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President Vladimir Putin: Good day dear colleagues!

Before we start our meeting I want to tell you that this morning we visited one of the new ground-based facilities designed to detect a missile attack. I should say that this represents the first step in the implementation of a major programme in this area between now and 2015. It is encouraging to note that all the relevant tasks were done not only according to schedule but also using domestic intellectual and industrial resources. This is what we call the modern development of the Armed Forces. This is what we call the innovative development of the armed forces, making them much less expensive, and much more effective and more reliable. Sergei Borisovich Ivanov, as Defence Minister, has given a lot of time and attention to the modernisation of the Armed Forces. I hope that the new administration of the defence department will also do everything to ensure without fail that all plans to modernise the army and the navy are carried out.

But unfortunately we are not doing so well in other areas.

At our meeting today we have to consider three interrelated issues : the development of aviation engine manufacturing, the plans for amalgamating aircraft construction in a single corporation, the United Aircraft Manufacturing Corporation, and the state of the helicopter industry.

Today the competitiveness of our aircraft engine industry is unfortunately very poor. Profit margins have declined in recent years from 27% to 7%, and earnings have dropped by nearly half. The number of sales of domsetic engines illustrates this trend. Earnings there, for example, are 15 times lower than those of the leading companies in the world, compared to companies such as General Electric.

In Russia there are about 40 companies making engines. Among them only seven are genuine contenders. And even their engines are inferior to the best in the world – at least today – in virtually every respect: service life, fuel consumption, noise and environmental impact. The most significant gap is in engines for passenger and transport planes.

In technological, financial and structural terms, the industry is unable to meet the demands of the market (by ”market“, I mean, of course, not only the domestic market but also the international market), neither in volume nor quality. Moreover, accumulated problems are delaying the implementation of major projects in the aviation industry.

First of all, I mean the plans for the United Aircraft Manufacturing Corporation. Its objective is to produce three hundred planes annually by 2025. Regarding military planes, we want to almost double its annual production. I want to stress that the implementation of these plans will bring the very structure of our aviation industry up to world standards.

This sort of breakthrough project in aircraft manufacture requires adopting the appropriate development strategy for gas turbine engine construction. Its implementation must be completed as soon as possible. And the work to be done in this area must be planned not only for the medium term, by 2015, but for a much longer period, until 2025 at least.

Today I would like to dwell on the principal directions of this strategic vision: on the issue of technology in the armaments sector, its financial support, and the problems of restructuring. At the same time I would emphasise that the main objective of integration is the creation of a new generation of engines. Today, I have signed a decree on the organisation of Salyut, a federal state unitary enterprise and the first such integrated structure.

I would also like to dwell on the need to develop the domestic helicopter industry. For our country’s climate and geography, it is hard to overestimate the importance of helicopters. They are widely used in remote and sparsely populated regions for military purposes, in the oil and gas industry, to put out fires, and on research expeditions.

The industry has already taken the first steps towards system integration. A major helicopter construction association has been created, which includes design offices and businesses, producing the basic units and working on the final assembly. This has led to opportunities to consolidate capacity, increase production, improve financial stability, and control the entire industry.

Currently preparations for the second stage of integration are being completed, which will create a single scientific and technological manufacturing system for helicopters.

I have also signed a decree on the transfer of shares in this sector into the Oboronprom United Industrial Corporation.

However, a major constraint on the development of the industry is the absence in Russia, as I said earlier, of mass-produced modern engines that meet market demands. Even though we actually are able to produce them ourselves. And today we witnessed this here at this enterprise, at the Klimov factory. In this connection, I expect to hear concrete and feasible proposals to create conditions for turning out domestic products of this kind. To consider expediently the issue of licensing foreign technology.

This, of course, is a very superficial analysis of what is happening in the industry. I think that today in our meeting we shall discuss this in more detail.