Russian market (3 BO105 and BK 117).

There has been a recent shift from helicopters with piston engines (Exec, Robinson, Enstrom) to single-engine or twin-engine turbine light helicopters.

Key Suppliers

Two corporations, Mil Moscow Helicopter Plant and Kamov, represent Russia’s leading helicopter brands: “Mi” and “Ka”. These companies are both design bureaus and manufacturing sites. Manufacturing of helicopters also takes place in other production enterprises.

Mil Moscow Helicopter Plant is a scientific and production company that manufactures helicopters of all types and classes: light, medium, and unique heavy helicopters. Over its fifty-five years in operation, Mil Moscow Helicopter Plant has designed and produced some fifteen helicopter models, with a total number of modifications exceeding 200.

Kamov designs and produces all types of “Ka” helicopters for various purposes, including Navy, Army Aviation, and civil operators.

Kazan Helicopter Plant manufactures Mi-8/Mi-17 helicopters, as well as Mi-38 test helicopters. It also designs and manufacturers its own models – superlight Ansat and Aksai helicopters.

Ulan Ude Aviation Plant is the only enterprise in Russia, which manufactures both airplanes (Su-25 and the export version Su-39) and helicopters (the family of Mi-171 helicopters). Over the period of more than 60 years, the plant produced over 8 000 aircrafts.

The Arsenyev-based Aviation Company “Progres”, located in the Russian Far East, manufactures Ka-50 and Ka-52.

Kamertau Aviation Production Company manufactures Ka-28, Ka-29, special purpose Ka-32, Ka-226, and Ka-29 crafts.

Rostov-based Rostvertol manufactures heavy-duty Mi-26T, transport multi-purpose Mi-24 (Mi-35), combat Mi-28N, light trainer Mi-60MAI, and light upgraded Mi-2A helicopters.

Vpered Moscow Machine Building Plant manufactures tail rotors and blades for Mi helicopters.

Stupino Machine Building Enterprise produces drive mechanisms for helicopter rotors.

Consolidation of the Russian helicopter industry

Historically, “Mi-” helicopters have dominated both domestic and international sales of Russian-made helicopters. “Mi” helicopters account for 93% of the civil helicopter fleet in Russia, compared to 7% share taken by Kamov. Within the former Soviet republics, 95% of all helicopters are Mi-family helicopters. The Russian army, including its internal affairs and frontier troops, are 99% equipped with Mi helicopters.

In an effort to diversify and strengthen the capacity of the Russian helicopter industry, the Russian government began an industry consolidation in 2001. President Putin signed a decree to establish OAO “Mil Helicopters Corporation”, focusing on consolidation of Russian companies engaged in developing and manufacturing the Mi family of helicopters. In 2004, the Russian government appointed OBORONPROM, an offspring unit of the government-owned arms export company ROSOBORONEXPORT, as the key sector player responsible for further consolidation of the industry. OBORONPROM united both Kamov and Mil helicopter manufacturers into one helicopter holding. The formation of the new holding under the name OAO “Helicopters of Russia” is still in process.

Best prospects

The helicopters in most demand are light-class rotorcraft. The size of this market is projected to be 3-4 thousand deliveries. At the same time, Russia has no serial production of light helicopters. All so-called light helicopters in service are turbine Mil Mi-2s and piston-engine Kamov Ka-26s, which were developed 30 years ago. Due to their poor operational economy and safety levels, most commercial operators have grounded them and perform light helicopter missions with Mi-8s.

The recent hike in fuel prices aggravates the need to replace aging Soviet helicopters with efficient light and medium rotorcrafts. In the past, Russian industry supplied light helicopters like the Kamov Ka-226 (the Ka-26 derivative powered by twin Rolls-Royce 250-C20R turbo shaft engines), the 10-seat turbine Ansat developed by Kazan Helicopters and the Mil Mi-2A (the modernized version of the Mi-2). None of these models have entered serial production and thus cannot cover the current demand for light helicopters. It should be mentioned that all of these have maximum take-off weights of 3-3.5 tons, so they are on the brink between light and medium helicopters under Western classifications.

The demand for medium offshore helicopters (i.e., mining and oil & gas) is also increasing, though it is more modest than the demand for light helicopters. Some Mi-8 derivatives and Kamov Ka-32s are employed in offshore missions. But they are heavier than their Western counterparts (for example, Eurocopter’s Super Puma models), and are less fuel efficient. Several Russian commercial operators are very interested in Western equipment, especially those that need offshore helicopters to serve international oil and gas programs.

Consistent with this market demand, more and more western companies have been bringing their rotorcrafts to the Russian market. Among them are: Eurocopter EC 135, EC 155, BK 117C1, AS 355; Bell 206, 407, 427, and 430; Agusta A109 Power; MD 500, 520N, 530, 600. Robinson helicopters are also actively marketing in Russia.

Avionics for helicopters is another area, which holds much promise for U.S. exporters. As the Russian avionics industry remains underdeveloped, Russian helicopter manufacturers are seeking opportunities to partner with Western manufacturers of on-board and radio equipment to produce state-of-the-art rotorcrafts

Market entry issues

Procurement of Western-built helicopters is hampered by very high import taxes. After all customs payments are tallied, an owner pays 41.6% of the aircraft’s declared value in customs fees. Domestic operators have been asking the government to decrease the taxes. Recent bilateral agreement between the U.S. and Russia and an overall desire on the part of Russian authorities to improve the export marketability of Russian rotorcrafts suggest that these tariffs will be reduced in the near term.

Resources & key contacts

Russian Helicopter Society,

Contact: Marat Tishchenko, President,

Phone: +7(495) 269-94-48,

Website: http://www.mtu-net.ru/rhs/

Association of Helicopter Industry

Contact: Mikhail Kazachkov,

Chairman of the Board.

For more information

If you wish to obtain more information on the Russian Helicopter Industry and market entry strategies, please contact Mark O’Grady or Vladislav Borodulin of the U.S. Commercial Service in Moscow, Russia. Phone: +7(495) 737-5030; fax: +7(495) 737-5033 or visit the website:

www.buyusa.gov/russia/en.

(Mark.ogrady@mail.doc.gov)

(vladislav.borodulin@mail.doc.gov )

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