While the consolidation processes among the Russian manufacturers of fixed-wing aircraft are only being discussed, the country’s rotary-wing sector has almost completed the merge that will bring together developers and manufacturers of both Mil and Kamov helicopters. The consolidation of the helicopter companies was initiated and held by Oboronprom investment trust set up by Rosoboronexport arms trade agency and government Agency of federal property management. In the interview with Russia/CIS Observer editor-in-chief Maxim Pyadushkin Oboronprom’s CEO Denis Manturov told about strategic development plans with regards to the acquired helicopter and other defense assets.

Russia/CIS Observer: In 2005 Oboronprom gained control over the major manufacturers of Mil helicopters – Moscow Mil Helicopter Plant (MVZ), Ulan-Ude Aircraft Plant (UUAZ), Stupinsky Manufacturing Plant (SMPP) and Moscow Manufacturing Plant ‘Vpered’ (MMZ) as well as to buy some stakes at Kazan Helicopters and Rostov-on-Don Rostvertol. Do you plan to get control over the latter companies?

Denis Manturov: At Moscow-based MVZ we own just 31% of shares, but manage another 30% on behalf of other private shareholders. So we control 61% along with 12% stake that belongs to Rostvertol – Oboronprom’s associated member and shareholder. Totally it amounts to more than 70%.

At Ulan-Ude we have 63%, 60% -- at SMPP and 50.5% at Vpered Plant. At Kazan Helicopters we control 30%. At Rostvertol we officially don’t have any stakes today but the Russian government possesses 3.44% which it hasn’t passed to us yet.

To have the fully integrated holding we aim to get 51% at both Kazan Helicopters and Rostvertol. At Kazan we are currently negotiating with other shareholders to buy out the controlling stake in 2006. As for Rostvertol, we want to get 25% of shares in 2006 while the controlling stake is to be acquired within 2006-2007. It will be a mixed deal. As Rostvertol is one of our shareholders, some share from its additional emission will be paid by the money we received from Rostov-on-Don company for our shares. I can’t say right now how many shares will be acquired in this way as it depends on the emission. It is planned for the first, maximum the second quarter of 2006. Other stakes will be purchased directly.

RCO: In 2005 Oboronprom also received the controlling stake at Kamov – designer of Kamov helicopters. Do you plant to include Kamov manufacturing facilities in Kumertau, Orenburg and Arseniev in the Oboronprom’s helicopters holding?

Manturov: We can’t buy Orenburg-based PO Strela because it has already joined NPO Mash Corporation [Russian space and missile designer and manufacturer – ed.]. Moreover, at the moment PO Strela is responsible only for [Kamov Ka-226] helicopters assemble and it receives full assembly kits from Kumertau KumAPE.

Kumertau is definitely on the list while our plans for Arseniev-based Progress plant require more analysis before the final decision is made. We also look to the remaining package of Kamov that’s now managed by MiG Corp.

RCO: When do you plan to complete the deals for Kamov plants?

Manturov: I hope that by the end of this year we should at least work out necessary legal environment for acquiring these companies.

RCO: What will be the managing system inside the merged structure?

Manturov: By the mid-year we plan to found a managing company, a 100% subsidiary of Oboronprom. It’s draft title at the moment – Vertolety Rossii (Russian Helicopters). It will receive all helicopter stakes of Oboronprom to become that much-discussed helicopter holding while Oboronprom will remain a multiproduct investment trust.

RCO: Do you plan to restructure the manufacturing facilities and to revise the current helicopter programs?

Manturov: At the moment it’s very difficult to say something about the restructuring as we have very long and serious work ahead and don’t want to make hasty decisions. We have reserved enough time for it – two years at minimum. In two years it became clear what programs will be launched and what will be cancelled. In the short-term perspective we need to complete the programs that have already been launched.

As for Kamov helicopters, first of all it’s Ka-62. We plan to finish its design and launch the large-scale production. This aircraft will be manufactured in Ulan-Ude. Among the other priority project that should be completed are Mil Mi-38 medium transport, Mi-28 attack helicopter and Ansat. We also keep in mind Kamov Ka-50 attack helicopter as in its current configuration it might be demanded by foreign customers.

In 2005 the total sales of Russian helicopter sector amounted to $700 mln, but by 2008 we hope to reach $1 billion in sales. It is quite achievable figure.

RCO: Besides the helicopter manufacturers Oboronprom also has the controlling stake in Defense Systems company - Russian manufacture of various air defense systems. What are your plans fro air defense sector?

Manturov: We plan to develop this company. We have good relations with Almaz-Antey Concern [Russia’s major air defense manufacturer – ed.] and work as a large subcontractor for its orders for S-300 and S-400 air defense systems and other products. Moreover we have orders scheduled for three years ahead for our own product – the modernized S-125 Pechora-2M short range AD system. The first order for Pechora came from a country in the Middle East few years ago, but now we have new customers from South-East Asia.