Air alert. Russian Helicopters to admit failure? 

Air alert. Russian Helicopters to admit failure?
The helicopter industry is on the verge of collapse Photo: The CrimeRussia

In 11 years, Russian Helicopters Joint Stock Company has degraded from a promising industrial structure into a company making empty promises. The helicopter industry is currently on the verge of collapse. Apparently, Andrey Boginskiy, Russian Helicopters CEO, also feels the impotence of his organization outsourcing its main functions. Or is this yet another embezzlement of public funds?

No risk no fun

Six months after his appointment the Russian Helicopters CEO, Andrey Boginskiy has understood that his subordinates are dead ends. A review of governmental acquisitions made by the holding inevitably leads to such a conclusion. Take, for instance, one of the most recent tenders to identify and assess key risks faced by Russian Helicopters Joint Stock Company. The successful bidder is supposed to evaluate the situation at the seven enterprises controlled by the holding and develop a risk management concept at a cost of 95 million rubles ($1.5 million). The terms of reference are pretty straightforward and require to produce a step-by-step guide for “holding employees of all levels”.

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Andrey Boginskiy, Russian Helicopters CEO

Isn’t it weird that there are no skilled economists familiar with the situation at subsidiary enterprises among the 650 persons employed with Russian Helicopters?

However, a brief review of the holding’s acquisitions reveals a severe talent shortage in the state company. Russian Helicopters outsource helicopter market development forecasts, patent researches, and even legal services. So, what do the hundreds of people subordinate to Andrey Boginskiy do on the job?

Perhaps, they design souvenir products? This is an area where the Russian Helicopters staff are really skilled. One of the pre-New Year tenders describes a memorial gift as follows:

“A hand-made borosilicate glass decanter produced using the lampworking technology with a helicopter miniature inside made of dark glass in accordance with the picture. The decanter is full of single malt whisky aged for at least 8 years and produced in Scotland, or an equivalent by the strength, ageing, composition, and production region”.

The managers are very busy tasting Scotch alcohol. It is not surprising therefore that they are not aware of the situation at the enterprises controlled by the holding. In fact, their affairs are pretty sad – it is not necessary to pay money to third companies to understand this. 

Human factor 

Yuri Pustovgarov, who was recently appointed the General Director of Kazan Helicopter Plant, had a number of meeting with the personnel in April and honestly reported to them the dire state of the enterprise. The much-needed contract with India to supply 80 helicopters worth in total over $1 billion has been postponed until the end of the year. The Kazan helicopter engineers have to tighten their belts again and switch to a four-day week.

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Yuri Pustovgarov, General Director of Kazan Helicopter Plant

Mil Moscow Helicopter Plant is in distress as well. In 2017, the enterprise had significant losses. A year earlier, the management started funneling its expensive real estate in Tomilino township, Moscow region out of the company. As The CrimeRussia wrote earlier, Viktor Zelentsov, son of the Senior Accountant of Mil Moscow Helicopter Plant, was among the interesants of this scheme – the assets have been transferred to his company for management. The company has more severe issues as well. In his letter to Andrey Boginskiy, Aleksander Neradko, Head of the Federal Air Transport Agency (Rosaviatsiya) complains that potential helicopter purchasers in China, Malaysia, and Indonesia are not interested in the models produced by Russian Helicopters and recommends to search for customers more actively.

The forthcoming assessment of key risks faced by Russian Helicopters must include the potential refusal of other ‘banana republics’ to deal with our aviation officials. In fact, asking Boginskiy to search for new customers is like putting him on the stage of the Bolshoi Theatre. What does a graduate of the Faculty of Economy know about the helicopter industry? Perhaps, Alexander Mikheev, General Director of Rosoboronexport and graduate of the Moscow Institute of Civil Aviation Engineering, could assist him? But during the two years that he was in charge of Russian Helicopters, Mikheev has distinguished himself mostly by corruption scandals. Another irreplaceable aviation specialist – Anatoliy Serdyukov, who had started his career in Lenmebeltorg, – is also a member of the Board of Directors of Russian Helicopters. Too bad, he is famous only for his corruption deeds as well.

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Alexander Mikheev, General Director of Rosoboronexport

As a result, all the scarce achievements of the holding pertain exclusively to the assembly of models created in the last years of the Soviet period. Soviet engineers haven’t designed a civilian helicopter – and it still does not exist. Decades-long promises to produce a high-speed civilian helicopter still remain promises – although its initial fantastic speed has been reduced over time to a realistic one. The current Russian Helicopters CEO has closed this project at some point – but taking the absence of other cloud castles, resumed the perspective high-speed helicopter development. Round and round the story goes, where it stops nobody knows... 

Air for sale. Expensive 

Nice pictures of the future helicopter haven’t brought any new funding yet; in the meantime, the state defense program sustains the holding – although certain issues exist in this sphere as well. For instance, Viktor Bondarev, Chairman of the Committee for Defense and Security of the Council of the Federation, named the electronics of Mi-28 attack helicopter a failure: “The pilot can neither see nor hear nothing”. But the Ministry of Defense has no choice, so Andrey Boginskiy has no worries about governmental contracts.

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Mi-28N

Another source of income for Russian Helicopters is aircraft maintenance. But the state corporation makes every effort to redirect these revenues to privately-owned structures. For instance, the helicopter plants are unofficially prohibited from servicing their machines. Similarly with the high-speed helicopter, the promised efficient maintenance system remains a fairy tale. The civilian helicopter aviation cannot sustain the high maintenance costs and has no choice but to reduce the number of flights.

The military has no choice as well – and not only in Russia. It is not a secret that many Middle Eastern countries use Soviet aircraft. Military planes of Afghanistan and Pakistan are pretty obsolete and desperately need maintenance and repairs. To secure proper maintenance for the Afghan helicopter fleet, sanctions against Rosoboronexport were partially lifted. But, according to American general John Nicholson, despite all the requests from the Afghan authorities, Russian Helicopters refused to service their aircraft.

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Andrey Boginskiy

Economist Andrey Boginskiy found a better way to compensate losses incurred due to the sanctions. The holding has sold the Russian Helicopters trademark to its subsidiary company Rostvertol for 1.4 billion rubles ($21.9 million). The question of how much may be the cost of the trademark of a company whose products are of no interest even for Malaysia is rhetorical. By the way, Rostvertol is among the enterprises whose assessment should become the basis for the future risk management concept worth 95 million rubles ($1.5 million). Why wouldn't Russian Helicopters take a risk to stop wasting the public funds?    

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