27 February 2014

Five years ago, on the 4th of February, 2009, Rostec State Corporation signed a memorandum to create a managing company which would consolidate 36 aircraft production facilities located all over Russia. Rostec's key objective in creating the holding was to provide a national foundation for the design and manufacture of complete aircraft systems and their subsequent application by the global aviation industry.

Before the consolidation, each production facility had their own development strategy, which limited their ability to switch from the manufacture of individual components to the manufacture and supply of complete systems, in line with the new market environment.

The holding has undergone three stages of development in the last 5 years, according to Maxim Kuzyuk, the CEO of Aviation Equipment. The first involved asset consolidation within Rostec Corporation, which took place from 2009 to 2011. The company spent 2012-2013 developing a new strategy, researching the market and studying best international practices of corporate development. At present, the holding is on the third stage of development, which involves improving marketability in order to become a truly global supplier on the aircraft equipment market.

'Aviation Equipment is currently centralising its managerial functions including purchasing, supplier management, marketing, sales, cash flows and launch of new products,' said Maxim Kuzyuk. 'We are also rolling out new corporate management solutions, e.g.: a shared IT environment, international certification of production and managerial processes, a design centre, and a life cycle management scheme for systems and components, as well as switching to a new production model. All of these changes will increase production efficiency and profitability, while improving overall customer satisfaction. The innovations will help us integrate into the global aircraft industry and establish partnerships with the world's leading aviation companies.'

The new approach to management and production has already yielded results - Aviation Equipment participates in large-scale Russian projects and is gaining access to international markets through cooperation with the US' Curtiss-Wright Controls, the French Messier-Bugatti-Dowty (MBD) and Boeing. 'The holding has already achieved profitability. The revenue in 2013 went up by 44% year-on-year and profitability doubled,' remarked Maxim Kuzyuk. 'Our plans for 2014 involve increasing revenue by 25% and profitability by 50%.'

Research and development is an important part of Aviation Equipment's development strategy. The holding's facilities, design bureaus and research institutes invest substantially in R&D and innovations. In 2013 alone, the holding launched the production of 10 innovative systems for Russian aircraft and helicopters. In 1Q2014, Aviation Equipment is opening a unique centre which will centralise the management of primary design facilities located in Russian regions.

One of the bottlenecks for the development of facilities within the holding is the lack of qualified design and process engineers. To tackle this issue, the holding established cooperation with a number of leading educational institutions.

'We believe that people should have competitive compensation for their work and an opportunity to build on their competencies. Investment in people is something that has not really been done before in the defence industry,' says Aviation Equipment CEO Maxim Kuzyuk.

Another strategic goal for the near future is increasing workforce productivity. The holding plans to achieve workforce productivity equivalent to leading companies in the industry by 2020.