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Airline Management, Commercial Airliners, Regional Aircraft, Regional Airlines, UPDATES

UPDATE: The French national airline, Air France is actually talking to Irish carrier CityJet (owned by Intro Aviation) about wet leasing it’s soon to arrive Russian made United Aircraft Corporation’s (UAC) Sukhoi SSJ-100-95 SuperJet, UAC is under EU/US sanctions as part of Russia’s military industrial complex. The strange thing is that after making headlines with it’s risky move to operate 25 x SSJ-100’s, CityJet will conveniently be sold before the first Sukhoi ever arrives, convenient for the seller and risky as hell for the buyer, this surely raises many “RED” flags ! This should create and outrage by many Europeans, as it benefits Russia’s emerging commercial aviation industry which seeks to compete with Airbus, and at a time when Russia and NATO relations are at their worst, and many EU nationals are suffering from the economic sanctions against Russia, as Moscow has retaliated back, especially against EU agricultural products. To have sanctions in place against Russia, while NATO is increasing it’s military budget and preparedness is a slap in the face for all EU nationals. The Dutch lost 189 nationals in the downing of MH17 in 2014, and the criminal investigation will be completed soon, and all evidence points to a Russian fired BUK within territory held by Russian supported separatist. This will require further sanctions, that must include the Russian commercial aviation industry. The Dutch and all other peace loving Europeans need to boycott and protest against Russian airliners in service with CityJet, Air France, Sky Greenland, VLM Airlines and any other western European operator. The SSJ100 is Putin’s ‘baby’ to crack open the western market for the Russian civilian aerospace industry, which till now had NOTHING to offer the west (except very good helicopters). The success of the new Irkut MC-21 greatly depends on how well the SSJ-100 opens up the western market, so far it is a disaster, +5 years 101 produced, 64 in service, 37 ‘white tails’ waiting for a home, 45 were to be built in 2015, only 17 were built, 56 were to be built in 2016 but only 20 will now be built yet 31 will be delivered (“white tails”). It is very cheap, they can’t move their product so they heavily discount it in price and state supported leases, but life cycle costs are more than just capital costs. So desperate for sales, that Russian airlines are ‘asked”Finmeccanica (Italy) through it’s Alenia Aermacchi subsidiary is obviously not happy with its 51% stake in SuperJet International the JV with Sukhoi as profitability outlook looks very bleak indeed. Time for Europeans to stand up to Russia, the annexation of Crimea was it’s 4th occupation of another sovereign state, eastern Ukraine is a mess, and short of war we need to send a message to Russia we don’t like it’s aggression, and time to say NYET to Russian products like the Sukhoi SSJ100.

Air France is negotiating with CityJet (Ireland) to wet lease several Russian Sukhoi SSJ-100’s come this summer, I find this totally unacceptable, and so should all citizens of the EU, I would urge Air France NOT to wet lease Sukhoi SSJ-100s from CityJet as it is part of the Russian Military Industrial Complex, that sees us as the “enemy” and we should not support their ambition to create a future civilian commercial aircraft industry to challenge Airbus and Boeing.

The SSJ-100 is heavily backed by President Putin, to break into the western market, to open the doors for their future Irkut MC-21, shut out the SSJ100 today and the program becomes a commercial failure as does the Irkut MC-21 that follows it, ending the hopes of Russia of becoming a major commercial aircraft producing nation.

READ my BLOG on the Sukhoi SSJ-100-95 and how it is being sold, to whom and it’s poor sales performance written on the following dates: January 19, 2016, December 12, 2015, March 4/2015, January 15/2015, January 13/2015, January 6/2015.

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At a time when tensions with Russia are at a 26 year high, when Russia declares NATO a “threat to it’s security”, at time when United Aircraft Corporation the holding company of Sukhoi is under UE/US sanctions for it’s military annexation of Crimea, when EU farmers greatly suffer from these sanctions and when the Dutch Ministry of Justice is close to reporting on its criminal investigation of the shoot down of MH17, it is out right very risky to operate Russian aircraft in the EU, because when tighter sanctions on Russia come, those Sukhoi SSJ100 will not only find support difficult, but a public wave of protest and boycotts will make sure the operating airline is crippled.

A good executive always minimizes risk, in CityJet’s case they increased it, but then owner Intro Aviation is selling the airline before the Russian Sukhoi’s arrive ! how convenient, take your money and run and leave the poor chap with what may come, who is dum enough to buy such a risky proposition ? time will tell, soon enough I guess.

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Which as most keen followers of that incident know came from Russians in the Donbass separatist movement, whose own leader Igor Girkin posted on social media Vkontakte that they shot down a AN-26, quickly he removed the post when they realized they shot down a Boeing B777 with 298 people on board, 189 were Dutch nationals.

