OAO Aeroflot, Eastern Europe’s largest airline, signed a preliminary agreement today, CEO Valery Okulov said. Airbus parent European Aeronautic, Defence & Space Co. also agreed to work with a Russian company to convert passenger planes to cargo carriers and to consider building a military transport plane, said EADS Co-CEO Tom Enders. The agreements come as Amsterdam-based EADS and Russia’s state-controlled Unified Aircraft Corp. discuss cooperation. The two sides have been in talks since February 2006 about forming a $25 billion partnership to develop aircraft as part of Russian President Vladimir Putin’s push to revive the country’s aerospace industry.

„We want to share the burden with competent partners,” Enders said in an interview at the Baltschug Kempinski Hotel in Moscow overlooking the Kremlin. „Russian industry is very competent, particularly in design and engineering.” Enders, who visited the Kremlin today, didn’t say with whom he met. Airbus had previously talked about offering Russia a 3% stake in the A350. In December, the aircraft maker announced that the development cost for the plane would be €11.6 billion ($15 billion) including capital equipment, more than double earlier projections. Costs rose because Airbus decided to use composites for about half the plane’s structure.

 
The A350 XWB, a long-range aircraft that will enter service in 2013, is Airbus’s sixth attempt to build a rival to Chicago-based Boeing‘s 787. Enders described EADS’s approach in working with Russia on aerospace ventures as „the crawl, walk and run strategy: we are now entering the phase of walk as we are talking about partnerships and larger areas of responsibility for our Russian partners,” he said. Unified Aircraft Corp. and EADS also agreed to create a joint venture based in Dresden, Germany, to convert passenger planes in the A320 series to carry cargo. A preliminary agreement was announced in May. The venture will start delivering converted planes in 2010, with plans to produce 30 aircraft a year, said Andreas Sperl, chief executive of EFW, the EADS unit in charge of the work, said

The conversion agreement will generate $200 million a year for Unified Aircraft Corp., said Valery Bezverkhny, first vice president of OAO Irkut Corp. Unified controls Irkut. Russia’s participation in the A350 program will generate $200 million to $250 million, beginning in 2015, he said. The conversion and A350 programs are meant to last 20 years. „The entire world is going the way of transfer of technology, knowledge and experience, and it is only possible through large joint projects,” Bezverkhny said. „We are not leaders in civil aviation and we would like through cooperation with Boeing and Airbus to lift our competence.”

The $4.4 billion estimate on Aeroflot’s order is based on catalog prices for the aircraft. Putin is seeking to consolidate the defense industry, in part by creating a national aerospace holding company from private and state-owned enterprises. Aircraft production in Russia collapsed along with the Soviet Union in 1991 as government revenue and orders dried up. The companies also agreed to undertake a joint study on the market for transport planes that would involve potential collaboration between EADS and the Russian aerospace industry, Enders said. One possibility is a short-range passenger plane, he said. (Bloomberg)