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President Vladimir Putin: Good day, dear colleagues.

Today we are discussing ways to develop the aircraft manufacturing industry. This issue has been under discussion for a long time and it is high time to begin arriving at some conclusions.

This is why this question of particular importance is on the State Council Presidium’s agenda today and why we have to examine the state of affairs in the sector and decide what our main priorities are for a long-term development strategy. It is time to make a final decision on the direction the sector’s development will take and define the corresponding long-term strategy.

Unfortunately what we have often seen during these complex discussions is that group interests come into conflict with national interests.

The sector needs a strategy that meets the challenges of global industrial and technological competition, takes into account the trends in the world market and is based on the existing possibilities and resources the Russian economy can offer.

I want to stress that aircraft manufacturing was and still is a priority direction in our economic policy. We must not forget that we have traditionally held a strong position on this market.

Furthermore, in today’s situation aircraft manufacturing could become one of the principal means for diversifying and restructuring the Russian economy and a solid foundation for its further growth.

Finally, in developing a strategy for the sector, we must remember that the aircraft manufacturing industry plays an important part in ensuring the country’s national security and in increasing the potential of our armed forces.

As you know, here at the Central Aerohydrodynamics Institute we can see the unique potential that Russia has built up in the aircraft manufacturing industry, and today we have had the opportunity to confirm this for ourselves once again. This potential we have is the result of the efforts and work of whole generations and a wealth of financial and intellectual resources. To this day the world’s leading aircraft manufacturing countries make use of Russia’s experimental, production-test facilities and test beds, including here at the Central Aerohydrodynamics Institute where our meeting is taking place.

What’s more, there is demand for our products on the world arms market. This enables Russia to take its place as one of the world’s leading military aviation technology exporters. I would add here that a number of segments in the Russian aircraft manufacturing sector are now undergoing quite rapid growth.

But there are also clear negative trends, worrying trends. Our civilian aircraft products are definitely losing in competitiveness. They are clearly less attractive and fail to meet international comfort standards, and this doesn’t help us consolidate our positions on world markets, including the CIS market, where we have traditionally been very strong.

Equipment in the industry is wearing out, qualified personnel are leaving the sector and, particularly worrying, the technological level is dropping both in production and in design.

The reasons for this state of affairs are clearly of a systemic nature. The root of the problem is that the Russian aircraft manufacturing industry still does not have a management system up to modern demands and effective economic instruments able to ensure the sector’s stable functioning, make it attractive for investors and consequently put Russia in a position to take a significant share of the world aviation equipment market.

I believe we should take the achievements of the military-technical segment of our aircraft manufacturing industry and make use of them throughout the sector as a whole. We need to clearly define the segments on the world market in which we plan to concentrate our resources, and we ultimately need to consolidate our position and obtain visible results.

I am convinced that what we need today are responsible and genuinely innovative decisions for the entire sector and the very principles of how the Russian aircraft manufacturing industry is organised.

I hope we will discuss all these issues in detail today and I would especially like to draw your attention to the following points.

First, we should keep in mind that looking only to the domestic market and counting only on domestic demand will not ensure a stable and even flow of work for the sector.

Today’s aviation market is a global market and countries bring into play tremendous resources in order to promote their products on such a large-scale market as this. Competition on this market is not just between different national companies but between aircraft manufacturing nations.

Second, it is not enough to rely solely on protectionist measures to keep up with the competition on this market. As we have already had occasion to observe, this is a road that leads straight to stagnation and to a drop in quality in what is one of Russia’s most technologically advanced industries.

Of course, we do need to think about how to provide proper protection for our manufacturers. But we also must not forget that modern consumers now choose the most advanced, safest and most comfortable products and look for the most advantageous purchase and maintenance conditions. If we want to create genuine demand for Russian products, our manufacturers will have to meet these tough but necessary demands.

Third, we need to make the widest possible use of our cooperation ties in order to expand the geography of our partnerships and build up our export potential. I am referring here to the potential for attracting foreign capital and advanced technology to Russian projects and to Russian aircraft manufacturers’ active participation in international aviation alliances.

I think the sector should thoroughly modernise and diversify the financial and economic mechanisms it uses in its work, including, of course, support for aviation equipment leasing schemes. There has also been considerable discussion on this subject. I think that regarding public procurement there is also something to think about.

Private investment can and should have open access to the aircraft manufacturing sector. The industry as a whole should become commercially profitable and attractive.

In conclusion, I would like to emphasise once again that a lot of the sector’s problems today have their roots in its ineffective organisation and management model.

I hope that by concentrating resources on genuinely promising projects, Russia will be able to obtain visible results without much delay.

The State Council Working Group has drafted its own proposals regarding this point and we will examine them in detail today and formulate specific instructions for the government.