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When that comes out, current sanctions On Russia will have to be increased, we cannot have a nation today, occupying annexing other countries territories as Russia has been doing for years (South Osseti, Abkhazia, Transnitria, Crimea) and attempted to seize eastern Ukraine as well, if it were not for western opposition and NATO’s threats.

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Russian airlines flying for Air France, must be stopped, if not then European citizens need to BOYCOTT Air France and City Jet, it outrageous to put European travelers are Russian airliners that are built by the Russian military industrial complex. The Dutch should be outraged, 189 of their nationals died in MH17 shoot down, and all we here from the Russians is their BS about how it was not them, yet we witnessed how reporters and investigators were denied early access, how the crash site was “cleaned”.

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I do not know what CityJet is really doing, they have order up to 25 x SSJ100’s claiming they are a “game changer” and yet Intro Aviation of Germany, the owner of the airline, is selling it after less than 2 years ? and before any SSJ100’s arrive ?

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It stinks all over ! the airline is a money loser (EUR 30.5 million in 2014), as were other Intro Aviation airlines VLM Airlines (sold in 2014 by MBO) and InterSky (liquidated, November, 2015). I know there is a lot of money to be made today moving any SSJ100, they are desperate and are pulling out all the stops to make it happen.

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Does it make sense to anyone to go out and get $1.0 worth of risky Russian airliners that no one has yet touched in western Europe because they are suppose to be such “game changing” aircraft only to bail out and sell the company and run with the money before the very first Sukhoi arrives ?

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Heck, they got a “undesirable” German investor with close ties to Russia’s aerospace industry (possibly ex-Stasi) to put up EUR 50 million for 20% in airBaltic, and wham ! the airline was ready to order 5 x SSJ-100’s ! The Government of Latvia put a quick stop to that, but this is how Russians are making business, it’s unethical, immoral but it’s the Russian way of doing business, why they are where they are economically today, behind the rest of Europe.

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Something is just not right here, is this some crazy Russian scheme to get the SSJ-100 into an airline and then they buy the airline with some front man maybe like the CEO of CityJet, Pat Byrne who is their biggest and most vocal Sukhoi supporter in Western Europe and self confessed total expert on the aircraft, it could be, for when Russians are in the game, anything is possible, and I mean anything ! look at the “soap” opera in Latvia in November of last year with SSJ-100’s and airBaltic, when the airline is suppose to take Bombardier CS300’s in 4Q/2016, all of sudden they included 5 x SSJ-100’s to appease their new “undesirable” German investor.

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How can Air France put their passengers on a Russian airliner ? will they inform everyone they are booking a flight on a Russian airliner ? who buys anything Russian today ? Look this Sukhoi SSJ100 SuperJet is a pet project of President Putin, Russia needs to export more than just oil, arms and vodka. This program’s main goal is to put Russian airplanes into the west, which has not been done till the SSJ-100, with only Mexico’s Interjet operating them in the west today.

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The success of the Sukhoi SSJ-100 is important as it must open the western doors to Russian aircraft if the new $US +4.0 billion Irkut MC-21 narrowbody airliner program in development has a chance to be successful, now western orders for the SSJ-100 means the program will not be successful and the MC-21 will be a commercial disaster. I do not want to see the MC-21 compete with Airbus and Boeing, the Comac C919 is coming as well and then too many competitors.

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Why would we in the EU help Russia develop a viable commercial airline industry ? so it can compete with Airbus ? to hell with them, crush the SSJ100 program and you crush the MC-21 program.
I and many Europeans do not want to see a Russian entry into the commercial aircraft market, Airbus and Boeing do not want more competition, and will crush it, but at a cost that will cause job losses at both OEM’s, as the only way the MC-21 will sell, like the SSJ-100 is being real cheap to buy or lease. The EU needs to stand up for EU values, we have sanctions against Russia, and many EU nationals have lost their jobs because of the sanctions, as Russia retaliated on many products.

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It would be a slap in the face for EU nationals to have a national flag carrier like Air France flying Russian built airliners, and a debate and protests need to be launched right away, because it is just plain wrong. It is also about protecting Airbus and Boeing in the future and the thousands of jobs and about not accepting aggression and fighting back, short of war, that is what economic sanctions are, a war without bloodshed.

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In the Baltic states today they worry about Russia, for they know IF it were NOT for NATO, Russia would have moved into Estonia and Latvia a long time ago, just like in 1940. The Hungarians remember Russian occupation in 1956 and the Czechs and Slovaks remember 1968, the Russians always feel everyone is against them, because they are not taught their own real history and that they were the “evil” empire, and the people of eastern Europe do not forget the years under Russian occupation.

