Russian Government spells out subsidizing rules for regional airliner projects

A likely candidate for government subsidies is the project to assemble L-410 regional turboprops in Yekaterinburg A likely candidate for government subsidies is the project to assemble L-410 regional turboprops in Yekaterinburg (Photo by Aircraft Industries)

The Russian government has spelled out the requirements to be met by domestic regional airliner projects in order to be eligible for subsidies from the federal budget. The subsidies will apply to airliners seating up to 19 passengers, and will not exceed 85% of the sum invested by the manufacturer. The resolution to that effect, signed on June 22 by Prime Minister Dmitry Medvedev, was posted on the government’s website on June 27.

The document reads that federal subsidies will be offered towards covering the costs incurred by regional aircraft manufacturers. The program is aimed at stimulating domestic production of airliners with up to 6,000 kg MTOW and seating up to 19 passengers. To be eligible, a company needs to be licensed to develop, manufacture, test and repair aircraft, and that it has no outstanding taxes, fees or other compulsory payments in its budget. The program also covers organizations involved in localized production of foreign-designed aircraft.

The explanatory note accompanying the government resolution defines the procedure manufacturers have to follow in order to apply for subsidies. The applicant is required to submit to the Ministry of Industry and Trade a business plan that will meet the criteria of the Aircraft Production subprogram, which is part of a broader government program to develop the country’s aircraft industry in 2013-2025. The application package also needs to include documentation describing the aircraft’s technical characteristics, including its seating capacity and/or MTOW.

There are also several other parameters to be met for the application to be accepted. For example, the share of the manufacturer’s own funds invested in the project needs to amount to at least 15% of the subsidy being requested; the net preset value of the project is to be at least 250 million rubles ($3.83 million at the current exchange rate); and the project is to break even in under seven years.

The application is to be submitted on June 30 at the latest, and will be considered within 15 days. The overall cost of the project for which a subsidy is being requested cannot exceed 1.5 billion rubles.

On receiving the subsidy, the manufacturer will have to prove that it is being used effectively. One of the effectiveness criteria will be whether or not the resultant aircraft’s technical characteristics meet those stated in the original business plan. If the declared parameters are not met, the company will be fined.

The most likely candidate for a government subsidy under the new scheme is the project to localize the assembly of the 19-seat Czech Let L-410 Turbolet regional turboprop at Yekaterinburg-based Ural Works of Civil Aviation (UWCA). The project tentatively involves production localization for at least 50% of this aircraft’s components. According to the Federal Air Transport Agency, around 35 L-410s are currently operated in Russia.

Earlier, there were plans to fully reimburse the production costs incurred by Russian manufacturers of regional aircraft seating up to 19 passengers. A relevant bill was even posted on the government’s Internet portal for draft legislative acts.


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