Rostec Takes over United Aircraft Corporation in Long-awaited Move

Russia’s state-owned hi-tech and aviation behemoth Rostec has won President Vladimir Putin’s final approval for integrating United Aircraft Corporation (UAC), parent of Russia’s major aircraft manufacturers Sukhoi, MiG and Irkut.

According to ATWOnline, the long-anticipated move will see Rostec become not only a supplier and services provider, a helicopters and aircraft engines producer, but also a manufacturer of fix-winged aircraft.

The merger means that Rostec will now acquire 92.31 per cent of UAC’s shares from its current owner, Rosimuschestvo, the federal agency for state-owned property management.

The scheme, which has been on the agenda for the last few years and has survived several iterations before taking its current shape, is aligned with Rostec’s ambition to consolidate all national aviation assets in its hands. The corporation already controls the country’s rotorcraft monopolist Russian Helicopters, aircraft engine monopolist United Engine Corporation and some 750 aircraft components producers that supply up to 70 per cent of parts for UAC’s aircraft programmes. Although Rostec’s executives insist that the resulting structure has Europe’s Airbus as its role model, in reality it is remarkably similar to the former Soviet Union’s Ministry of Aviation.

The integration process is scheduled to be completed within 18 months and is expected to “strengthen the cooperation between airframers and components suppliers due to optimised investment programmes, overhead cost reduction and increased efficiency,” Russia’s vice-prime minister Yuriy Borisov said.

“According to preliminary estimates, the cumulative effect from integrating UAC into Rostec may reach 120 billion roubles ($1.8 billion) by 2025,” he added. It should also facilitate UAC’s access to the financial resources vital for the development of its key programmes. Another argument of the plan’s advocates is that the resulting structure would be “more appealing for investors.”

To support its case, Rostec said it is willing to invest up to 40 billion roubles into the MC-21 project, Russia’s advanced, medium-range airliner program, taking some burden away from the federal budget.