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I want to hear from the Dutch, I want to hear from the Baltics and Eastern Europe, and from all over the EU that you will NOT fly on a SSJ 100 and any operator of the aircraft at a time, when our men in arms may be in danger as NATO and Russia face off in the east. This is serious stuff, we are in the equivalent of 1938, when Hitler occupied Austria and the Sudetenland was occupied from Czechoslovakia.

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For those that follow international relations, these are worrying times, and Russians once again are causing trouble, Putin tells his people we want to crush them, control them, and yet they have no free press or TC, no real opposition to tell them anything ‘real’ and like Hitler convinced his people that everyone was against Germany in the 1930’s, Putin does the same in 2016 to his people.
Say NYET to the Soviets ! NYET to the Sukhoi. Look the aircraft, is NOT selling well, it is really a disaster till now, and you can read my blogs on the aircraft, they are simple.

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As of today, 5 years into production only 101 have been built at best 64 are in service (Aeroflot x 24, Interjet x 19, Gazpromavia x 10, Red Wings x 5, Yakutia x 2, Bural x 2, RusJetair x 1, Ministry of Inernal Affairs of Russia x 1 and MCHS Rossii x 1), all but 1 operator is Russian.

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So where are the other 37 aircraft ? all over, waiting for a home, and it why they are so cheap, can’t get rid of them fast enough, and then many operators of the SSJ-100 went bust like Laos Central, Armavia (Armenia), Sky Aviation (Indonesia), Moskovia (Russia). There is no hiding the fact Russian airlines, especially national flag carrier Aeroflot are pressured to take more SSJ-100’s
Now they move them with low purchase prices and very low lease terms, but many are financially weak airlines, and easily fail (see photos below of some SSJ100 losers):

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Lao Central received its first Sukhoi Superjet 100 this month. Credit: Sukhoi

The Russians know it is not selling they had set very ambitious targets for production, but for instance instead of building 45 in 2015, they built only 17, as they already have too many “white tails” sitting around, and the plan WAS for 56 in 2016, 60 in 2017 and 60 in 2018, which is fantasy, like Soviet era they lie to their masters in Moscow and to themselves. Now, the plan for 2016 is to build only 20 (-64% from planned) while delivering 31, again evidence sales suck and more aircraft sitting around and waiting for a home to be delivered to.

They talk of 110-125 passenger stretch, the SSJ 100SV, hoping to sell 140 by 2031, while they brought down their SSJ-100 sales projections to 2031 from 830 (46/year) to 595 (33/year), which is broken down to 42 business jets and 331 LR version, crazy ? how do you want to compete with such low volumes ? you can’t.

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The aircraft is 2 years away from being a “classic” as the Embraer E190-E2 appears ahead of schedule and why would you buy now any “classics” ? It is one thing to buy A320ceo and B737NG’s because there are many out there in the market, and second hand values will hold for some time as the A320neo and B737Max enter the market, these SSJ-100’s will crumble quickly in fact there are currently 31 SSJ100’s with Lessors, valued at $US 571 million, which equates to $US 18.4 million per unit, a very low value for new aircraft.

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So back to CityJet, and I have discussed this often, Intro Aviation has become the propagandist for Sukhoi and its “game changing” aircraft, that only the ignorant would believe, and they tried to buy Adria Airways in Slovenia, but were not successful, had they been, the Slovenians would be flying on Sukhoi’s this year, I am sure of that. VLM Airlines of Belgium is another airline, that was sold by non-other than Intro Aviation in 2014 a MBO (financed by ?) to its Managing Director, and quickly wanted 12 x SSJ100’s and another strange deal, as VLM is struggling with its F50 operation, and its big plans for operations out of Antwerp do not look like they are bearing fruit, so we shall see, but like CityJet both airlines need London City certification, we shall see how long that takes, because Russians take a lot longer than western companies to get anything done quickly.

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Now, the Irish and Brits will fly on the Sukhoi with Cityjet, and they have a chose and should let CityJet know what they think of flying on the aircraft, the same with the Danes and their Sky Greenland (ex-Greenland Express) that plans to fly 5 x SSJ100’s to Paris, Stockholm, Berlin, Narsarsuag, Kangerlussuaq, Halifax, Toronto from its base in Aalborg and Billund in Denmark. The Belgians may also find themselves on a Russian SSJ-100 if they fly with VLM Airlines (once owned by Intro Aviation), but that airline is struggling, but Russians are desperate to place SSJ-100 in Western Europe, so they are rolling the dice with any airline with a pulse, might as well be flying somewhere in Western Europe than sitting at some cold Russian airport waiting for an owner.

