August 2004 
Volume 03, Issue 4 
Industry Wrap

Taking Care of Duties

Above: A Boeing 777 in Aeroflot livery takes to the air. If the Russian government follows through on indications that it will lower duties on foreign-made aircraft, other Russian airlines could find it easier to purchase airplanes such as the 777.


After years of prodding by Western aerospace giants and Russian airlines, the Russian government indicated last month that it would lower duties on foreign-made aircraft.

Russian Transportation Minister Igor Levitin told journalists that the government had tasked him with reducing duties on products with “no Russian equivalent,” according to the Moscow Times.

Russia’s domestic airline industry is one of the fastest-growing in the world, but carriers are struggling to meet demand and update their aging fleets, because Russian-built airplanes are not readily available, and duties make foreign jets affordable only to the biggest airlines. Currently, importing a $100 million jet costs the buyer an extra $40 million in duties and value-added taxes, the Times said.

“By Levitin’s announcement, the government is admitting the obvious,” Boris Rybak, head of Infomost, an aviation consulting consulting firm, said in the Times article.

In its Soviet heyday, the domestic industry rolled out 150 commercial planes per year. But the collapse of the Soviet Union pushed the industry to the brink of extinction, the Times report said. Producers are now starting to recover, but only a handful of airplanes are produced each year.

“The government should support its industry,” said Lev Lanovsky, the chief designer of Tupolev’s midrange Tu-204, which would compete against airplanes such as the Airbus A320 and the Boeing 757.

The debate now will focus on “what counts as a Russian equivalent,” Rybak said in the Times story.

According to the article, domestic airlines say there aren’t any. “There are no [Russian] equivalents to Boeing and Airbus,” Igor Blinov, spokesman for No. 5 carrier UTAir, told the Times.

However, there are many officials in the Russian government, the article said, who are convinced that a Russian firm can again become a global leader in aircraft production—if not No. 1, than certainly No. 3 after Airbus and Boeing.

“If Russia cannot become the biggest center for producing the whole spectrum of aircraft, then it must be at least third,” Yury Koptev, head of the military industrial department at the Industry and Energy Ministry, told the Associated Press.

The duty and tax issue has been a nettling topic in Moscow’s commercial relationship with Europe and the United States. The United States has linked resolving the tariff issue by eliminating duties and taxes to Russia’s renewed bid to join the World Trade Organization. This would put Russia in the same position as all other WTO members. A senior Transportation Ministry official told the Times that Levitin’s announcement was directly linked to the WTO issue.


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