INTERVIEW: Antonov flies in the face of Ukraine's crisis

By bne IntelliNews October 28, 2009

James Marson in Kyiv -

While most Ukrainian companies are simply trying to survive the country's economic meltdown, Antonov Aeronautical Scientific/Technical Complex is flying in the face of the crisis and talking about expansion.

A Soviet company famed for producing enormous and reliable aircraft, Antonov has successfully made the giant leap into the capitalist world, becoming one of Ukraine's few world leaders by taking advantage of its Soviet inheritance of experience and knowledge. "A few years ago, the president of Lockheed told me that there are only two firms in the world that know how to produce good transport planes - Antonov and Lockheed," says Dmytro Kiva, president of Antonov.

Nato seems to agree: it entrusts Antonov planes with the transportation of its troops, tanks and equipment in Afghanistan.

Antonov is a diverse state company that takes aircraft from conception to production, although its major focus is design, with most of its aircraft manufactured on licence in factories across the world. It also includes a large cargo carrier, Antonov Airlines, which was launched in the dying days of the Soviet Union and was key to generating revenue in the tough transition years.

Yet the company remains best known for its huge cargo aircraft, with legendary tales of world-records for carrying massive payloads. Antonov's other main niche is in regional passenger aircraft up to 100 seats, and it produces planes of all sizes and for all uses. The company combines its six decades of experience with cutting-edge technology from the West to produce planes at a low cost, because of the relatively low wages in Ukraine.

Receiving orders

Despite a punishing recession in Ukraine, Antonov has continued to attract orders, announcing deals with Russia and Iran in recent months. Kiva puts the firm's continued success down to the diversity of its work and partners - China has been less affected by the crisis, and military transports are still in demand. "You have to pre-empt the crisis. We have several different niches, so are less sensitive to its effects," he says.

As Ukraine isn't an EU member, Europe is not a major market for Antonov, although it has many partners there, such as the French company Dassault Systems. Nor is the company lacking for partners or markets elsewhere. Its aircraft, which can land on rough terrain, are in demand across Russia, Asia, Africa and South America, where runways are not always tarmaced.

Russia, where many of the aircraft are manufactured, remains the key partner and market. After the Soviet Union fell apart in 1991, Antonov kept working with Russia, while other companies in the Soviet bloc turned their backs on their former overlord. "You have to put more effort into opening up new markets than keeping existing ones," explains Kiva. Russia also provides access to other markets where it has strong relations, such as Cuba and China.

The break-up of the Soviet Union brought about a number of conflicts over intellectual property. Poland began producing Antonov planes under another name, as did China. But without the necessary expertise, they couldn't develop them. China realized this, and now has three contracts with Antonov for the development of aircraft of various sizes. Strict contracts now keep the rights to the designs in Antonov's hands.

Kiva has worked at the company for over 40 years, including under the founder, legendary aircraft designer Oleg Antonov. "Antonov didn't used to have to think about money, he just used to create aircraft," he smiles wistfully. "They gave him as much money as he wanted for research and development."

Those days are long gone, but Kiva is full of praise for current Prime Minister Yulia Tymoshenko, who pushed government investment into the aviation industry and cooperation with foreign partners, particularly Russia and China. According to Kiva, her government is helping to get two factories, partners of Antonov's, back on their feet after they were "robbed" by the previous government that was headed by opposition Party of Regions leader Viktor Yanukovych. Chasing a quick buck for themselves, he claims, the management bled the factories dry, leaving wages unpaid while employing a number of dodgy schemes, such as selling one aeroplane several times over. Tymoshenko made the same accusation on a trip to Libya earlier this year.

Kiva is bullish about the future and says Antonov needs to think big to remain an international player. The company is currently restructuring as part of a three-year plan that will end with an IPO. Kiva says that Russia and China are both keen to buy shares and strengthen cooperation, though the EU has given Antonov something of a cold shoulder.

Kiva is baffled by the EU's stand-offish attitude, which he puts down to a historically motivated lack of trust and a protectionist attitude. "Cooperation would be profitable for them and us," he says. Airbus is currently developing its own military transport aircraft, the A400M, to rival Antonov's An-70, but is running behind schedule and over budget. "They have spent €10bn on it and their aircraft doesn't fly, but ours is a real aeroplane that we developed for $1bn," says Kiva proudly.

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