Denis Savostin, Airflot Technics - Эйрфлот Техникс
Release Date: 2009-03-20
Date: December, 2008You started your professional activity in air transport industry in Yakutia and then you moved the business to Moscow. How did you come up with the idea of integrating the transport sector in the Russian Federation?
My presence in aviation is not casual: my father is a veteran pilot of RF - he has worked in civil aviation for over 30 years. All my life I have dreamed to be pilot, so after graduating from school I entered the Ulyanovsk Flying College as well as the Blagoveshchensk University of Foreign Languages to study Mandarin. As there was a crisis in aviation in 1994, my father recommended me to start studying foreign languages. After graduation from both Universities with two degrees - in world economy and linguistics - we went into aviation business.
Initially, we started to cooperate with China in the sphere of aviation back in 1992 when they used a large fleet of Russian equipment. Acting as intermediates, we aimed to attract Chinese partners for Russian factories. We were based in Blagoveshchensk, just across the river from China. Later, in 2000, I moved to Moscow and formed a company that supplied complete spare parts for Russian civil aircrafts.
What factors made you move to Moscow?
Moscow is the business centre of Russia; all the key decisions are made here.
What has changed in the organization of your company since you were involved in connecting Russian aviation facilities with Chinese partners?
The main objective of creating Airflot Technics was, firstly, to develop trade and eсonomic relations between Russia and China in the sphere of civil aviation; secondly, export and import aviation products of Russian and Chinese manufacturers and, thirdly, to attract investments for the Russian aviation sector.
But, between 2000 and today, the activity of civil aviation in Russia has been close to zero. The Chinese have bought extremely small numbers of planes. Is it still a profitable & sustainable business?
The point is that all the air fleet consisted of Russian aircraft. Later, in 1997, Boeing and Airbus began to enter the Russian market offering much better conditions. Nevertheless, even today all transport aviation in China consists of Russian aircraft and they still use about 18 Tupolev aircraft. So, export of spare parts was our main business till 2005 and afterwards we moved to transport.
In 2005 we took one of the last Tu-154 planes and it was a great achievement because this aircraft had been for about 7 years in China without technical maintenance, with uncovered engines and when we started repairs, Airbus people thought we were crazy because with a 99% probability the aircraft would not take off. Nevertheless, in three months we repaired the aircraft with our partners, Aviacor Service, and it eventually took off. It took us one more month to persuade our Chinese partners that the aircraft would fly. It did take off and the first news piece that appeared on TV was that Tu-154, after seven years in China, came back to Russia. The story was printed in the newspapers. Most journalists asked how much we gained.
The answer was that our task was to prove that a Russian aircraft, after 8 years without servicing, still can fly. We can try putting an Airbus or Boeing aircraft for 8 years without servicing and I doubt that it would take off.
Does it shock you that the Russian aviation sector cannot produce more than 3-4 planes per year?
It’s rather a political question. I believe that today Russia is strong in aviation construction and in military aviation where Russia is an absolute leader; as for civil aviation, our management has not yet adapted to the new market conditions that emerged in the 90s.
You belong to the young generation of managers… how did you manage to adapt and enter the transport sector?
This question answers why we have managed these changes! Firstly, there is less and less aircraft produced in Russia. Factories cut production; at a certain period there were almost no spare parts for Russian aircraft and factories were becoming re-oriented on servicing foreign aircraft. It was the main reason why the Russian aircraft fleet was mainly focused on Russia, whereas we, as an external trade company, are focused on the Chinese market. In 2005 we started to supply ground support equipment for airports and this became our main profile.
Where is this equipment manufactured?
We started our work from the Chinese manufacturers, as our advantage was extensive experience of work with China.
Looking from a customer prospective: how do you evaluate Chinese equipment?
Today the Chinese manufacture nice products with a competitive price; quality is, of course, lower than European but I have noticed, after more than 2 years of visiting Chinese facilities and about 40 enterprises, that today there is a lack of technology in China but a great potential. Today we represent 14 Chinese plants producing highly specialized products. We have chosen more specialized and high quality enterprises with a narrower specialization.
One of our advantages in Russia is that we have 3 categories of customers. In the first category are rich companies that purchase expensive modern brand products by famous manufacturers - the key representative of this category is the Moscow Transport Hub. The second category comprises regional airports like Koltsovo and Tolmachevo that purchase second-hand European equipment. This niche is positive towards Chinese products. If we take Sheremetyevo and Vnukovo, for example, trolleys in these airports are produced, correspondingly, by Wanzl and Caddie. Such trolleys cost €700. Chinese trolleys that we offer cost half the price. Just compare: if we take 2,000 trolleys, the price difference is the cost of one aircraft tractor.
Our advantage before Cavag is that today we have 14 Chinese factories and two exclusive agreements with French manufacturers - Musthane and Sovam, manufacturers of equipment for aircraft recovery systems. Firstly, we cover all the three categories and, subsequently, all airports. We offer different products depending on the budget of our client. Secondly, we, unlike Cavag, have our own engineering group; we cooperate with an aviation plant and integrate designers.
Our principle is to work only under exclusive conditions in Russia and the CIS. We are also negotiating with five European manufacturers; 99% is exclusive cooperation. In less than 3 years we have reached the level of suppliers with an expertise of over 10 years. Besides, our administrative resource is much stronger than that of our competitors. We manage to cooperate successively with Europeans as well - ask our French partners!
To sum up, it is a combination of products, good relations and a 2-year business plan. How will the financial crisis affect the reconstruction and upgrade of airports - in view of the federal plans to revive the transport sector?
There is a state program for airport development. So, the funds are actually assigned by the Government. Of course, the global crisis has affected the aviation sector and our company in particular. Some of our clients have postponed payments to the first quarter of next year. Some products remained unpaid and we had to close foreign trade contracts with our investments.
In general, I think that the situation is temporary. We have a huge plan for 2009 related to equipment supplies and participation in construction of airport terminals. As I have said, our advantage is that we have both premium and economy class equipment.
What is the purpose of the conference that you are attending in early December?
The purpose is to break common stereotypes in relation to China.
What are your business expectations?
Initially our task was to focus on exchanging experience between Russian and Chinese airports, with speeches made by manufacturers of new products. It is an opportunity to show that we feel confident and professional on the Chinese market; however we are and will not be limited to China, as we also have active cooperation with European partners.
Our website targets foreigners who are looking for reliable partners in this market but at the same time might have preconceptions about Russia’s aviation and transport sector. What are the qualities of Airflot Technics that make your company a good partner?
Concerning the market, I would advise to concentrate on finding a strong partner in Russia. It is not feasible to waste time opening rep offices. If our company were to enter another market, we would look for the same solution.
As for our strong points as a company, we, being originally from a region with very severe climate, are not offset by difficulties and have a clear objective that we are pursuing. Our motto is: “Flight starts on the ground”.
| Company: | Airflot Technics - Эйрфлот Техникс |
| Position: | Chairman of the Board |
| Country: | Russian Federation |