It's Not Business As Usual In Russia

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So, it's probably not on anyone's speed dial but there are a few aviation companies who might consider dropping a dime on Secretary of State Condoleezza Rice to round out their business plans. They'll have to excuse her if she doesn't get back to them right away since she's trying to keep Russia and the U.S. from clipping each other about the ears over a dust-up between Georgia and a breakaway state known to its people as Abkhazia.

In case you haven't been following the news, the U.S. wants Russia to leave Georgia alone and Russia wants Georgia to leave Abkhazia alone and the whole thing came to a head because some Russian diplomat blew a tire and couldn't change it himself. As I write this the Russians have troops and tanks and guns in Georgia and despite some kind of agreement they're looking like they might hang around awhile and, if necessary, sink a few more ships. I wish I was making it up.

Then there's the Russian general who casually mentioned that Poland could become a parking lot for allowing U.S. missile defense systems within its borders. Makes you want to put your head between your knees.

With oil money (and God knows what else) fueling a boom in private aviation there, it's only natural that companies would seek opportunity in Russia. After all, Russia has seen the light and has free enterprise and all that oil money (and God knows what else).

So, the rooted-in-the-West companies like Cessna, Bombardier, Hawker Beechcraft etc. have been testing the market, finding some success there and expanding in the region to meet demand. Seems reasonable and rational. But there are a few companies whose future seems at least partially dependent on a neighborly exchange of goods and services as if all the nuke talk, the tanks and sunken ships were secondary to the ordained right of making money.

First, there's Epic Aviation. They hope to build their twin-jet Elite in Tblisi, the capital of Georgia. Well real estate prices are probably pretty low right now, especially compared to the costs the might have faced in Calgary, Alta., which, while it might have expensive dirt, has a remarkable absence of Russian tanks in the vicinity.

Then there's Eclipse. A Russian factory appears to be a major part of the plan to make the company profitable but maybe Roel Pieper, et. al. should investigate friction stir welded tanks instead. Seems to be a market...

The most confused aviation company executives on the planet may be at AAI Acquisitions in Denver. They're the Americans who run the Russian-backed company that took over Adam Aircraft for pennies on the dollar. There are some good people there and the A700 is a nice jet, but it'll be interesting to see if business trumps politics (and God knows what else).

Condi, if you have a minute...

Comments (16)

It seems some people in Russia are nostalgic for the good ol' days of the Cold War and have decided to start up that franchise again.

I guess it has lots of benefits for some Russians - more military spending, you get to invade your neighbours for fun and profit, blow up some bridges and it puts the government of the USA on a different side of the conflict from some US-based aerospace companies.

As an old-time cold warrior, I thought we had won that war. Maybe Cold War nostalgia and the benefits that go with it win out over world peace.

Posted by: Adam Hunt | August 18, 2008 5:50 AM    Report this comment

There are other countries in eastern Europe that may help these companies reach profitability. Some that have experience in that they already market some of the certified light sport aircraft here in the US. Romania, Poland, France, Germany, to name a couple. Just as it is bad for politics to hinge ideals and strategies around one country so to is it for business. Additionally, with the high costs of transportation business might have to re-think does it make sense to build overseas if your customers are elsewhere. Cost benefit of labor verses delivery may also figure in future business models.

Posted by: Walt Bogaardt | August 18, 2008 10:53 AM    Report this comment

It is, perhaps, old wisdom but nations do not have friends. They have allies, but not friends. I really do trust the Russian government. I trust them to behave exactly as they are presently behaving. Any similarities between them and the Mafia are not coincidental. Both really prefer to rely on muscle. Doing business with either is a good way to end up with them owning you.

Posted by: Donald Dinwiddie | August 18, 2008 3:01 PM    Report this comment

I currently live in Russia and am working as a broker. The Russian way of thinking has nothing to do with cold war nostalgia. They just want to be taken siriously. Putting a missle defense system in their back yard is not a good approach to keeping things civilised. Also there always seems to be a double standard to the way America deals with the world and the way Russia can. Having said that The aviation market in Russia is growing at a steady 26%. The market for second hand aircraft has completly gone from 90% in the states to 90% in Europe and Russia. All the big companies are represented here and are fighting strong for market postion. As a broker I can clearly say that there is nothing to be afraid of working here (except regestiring an aircraft in Russian and paying over 46% vat on it). Regarding eclipse I think its total PR.

Posted by: George Bellow | August 20, 2008 2:15 AM    Report this comment

If the Russians really believe that the missile defense systems going in are a threat to them, then they should not be taken seriously. That is a ruse on their part, which means also, they should not be taken seriously.

They could have done a lot better for themselves by not pushing so far in Georgia, and not protesting so ridiculously about the missile units. They could have gotten something positive out of that deal. The beauty of their position is that if they only act like somewhat unreasonable, ignorant, and pugnacious, the world rewards them if as if they are saints. When they go over the line, everyone is reminded of Stalin and his ilk. Their military knows better. They can get swatted like so many bugs.

Posted by: Eric Warren | August 20, 2008 10:38 AM    Report this comment

Eric just a little reminder would be the cuban missle crises america seemed to find russian nuclear weapons 50 miles of there cost pretty seriously just like if Russia set up a defense missle system that one day will be able to shoot down american nuclear missles in cuban Im sure everyone would be going crazy by know.