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The airline has acquired Denim Air (Amsterdam), an ACMI specialist flying 1 x ERJ-145, 2 x F100, 1 x F50. In fact, it was Denim Air that did the initial flying for Greenland Express in 2013/2014. It’s been a “gong show” from the beginning at Air Greenland, with investors pulling out left and right like Silver Tiger Aviation, Delta Capita, Eyjaflug, Air Artic and from the agricultural sector in Africa, the Wurban Group, to having Bulgarian A319’s flying, then suspending services in September 2014, then a Let410 (18 pax aircraft) regional service followed by four start up dates coming and going in 2015, and then the Sukhoi SSJ-100, this is the kind of customers that Sukhoi gets, and why many go bust, poor airlines (financially, business wise and strategically).

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I wonder where CEO Gert Brask got the money all of a sudden for the SSj100’s because he was not paying on his ACMI lease with Denim Air (F100 used) and it is why that relationship broke up and now he buys the company he did not have money to pay before ? hmm another “funny” European airline transaction taking place here.

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I read with interest that Yakutia Airlines (Russia) gets $US 10.5 million in state subsidies from Sakha Republic (Yakutia) to cover lease payments as it gets ready for more SSJ100’s, now 2 in service, while it like so many Russian airlines, dumps B737-700’s/800’s, B757’s and Q400’s, as Putin wants “Russians to Fly n Russian airliners.”

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Aeroflot just confirmed an order for 20 more SSJ-100’s added to the 24 already in service and should be operating 50 at some point, with only 20 units to be built this year, and some going to Interjet, CityJet, Aeroflot it again confirms many current “white tails”. Meanwhile Ilyushin Finance Corp. (IFC) owned by United Aircraft Corp. (UAC) buys 74% of local carrier Red Wings to keep it afloat and it’s 5 x SSJ100’s and 9 x TU-204’s all leased from IFC.

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A real good example of how easy it is to lease a Sukhoi SSj100 and how desperate Sukhoi is to place aircraft, one needs only to look at it’s latest customer, tiny little Bural (of Ulan Ude, Russia) which is to lease 2 x SSJ-100’s (both ex-Center-South Airlines of Russia that went bust), and 13 x SSj100’s to follow. That is a lot of airplanes for an airline that presently operates 1 x AN24 turboprop and 2 x Mi-8 helicopters.

Then there is Grozny Avia of Chechnya owned by the Chechen Government, run by Ramzan Kadyrov a brutal gangster that is loyal to Moscow and keeps the place in line through abuses of human rights, corruption and brutality, anyway this airline is now going to take 3 x SSJ100’s as well.

Hope they don’t wonder why SSJ-100 airlines drop like flies, many do not have the financial, managerial and operation experience and capacity to be operating 90 seat jets, but when you have 37 aircraft sitting on the ground, you become desperate to move them, that is why they are cheap, but cheap is NOT always less expensive in the long run, especially in this case with the SSJ100.

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I must make a note here on the return of western aircraft to their respective lessors, and that is that especially in bankrupt Transaero Airlines case, the aircraft were found to be in terrible shape, “most of the aircraft are not in working order” and were not maintained properly. A head up for future aircraft leases to Russian airlines, as obviously the local MAC oversight is very poor.

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That brings me to a big crisis going on now at Sukhoi, this has to do with the fight between MAC and the Federal Air Transport Agency for the right to be sole regulator of the industry, after MAK announced in November it was withdrawing the certificate of the B737 in Russia, and FATA disagreed. MAC is now being privatized and powers diminished.

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The move curtail the powers of MAC will have negative effect on exports as MAC gives the export CofA to the SSJ100, Italy may not issue export certificates of airworthiness outside of the EU, which is a must into the EU, it is why all SSJ100’s sold worldwide must pass through SuperJet International (51% Alenia Aermacchi and 49% Sukhoi Civil Aircraft Company).

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Anyway, this brings up the fact that Finmeccanica which owns Alenia Aermacchi, which itself is a 50% partner in ATR (other 50% is Airbus, 51% of SuperJet International other 49% Sukhoi) and 21% Eurofighter (other 79% is Bae and Airbus), is NOT happy with the SuperJet International holding. Poor performance and surely tough to work with Russians and old mentalities. This partnership may not last long.

Cracks are already apparent, with a deal in Egypt for several SSJ-100’s to possibly 100, but this deal is being done on a state to state level, bypassing SuperJet International which is suppose to be undertaking all sales/marketing outside of Russia/CIS, and the same is going on in Iran, though hopefully the Iranians are not going forward to the past, they have had their share of Russian aircraft (AN-140, TU-154, TU-134, Yak-42, etc.) and I say don’t look in the rear view mirror, just go forward and buy Airbus, Boeing, Embraer, ATR, Bombardier.

Thanks for reading my blog, will try to shorten it next time-LOL, cheers.

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About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 25+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (45+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems be in the business, and help with restructuring for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com and I comment a lot on Google+, my Facebook and LinkedIN.

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