22 Oct 2019 16:54

Russian planes can't yet replace foreign ones in EAEU - Kazakh deputy PM

KAZAN/MOSCOW. Oct 22 (Interfax) - Russian airplanes are not yet capable of replacing foreign ones in the fleets of EAEU airlines, according to Kazakh Deputy Prime Minister Roman Sklyar.

"I'll express the general opinion of all transport companies, all airlines: for now, there's absolutely no way to replace foreign airplanes. The fleets of Russia, Belarusian, and Kazakh airlines consist primarily of imported airplanes," Sklyar told Interfax when asked if Kazakhstan will succeed in getting the Customs Union Commission's Resolution No. 130 extended until 2032.

That decision excepts medium-range Airbus A320 and Boeing 737 and long-range A330 and Boeing 767 planes imported into the EAEU from import customs duties. The exception is currently in place until 2023 for the first category and 2025 for the second. A source told Interfax earlier that Kazakhstan wants to extend it until 2032.

According to the Kazakh government's estimates, in the period between 2023 and 2031, the nation's airlines - Air Astana and SCAT - will require around 60 new midrange aircraft with 140-150 seats. The absence of tariff preferences will lead to additional expenses in the amount of over $500 million, which will have a negative effect on airlines' business, making tickets more expensive and derailing state programs, First Deputy Prime Minister and Finance Minister Alikhan Smailov said in a letter to Russian First Deputy Prime Minister and Finance Minister Anton Siluanov in early June (the letter was seen by the Interfax source). As such, he proposed that the tariff preference under Resolution No. 130 be maintained, and precisely this year, because contracts for the leasing of aircraft and must be concluded ahead of time. Prior to this, the proposal was considered several times in various venues beginning in 2018.

The Kazakh government believes that the Russian aviation industry will not be able to meet the demands of EAEU countries for modern aircraft in the coming decades in full, with these "prohibitive customs duties" running counter to international practice. In Russia, 75% of aircraft are produced in the West, with Russian airlines buying 318 planes in the past three years, 225 of them foreign, Smailov also said in this letter to Siluanov. He also recalled that in April, the Russian government's state commission on import substitution allowed Aeroflot to purchase 100 Airbus and Boeing aircraft, meaning that half of the carrier's fleet will consist of foreign aircraft by 2030.

"There's still time. A discussion [of the potential extension of the resolution] is now underway within the Eurasian Economic Commission," Sklyar told Interfax. When asked whether Kazakh airlines plan to buy Russian airplanes, he redirected the question to the airlines themselves.

Russian airlines import foreign aircraft under Resolution No. 331, which excepts the planes from both customs duties and VAT. (VAT is not applied to imported airplanes in other EAEU states.) However, Russia plans to let Resolution No. 331 expire this year and begin using Resolution No. 130. Earlier this year, the Russian State Duma adopted a law excepting imported planes from VAT if they are included in the Russian register.