Posted by: George Bellow | August 20, 2008 10:55 AM    Report this comment

As Donald stated, I too trust the Russians. When Putin made his weak attempts at showing that he is our friend, I trusted his background as KGB, that secret organization dedicated to eliminating people insisting on freedom. I have made several trips to Russia in corporate jets and I'm here to tell you, there isn't a more screwed up country on the planet, including Africa. I'd go back to Ouagadougu (in Africa) any day before going back to Moscow. Holding on the ground for 9 hours due to "airport closure" while Russian airplanes came and went by the dozens, and a "technical problem" which took several hours to identify, prior to departing for the US on a 10 hour flight just doesn't happen anywhere else in the world. They're incompetent and have no interests other than their own. Other corporate airplanes having to hold for the same reasons lost landing slots at their destinations due to this moronic waste of time. Deal with the Russians at your own risk. You will eventually lose, and we will, eventually, be facing off with them, along with Iran, Venezuela and possibly China, but I'd like to think that the Chinese are smarter than the Russians. The facts are that the world is changing back to the way it was when we (many of us) were kids. Burying heads in the sand doesn't stop the freight train. Russia will go back to some form of the old days and Putin IS in charge. What a ruse! He did that for a very good reason. If I never go back to Russia it'll be too soon.

Posted by: Noah Trent | August 20, 2008 11:58 AM    Report this comment

Sorry George, but the two are not the same. In 1991 we opened up most of our military for the russians to see. I know, I was there. I saw some of them go white as ghosts when they learned of our capabilities (especially how the old stuff worked) while being briefed by our soldiers and airmen. (The beauty of our position is that they know we aren't all propaganda).

They have been offered inspections of these new sites. These sites in no way change the balance of MAD, and they know it. Everyone knows it. No patriot battery is going to stop the Soviets from nuking poland, nor will the Ukraine site protect it. Also, neither of these countries has the power to repel a Russian conventional incursion.

The Cuban situation was the opposite. It did threaten MAD, it was all cloaked in secrecy, and it was offensive nukes in the hands of a belligerent third world dictator.

If we had invaded Castro, he could have nuked us. If the Russians invade Poland, the patriots might shoot down some of their planes. Not the same at all.

They ought to be playing more nice. If the other NATO players start to rearm, Russia will be spending all its new wealth on military planes rather than luxury jets. Maybe that's what they really want though.

Posted by: Eric Warren | August 20, 2008 12:15 PM    Report this comment

I just returned form Moscow and attending the business aircraft aviation expo. I was shocked to see absolutely no one there and virtually no aircraft on display (Diamond aircraft had three planes on the ramp but they were not allowed by Russian Customs to cross into the spectator area). . There were a few vendors but all had set up their booths and then left by 12:00 noon. I wouldn't put much on the future of Russian business aviation at this time.

Posted by: larry schlasinger | August 21, 2008 3:08 PM    Report this comment

Larry the expo that you were at has no interast to business aviation.Just some people who thought they could make some money. The most interasting one and the one were there is a big static display is JetExpo. All companies are represented there and it goes for 3 days. http://www.jetexpo.ru/ Russia had over $1.2 billion in sales last year. That might not be as much as the states but its definatly something to mention

Posted by: George Bellow | August 22, 2008 2:24 AM    Report this comment

Thanks George, I'll look this one up. The one I attended was a waste of time. And very expensive as well.

Posted by: larry schlasinger | August 22, 2008 6:15 AM    Report this comment

Before we go and blame Russians for their behavior, let's look at ourselves. We invaded Iraq! We ARE at war with Iraq for the reason still not known. We are killing people over there. We spent billions of our money for nothing. We conduct policies dictating nations what to do. We bully other countries. US government brainwashed our minds. We are no better than Russia. And, did you forget American war at Panama???

Posted by: Alex Johnon | August 22, 2008 11:32 AM    Report this comment

Alex, you do realize we are no longer at war with Iraq?

At any rate, let's avoid the pitfall of saying everyone has done bad things, so everyone is the same. If you were buying a plane, would you rate all manufacturers the same on quality because they all have things break? The same on safety because they all have fatalities? The same on customer service because they all have made people screaming mad?

Posted by: Eric Warren | August 22, 2008 12:10 PM    Report this comment

Eric, I agree that Russia has problems. But who are we to judge them? It's pot calling a kettle black. Sure, the Russian way of dealing with issues and general business are not what we as Americans are used to, but why do they have to be like us? If it works for them - fine. Their planes don't fly? OK. They will figure out or ask for help. "It's Not Business As Usual In Russia". -- It's their business.

Posted by: Alex Johnon | August 22, 2008 3:20 PM    Report this comment

There are accepted international standards for conducting the affairs of nations. It is not a case of everyone having their own truth. Alex makes some statements without foundation and then says, "It's their business." Perhaps Alex is too young to remember what I and the 'cold warrior' remember. The problem with not knowing history is you have nothing with which to compare present behavior. You will also note that after signing a cease fire, agreeing to boundaries the Russians simply stay where they are. They know well that the U.S. is over extended and are taking advantage of that condition. My comment was that I fully expected that kind of behavior from them based on past actions. Naiveté is a particularly serious flaw in international diplomacy.

Posted by: Donald Dinwiddie | August 22, 2008 5:39 PM    Report this comment

I am sure that politics has nothing to do with business opportunities. The problem of doing business with Russia is that the legal system is corrupt (as not only BP and other oil companies have found to their chagrin). Under the present conditions, it would be foolish to invest or have normal business dealings in a country where one does not have the slightest chance of taking local citizens to court.

Posted by: patrick villiers | August 24, 2008 2:12 PM    Report this comment

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