Sukhoi Pursues Civilian Jet Deal /www.avia.ru/

Fighter-jet maker Sukhoi is moving ahead to strike its first international civil
aircraft deal with U.S.-based Alliance Aircraft Corp. on a new regional jet to
market abroad and domestically.

However, even before the first jet leaves the factory, industry analysts said
there is little room for a new regional liner on the crowded world market and
several local designs already in the air.

Earlier this month, the Sukhoi aviation complex announced it planned to join
Alliance to make a family of regional 50 to 110-seat airliners under the name of
StarLiner. The plane, using the latest technology, is to enter the world market
in 2003.

Alliance already has ``letters of intent for 30 aircraft`` and is in
``discussion with five airlines,`` Reuters quoted Alliance president and CEO
Earl Robinson as saying. He did not name the airlines.

Robinson is a former executive of U.S. plane maker Fairchild Dornier.

The contract with Sukhoi is being finalized, but is expected to be signed in
July or August of this year, said Andrei Ilyin, general director of Sukhoi's
recently created civilian-craft division.

Alliance was set up last year by ``a group of private individuals,`` he said,
but did not name the group members.

Meanwhile, Sukhoi staff are participating in the design of the jet.

The new plane will be a turbojet made in versions with 50, 70, 90 or 100 seats.

An Airclaims` Blue Print newsletter quoted by Reuters says Alliance is buoyed by
$500 million in financial guarantees from private financial organizations and a
consortium of investment banks.

The craft is to be produced at an Alliance factory that is yet to be built,
while Sukhoi will provide engineering and design expertise and supply parts for
the production line.

Sukhoi offers Alliance a chance to beat down the price of the design works,
which are expected to cost $660 million, Ilyin said.

Sukhoi may become a sub-constructor for the craft, officials said.

Unknown abroad as a civil manufacturer, Sukhoi sees cooperation with Alliance as
a chance to crack the door open onto the international market, Ilyin said. It is
creating a Sukhoi Civil Craft International subsidiary in the United States, he
added.

Sukhoi`s general director Mikhail Pogosyan said at a news conference Monday that
it was Sukhoi's initiative to offer its services to the international project
and a preliminary agreement was reached at the Berlin ILA-2000 air show earlier
this month.

The new regional jet was devised after a study of the market niche that Alliance
Aircraft is aiming at, he said.

``Sukhoi`s research coincides with /Alliance`s/ findings.``

Although Alliance forecasts a bright future for the new craft, industry analysts
are wary.

The new plane will be ``entering a market that`s already heavily crowded,`` said
Paul Duffy, a Moscow-based independent aviation analyst.

``There are so many planes in this category already, selling by the hundred.``

``The regional jet market is extremely competitive,`` said Robert Stangarone,
vice president of corporate communications, at Fairchild Dornier Corp. in an
e-mail interview.

``There are three players f Embraer, Bombardier and Fairchild Dornier. We shared
the market for 100 seats and below equally last year. I believe the barriers to
entry of this market are very high, and a fourth competitor would find it very
difficult to penetrate, especially this late in the game when more than $30
billion worth of airplanes have already been ordered,`` Stangarone said.

Fairchild already has orders and options for its 276 70-seat 728JET that will be
entering service in mid-2001. Its 90-seat 928JET got its first customer this
month.

Brazil`s Embraer has 700 orders and options for its 50-seat ERJ-145 jet liners
and already has 175 orders for a new family of regional jets consisting of 70-,
98- and 108-seat jetliners.

Canada`s Bombardier Aerospace is also filing reports of increasing orders for
its 70-seat CRJ-700 and CRJ-900 to enter service in 2001 and 2002 respectively.

But in this tough competition, Alliance Aircraft's ambition goes as far as to
have a 40 percent share of the 70-seat market, says Airclaims' report.

Beside the technical edge, which is kept secret, the catch is its price. The new
craft may have a price tag of $16 million to $18 million, Ilyin said, when the
above-mentioned jets fetch $21 million to $30 million.

Sukhoi`s own in-house civil projects, such as the 20-seater S-80, is unlikely to
gather orders abroad or at home, Ilyin said.

Nor is the new liner likely to get many domestic orders because of competition
from established civilian aircraft makers Ilyushin, Tupolev and Antonov.

Turboprops` Ilyushin 60-seat Il-114, Antonov`s An-140 and Tupolev`s Tu-334
100-seat turbojet are already flying, the latter heading towards certification.

``In Russia there are three designs flying. Sukhoi will be starting a long way
behind which is a difficult thing to do,`` says Duffy.

But diversification from military-only is an important move for fighter jet
manufacturers. Lack of state orders and faltering deals with foreign customers
have already pushed Sukhoi`s domestic competitor MiG Corp. to start off a civil
production line with Tu-334.

``Military orders are being slashed world over, Russia is no exception,`` Ilyin
said. ``If you want to make a profit, you have to diversify.``

/MOSCOW TIMES/
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