Friday April 13 9:38 AM ET
Boeing Inks Key Deal with Russia

By Karl Emerick Hanuska

MOSCOW (Reuters) - U.S. aerospace giant Boeing Co. signed a major cooperation agreement with Russian space and aviation agency Rosaviakosmos on Friday that could lead to the joint development and marketing of new jet aircraft.

Rosaviakosmos head Yuri Koptev and Boeing Chairman and CEO Philip Condit hailed the move as a great step for Russia's ailing aerospace industry, but critics said it worked against local firms, giving Boeing a larger stake in the sector.

``This is about preserving and expanding the Russian aerospace industry,'' Condit said at a signing ceremony.

Both he and Koptev declined to say how much the deal was worth, citing ``commercial secrets,'' but they said it covered areas such as aviation infrastructure, aircraft maintenance facilities and procurement of aerospace materials.

Boeing has made itself one of the most prominent foreign companies in Russia since the Soviet collapse a decade ago and has developed strong ties with major aviation and space firms.

It has also supplied more than 50 aircraft over the last five years to carriers in Russia, including national airline Aeroflot, and elsewhere in the former Soviet Union.

The company has recently come under fire from many politicians and aircraft builders, who say tax breaks on the import of Boeing planes given to some local carriers threaten Russian plane makers.

At its peak, the Soviet Union accounted for up to 60 percent of world aircraft production, but annual output is now measured in single digits as demand for locally-built planes remains low.

Many people are demanding Russia take protective measures against the import of foreign aircraft from Boeing and its European rival Airbus Industrie -- which also has a large market here.

Some are calling for an outright ban on foreign planes.

Flawed Thinking

Koptev called such thinking ``flawed'' and ``narrow-minded,'' saying that cooperative projects with Boeing were important to Russia's economy and the development of the aerospace sector.

He cited cooperation with the Ilyushin design bureau that has seen hundreds of engineers trained by Boeing, work on polar air routes that Russia hopes will prove to be money-spinners, and joint commercial space programs such as Sea Launch.

``To sum all that up as 'Will people here buy (Boeing) planes?' is...a sufficiently primitive appraisal of cooperation between Russian industry and Boeing,'' Koptev said.

Condit said that Boeing could help Russia develop and build a much-needed regional jet liner, one that would have appeal not just in the ex-Soviet states, but across the globe.

``Looking at just the Russian market in the next few years there is a clear need for a regional jet...My guess is this is an opportunity for an all together new airplane and a very big market,'' he said.

But not everyone is convinced.

An official at one local aircraft builder said he feared that if Boeing's influence in Russia continued to grow then the country's space and aviation firms might never see a turnaround.

``Boeing is a very smart and aggressive company, not a charity. It has no reason to want Russia to build more planes, rockets or satellites. These are the things it does,'' he said.

``Instead of helping Boeing build more of a foothold here and expand its influence, our government should be more concerned with what can be done to help its own firms recover and grow.''

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