“MI” HELICOPERS GAIN ALTITUDE

 At present Russian helicopter industry undergoes significant changes. In order to increase operational effectiveness of the enterprises they are to be united under auspices of the “Oboronprom” state corporation. Andrei Shibitov, General Director of the “Mil Moscow Helicopter Plant” (MMHP) tells about his plant, consolidation process and problems exiting in the market.  

- Andrei Borisovich, it is almost six months since you have been appointed as general director. What sort of enterprise, from economic point of you, were you to head then? 

- As to the date of start of work it was an economically stable company that in due time aptly came out of a recession. Then, during previous four years using its substantial technical and economic capabilities and good management we managed to ensure dynamic development of the company. Economic growth rates indicate that the company has smoothly running mechanisms of financial management and planning.

In comparison with 2003 net profit of the plant increased by RUR 3m and following the results of 2004 exceeded RUR 115m. Core business cash inflow is rising constantly: year 2003 – RUR 923m, 2004 – RUR 1012m. Projection for the year 2005 is RUR 1260m.

In order to have full estimate of plant’s economic and financial position and its development dynamics it is necessary to take into consideration the scope of work performed by plant’s own means. We have a positive dynamics here as well: year 2004 - RUR 559m, 2005 projection - RUR 598m. These numbers are the best confirmation of stable use of MMHP production capacities.

- What plans does MMHP have concerning creation of new helicopters and retrofitting the existing ones?

- Thanks to the fact that apart from significant commercial projects MMHP is financed by the state, so we can afford to carry out planned programs. For example, development Mi-28N “Night Hunter” helicopter. The “Rostvertol” has already started serial production of this helicopter, state tests are underway. By the way, according to Presidential decree this helicopter is to be the main combat helicopter of Defense Ministry of the RF.

Also the project carried out jointly with the Kazan Helicopter Plant on Mi-38 is worth mentioning. State funds for this project are appropriated yearly and orderly. In 2004 KHP finished preliminary cycle of factory tests of this helicopter. The tests will be continued at MMHP Flight-Test Station. Assembly of the second prototype is underway. Moreover, we have developed several proposals on preparation of helicopter for serial production at KHP that should be started at the latest in 2006. All the necessary documents are forwarded to Federal Industry Agency. In our opinion, though, volume of financing somewhat slows down the pace of work.

Another important area of activity is certification of helicopters abroad: Mi-172 in Chile by KHP, Mi-G71A in Brazil by Ulan-Ude Aviation Plant. We are working on retrofitting of Mi-24 with the “Rostvertol”. There were signed contracts on delivery of Mi-24PN for Russian Air Forces, Mi-35M for Venezuela. Also there are works on several classified projects ordered by defense and law enforcement agencies underway. We are observing the time and these helicopters will soon enter inventory.

- What do you think about integration tendency in helicopter industry? How may this process influence your plant?

At the moment all aviation industry, not only MMHP, is faced with a necessity for integration. In military-industrial area where only large and economically robust companies can do business, it is almost impossible to survive alone. That is why establishment of integrated structures has become an integral element of state policy. In our sphere on the basis of “United Industrial Corporation “Oboronprom” a helicopter holding is being formed. Thus, in accordance with Presidential Decree authorized share capital of new company includes state-owned shareholding in MMHP, Ulan-Ude Aviation Plant, Kazan Helicopter Plant and some other enterprises.

I am convinced that creation of helicopter holding will give opportunity to all of its participants for dynamic development and promotion of our helicopters at the world market with joint effort. As for our enterprise, at the stage of new organizational structure creation we play a major role. Now MMHP acts as coordinator of development of Mi helicopters, soon we will coordinate production and promotion as well.

- Though significant changes in such industry are always accompanied by additional difficulties. What concerns you the most as a director?

- You are right, not everything goes smoothly. You probably know that Russian business is obsessed with so called corporate wars. Aims of these wars are quite evident – to take control over enterprises in illegal and unethical ways that impair the rights and legitimate interests of its shareholders. And it is necessary to mention that there illegitimate methods are used with respect to prosperous enterprises and companies

Unfortunately, we faced this problem too.

- What kind of pressure does your enterprise face?

- As any other type of war this one has its own tactics, strategy, goals and tasks, and ordering and executing parties. In our case the ordering party is some destructive forces, and I wouldn’t like to call the names in order to avoid unwanted publicity. They by all means are trying to bring the plant back to the deplorable state that existed five years ago, to get in the way of holding’s creation and to start so-called corporate war.

Some closed joint-stock company called “Air Company “Aerrin-Avia”, to tell the truth, has a very meager authorized share capital of RUR 2.5m that equals to the cost of one used helicopter made a claim against our enterprise for more that RUR 203m, which is a very considerable sum for the plant.

- At what stage is the lawsuit at the moment?

At present, we are defending our position at the Supreme Arbitration Court of the RF. Everybody clearly understands that all decisions made under this suit earlier can be regarded as lawless. I would like to remember that similar actions nearly resulted in bankruptcy of the enterprise.

With great effort of the state and plant’s shareholders we managed to prevent grave consequences and to settle down to a course of economic growth. I believe that another attempt to make the plant a bankrupt and to perform a hostile takeover may do a lot of damage not only to us but to the helicopter industry as a whole. In fact, in the last 203 years the “Rosoboronexport” and MMHP together achieve substantial success in terms of increasing exports volume and restoration of “Mi” goodwill in South America, Europe and South-East Asia. But actions taken by unscrupulous competitors are pushing us back; moreover, they may once and for all close foreign markets for “Mi” helicopters.

- How will you resolve the current situation?

- As I said before, at the moment a very thorough preparation for proceedings in our case at the Arbitration Court of the RF is underway. Unfortunately, our legislation dealing with corporate takeovers is so imperfect that all we can do is to hope that our lawmakers in the near future will pass appropriate laws on protection of joint-stock companies from hostile takeovers. Only in this case, shareholders will have an opportunity to defend their interests in a legitimate way and tie hands of “aggressors”. Otherwise, it will be a nationwide catastrophe.

- I see. And what was the reaction of shareholders to the incorporation of MMPH into “Oboronprom” holding?

- Upon the whole all shareholders considered the creation f the holding with understanding as integration processes are inevitable in our industry, given current economic conditions. Within holding framework MMHP will have an opportunity to pay special attention to new perspective developments as in such conditions it will be much easier to realize them. Naturally enough, the load of development-design bureau will increase. Though, even now the actual load of design bureau amounts to almost 20%.

- What is your estimate concerning national military and civil orders?

- Briefly, there is a perspective and this makes us happy. In recent years there was an increase in volume of government’s military order. There is nothing to complain about this year too – we have received substantial funds to continue the development of Mi-28N helicopter. This helicopter was chosen as the main combat helicopter and at present there is no alternative in Russia. Of course as any other contractor we wish there were more funds. But still, assigned funds enable us to carry out plan-schedule approved by the Defense Ministry at a stated time.

FOR REFERENCE: Andrei Borisovich Shibitov was born on July 1, 1961 in Rostov-on-Don. His professional life started in 1978 when he became a mechanic at the Rostov helicopter production association. In 1988 he graduated from Kharkov aviation institute as specialist in “Aircraft Development and Production”. He worked at the “Rostvertol” as design engineer, deputy chief designer, director of engineering company called “Special Helicopter Programs”, head of department on foreign economic activity, deputy general director on marketing and exports. Last year at the general annual meeting of the “Mil Moscow Helicopter Plant” shareholders he was elected as its general director.