Funding Reductions in Russian Aircraft Production Amid Ongoing Manufacturing Hurdles

The Russian government intends to cut its expenditures on developing new aircraft and helicopters by 22% due to persistent delays and manufacturing difficulties, as reported on Thursday by the business daily Kommersant.

Members of the lower house, the State Duma, are expected to approve these reductions as part of amendments to the federal budget for 2025 later this month, according to an official document cited by Kommersant.

If this legislation passes, funding for the federal project focused on Aircraft and Helicopter Production will be decreased by 22.4 billion rubles ($281.5 million), bringing it down to 78.8 billion rubles ($990.3 million) for the current fiscal year.

In detail, the budget for the state program dedicated to Russian Scientific and Technological Development will be slashed by 12.8 billion rubles, or $160.8 million (previously set at 54.7 billion rubles, or $687 million). Additionally, the Aviation Industry Development program will face a reduction of 9.6 billion rubles, or $120.6 million (a decrease from 46.5 billion rubles, or $584.3 million).

The most significant cut, totaling 8.5 billion rubles ($106.8 million), will impact subsidies meant for leasing companies and airlines that support aircraft purchases and operations.

A source familiar with the budget negotiations indicated to Kommersant that these reductions are due to delays and decreased production volumes within the Comprehensive Program for Aviation Industry Development (KPGA).

«If there are no aircraft, then there’s no need for compensatory subsidies,» the insider remarked.

The KPGA was initiated in June 2022 as a reaction to Western sanctions imposed on Russia’s civil aviation following its large-scale invasion of Ukraine. Its initial objective was to provide airlines with over 1,000 domestically manufactured aircraft by 2030.

However, since then, only five planes—three Tu-214s and two Il-96-300s—have been delivered. Earlier this year, the government halved its aircraft production targets.

Rostec, the state-owned defense conglomerate, reassured Kommersant that the budget cuts would not impede its aircraft production plans.

«We are in the process of testing new aircraft and preparing for mass production, with the aim of commencing deliveries of the SJ-100 and MC-21 to airlines next year,» stated a spokesperson for Rostec.

Although the funding reductions are not likely to accelerate production, Fyodor Borisov, a chief expert at the Institute of Transport Economics and Transport Policy at the Higher School of Economics, pointed out that it is challenging to fully gauge the impact on the aviation sector without knowing the manufacturers’ available financial reserves.

Dmitry Khoruzhik, CEO of Aviasystems, also emphasized that the changes in funding would not influence delivery schedules.

He noted that the primary challenges confronting the Russian aviation industry are supply chain disruptions caused by the high demand for components from the defense sector, along with incomplete research and development initiatives linked to import substitution.

«No amount of funding can expedite that process,» Khoruzhik asserted.

In March, the leader of Rostec warned that Russia would need to replace hundreds of foreign-made civil aircraft in the coming years as its fleet of Western jets approaches the end of its service life.