Weak ruble helps Russian aircraft painters

Photo by Engineering Holding

By Artyom Korenyako

In the light of the 2014-15 events, Russia’s civil aircraft painting market has experienced significant transformation. The strengthening of the dollar and euro against ruble has made local paint shops’ prices more attractive to Russian air carriers. And the opening of a new refinishing facility for narrowbody airplanes in the south of the country promoted competition in this market segment.

Russian and international market players expect between 80 and 100 foreign-registered airliners to be repainted annually for the country’s airlines in the near future, to the tune of 400 mln rubles ($5.6 mln at the current exchange rate).

Engineering Holding Company, which started offering aircraft coating services in 2014, believes more than 150 airframes, including those registered in Russia, will need a paint job every year. Air Livery Ltd, one of the world’s leading aircraft coating specialists, says t least 100 pre-owned airliners will have to be repainted in the liveries of Russian carriers.

Russia’s oldest paining center, Ulyanovsk-based Spektr-Avia, says nearly 100 Russian-operated passenger and cargo airliners would be repainted locally every year before the current economic crisis, and about 300 aircraft would undergo the procedure abroad.

Engineering’s subsidiary S7 Engineering inaugurated a new painting facility in the city of Mineralnyye Vody, in Russia’s North Caucasus region, last year. The market players’ consensus is that the new paint shop, capable of servicing up to 25 narrowbodies per year, is certainly the greatest recent development in the segment.

In the Caucasus

S7 Engineering’s first order as a stand-alone coating specialist was to repaint a UTair Airlines Boeing 737-400 in the UN livery. “This was back in January 2014; it was also the time when the original design of our painting hangar [which had cost some $6 mln to build] was defeated by the climate of the Caucasus [Russia’s tropical mountainous region where Mineralnyye Vody is located],” says Igor Panshin, deputy director planning and sales at Engineering: “We had expected the climate to play along, as is had done in the past, but when we started painting, ambient temperatures in the region dropped to -25°C, on top of strong winds. In these conditions, we could only keep the temperature inside the hangar at around +6°C to +10°C during the removal of the old paint (+20°C being the standard prescribed temperature). A few days later, the temperature outside rose to +10°C, so we were able to finish the job, albeit delayed.”

After this incident, the outer envelope of the S7 Engineering facility in Mineralnyye Vody was completely reconstructed. In addition, more powerful heating boilers were installed; gas reciprocating generators were put into operation to provide the facility with stand-alone power supply.

“As things stand, it is really hot in our paint hangar in every sense of the word this coming winter,” Pashin says. Over 20 aircraft, mostly those of S7 Airlines, UTair, Aeroflot, and the Pobeda discounter, have been painted at Engineering since the reconstruction. He continues: “We are expecting a very busy schedule next year; we are waiting for both old and new customers, the slots have been already reserved.” Engineering believes the introduction of a Russian painting shop integrated with a certified MRO provider makes it is easier for airlines to have their aircraft painting chores done (as witnessed by the successful completion of a D check on one of Aeroflot’s Airbus A320s).

Engineering’s business instinct is something to be envied. Says Konstantin Sablukov, Air Livery’s sales manager for Russia and the CIS: “The ruble’s depreciation has played into the hands of this services provider. Their timing with the inauguration of the Mineralnyye Vody facility was just right. The increase in the value of the dollar and the euro forced Russian airlines to turn to domestic suppliers, which accepted the national currency. The difference in the currency exchange rate has equalized the prices charged by foreign and Russian providers, and the Mineralnyye Vody’s readiness to conduct scheduled maintenance prior to or after the paint job became Engineering’s main selling point, as compared to Spektr-Avia, for example.”

Engineering has this to say about the depreciating ruble’s influence on its operations: “Without going into the finer details of our pricing strategy, it is a factor, but the fact that we charge in rubles for our services has been somehow alleviating the impact. Compared to European service providers, our prices are dramatically lower in the eyes of Russian airlines.”

Engineering says a full paint job on an Airbus A320 or a similarly sized airliner, complete with associated work, cost about 80,000 euros in 2014. This equaled to 4 mln rubles at the time, but the ruble’s depreciation has since driven the price in the local currency up to 6 mln if you shop for services in Western Europe. “We charge in rubles, which makes our offer 1 to 1.4 mln rubles less expensive than that of the competition,” Panshin says.

Volga Region

Ulyanovsk-based Spektr-Avia was established in 1994. Its paint shop can handle 100 aircraft annually, including Antonov An-124 jumbos The company expects to have painted 54 aircraft painted in 2015, compared to 49 last year and 39 in 2013.

Historically, new Russian-built passenger and cargo airplanes would mostly be painted at Spektr-Avia. However, now that the Sukhoi SSJ 100 production rate has been slowed down, as have the Ilyushin Il-76MD-90A and Antonov An-124 modernization programs, Spektr-Avia is trying to get more orders for foreign-registered aircraft. The problem is that the company’s Ulyanovsk-based paint shop has no Part 145 certificate.

“Our lacking the Part 145 certificate makes it really hard to get orders for foreign-registered aircraft, since any repaint job is accompanied with a range of associated MRO services such as weighing, CoG calculations, flight control surface balancing, etc.,” says Spektr-Avia First Deputy Durector Vitaly Zotov. “We are not looking to be approved under Part 145, seeing as EASA does not issue a special certificate related to the operations required in our line of work.” The enterprise has been tackling this shortcoming by involving specialists from Part 145-approved companies, including in the recent case of an Azur Air Boeing 767: the required maintenance check on the Bermudas-registered widebody was performed by a team dispatched by Engineering’s subsidiary Sibir Technics from its Siberian unit in Novosibirsk.

Spektr-Avia also has prior experience working with a number of other Russian MRO providers, including TS Technic and Tulpar Technic. As of early November, the Ulyanovsk-based enterprise was in talks with several foreign MRO companies, including Sabena Technics. Spektr-Avia has recently manufactured additional equipment for its painting facilities based on Boeing blueprints in order to cut the operating costs.

“We are in direct competition with the Mineralnyye Vody shop when it comes to narrowbodies,” Zotov says. “The competition is made even tougher by the fact that S7 Engineering provides a full package of services. For example, this past summer we were in talks with Air Astana over their Boeing 757, but the order eventually went to Mineralnyye Vody because we failed to secure Part 145 partners at the time; it was only recently that we signed the respective contracts.”

There are also several small-sized companies offering painting services for long-range airliners in Russia. In September, a Tupolev Tu-154 was painted in the Alrosa Airlines colors at the Novokuznetsk facility of the Novosibirsk-based firm Aeroteсh.

Elsewhere in the CIS, the painting hangars of Estonian company Magnetic MRO (opened in July 2015) and Uzbekistan Airways Technics are worth mentioning. The latter mostly works on aircraft of the national flag carrier Uzbekistan Airways, but also has experience with external clients, such as Kazakhstan’s SCAT. Panshin notes that the Russian aircraft repainting market is times larger than the combined market of the other former Soviet states.