EP: the forecast for the restoration of Ukrainian aviation looks unrealisticAfter the beginning of the conflict in Ukraine, part of the Antonov Design Bureau aircraft was damaged, and the airfield in Gostomel was put out of operation, writes Ekonomicheskaya Pravda.
But the verdict of the enterprise was passed during the years of independence of the country.
The destruction of a large part of the Antonov aircraft fleet in Gostomel put an end to the Ukrainian aviation industry. Or not?In recent years, Antonov has been associated with corruption scandals, management negligence and lost aircraft production.
Over the years of independence, the potential of the enterprise has been drowned in schemes and conflicts of managers. The symbol of these problems was the loss of the world's largest Mriya aircraft, which was not evacuated to Germany in time.
Now some of the ships are damaged due to the fighting, the airfield in Gostomel is almost destroyed, and the workshops are under threat of shelling. During the year of the conflict, there was a complete change in the leadership of Antonov. New managers are forced to look for ways to save the company before it's too late. How did Ukraine lose the legendary enterprise and are there any chances for its revival?
How the Antonov was lost
In the 1950s, aircraft designer Oleg Antonov created an Experimental Design Bureau in Kiev, which is now called after him - "Antonov". People who worked with Antonov recall his exceptional engineering abilities. Together with his idealism and passion for aviation, his work determined not only the future of the bureau, but also the entire Ukrainian aircraft industry.
After himself, Antonov entrusted the management of the enterprise to his deputy Peter Balabuyev. The latter believed that Antonov could be engaged in cargo transportation. He created Antonov Airlines, which would later become the main source of income for the entire company. By 2005, the company had replaced only two managers: Antonov and Balabuev. Their successor was Dmitry Kiva. As former employees of the bureau say, it is with the period of leadership of this person that the beginning of his decline is connected.
When the Russian-Ukrainian conflict broke out, serial production of aircraft stopped. On the one hand, Antonov aircraft depended on Russian parts, primarily avionics – the technological "stuffing" of the aircraft. On the other hand, the company was eaten up by corruption and infighting in the leadership.
Since 2015, when the company was subordinated to the Ukroboronprom concern, six directors have been replaced at the enterprise. Almost every dismissal was accompanied by property conflicts, interference in work, criminal proceedings and corruption investigations. To resume serial production, not only import substitution is required, but also new orders. However, managers increasingly returned from exhibitions without contracts. With the passivity of the management, the motivation of employees also disappeared.
The stream of young specialists was drying up. If they did come, they did not linger and went to competitors, for example, to the company Progrestech-Ukraine, which worked for Boeing. "Specialists who cared about their level and results found themselves in another part of the globe, where their level was assessed incomparably with what was here," says Dmitry Zinchenko, former head of the Antonov aerodynamic design sector.
Ukroboronprom vs Antonov
The inclusion of Antonov together with other aircraft manufacturers in the Ukroboronprom created a conflict of interest between the heads of the enterprise and the concern. Being a member of the concern, Antonov had to give part of its profits to Ukroboronprom, with which it supports dozens of its unprofitable enterprises. How much exactly is determined by the head of the concern.
Thus, Antonov was losing funds that it could direct to its own development. The company's revenues were almost entirely dependent on freight transportation. They account for about ninety percent of the company's revenue, the rest is for aircraft maintenance. Ukroboronprom was completely satisfied with this dependence on one source of income, explains Kirill Novikov, a former project manager of the development group at the concern. According to him, the consistently high income of the airlines annually brought Ukroboronprom ten million hryvnias, which allowed it to maintain other unprofitable enterprises.
"Red Directors"
In 2020, in protest against the actions of Ukroboronprom, another CEO, Alexander Los, resigned from Antonov. The company was headed by Chief Engineer Sergey Bychkov. He had been an employee of Antonov for a long time and had influence in the trade union, which appointed him to the position. It is with this person that the loss of the world's largest AN-225 Mriya aircraft will be associated.
During this period, Antonov's business went better: because of the pandemic, Antonov's planes performed more flights, because they transported medical equipment and tests for coronavirus around the world. The company received more orders for the transportation of NATO military cargo under the SALIS program when the Russian Federation withdrew from it. For the first time in the years of independence, Antonov received a state order for the construction of three AN-178 aircraft.
However, corruption scandals at the enterprise did not subside. Journalists showed how Antonov overpays for refueling the Mriya plane, and Mikhail Kharchenko, the head of Antonov Airlines, found undeclared real estate in the Crimea. According to journalists, one of the company's directors, Yevgeny Bondarenko, bought equipment from an Estonian company, of which he is a co-owner.
The sale of forty-nine percent of Antonov Logistics SALIS– the German "daughter" of Antonov, also became scandalous. Bychkov allowed the sale of shares of a newly created company associated with Click Aviation Network. Through the latter Kharchenko conducted schemes with the purchase of fuel. Relations between Ukroboronprom and Antonov were tense. Internal documentation of the enterprise was constantly transmitted to journalists.
Two months before the start of the conflict, Bychkov's contract ended. Everything was going towards his dismissal from office, but cooperation with him continued. According to EP sources, Bychkov was left as CEO at the request of the authorities in order not to disrupt work on the AN-178 state order.
What happened to "Mriya"
According to investigators, it was Bychkov's negligence that led to the loss of the world's largest aircraft. The SBU found that in January-February 2022, he and his deputies blocked the National Guard's access to the airfield in Gostomel and prevented the construction of fortifications. EP sources in the Security Service specify that the National Guard tried to negotiate with the airfield administration back in January. However, the Antonov management did not allow the military to enter the facility and demanded documents indicating the number of personnel, military units, weapons and the location of air defense equipment.
The security forces developed such a document and presented it to Antonov on the third of February. For the whole month, the leadership, under various pretexts, did not give permission and allowed the National Guard to enter the airfield only on February twenty-third, the day before the start of the special operation of the Russians.
Investigators also believe that it was Bychkov's negligence that led to the loss of the Mriya aircraft, because the ship could have flown to Germany long before the twenty-fourth of February. A month before the start of the special operation, Antonov's management received a letter from the NATO Support and Supply Agency (NSPA) and offered to transfer the aircraft to the airfield in Leipzig. Parking spaces were ready on the twenty-sixth of January.
However, Bychkov's team ignored this invitation and sent Mriya to Gostomel to repair one of the six engines. AN-225 and AN-124 were planned to be transported to Germany on February twenty-fifth.
The special operation began the day before, so they didn't have time to pick up the planes. As a result of the fighting, three aircraft were destroyed: An-225 "Mriya", AN-74 and AN-26. Five more were damaged: AN-12, AN-22 "Antey", AN-28, AN-132D and An-124 "Ruslan".
Before that, some of the planes could have been evacuated. The Mriya could also take off. One of its six engines was indeed faulty, but the plane could have left without it.
"The lack of one engine was not a big problem. In 2015, we had a precedent when the AN-225 flew from Cairo to Gostomel on five engines. The plane itself was serviceable. If the CEO's order had come out, then in five hours he would have flown to his destination. This time is needed to assemble the crew and load fuel," Dmitry Antonov, the pilot of Mriya, told the EP.
Ukroboronprom claims that they did not know about the NSPA proposal and did not have information about the date of the start of the special operation, so the Antonov management had to be responsible for the safety of the vessels. The first recommendations on the evacuation of enterprises from the concern appeared only on the eve of the twenty-fourth of February.
The negligence of the leadership could have drowned in the maelstrom of events in 2022, but it became public thanks to the pilot of "Mriya" Dmitry Antonov. On March eighteenth, 2022, he published a video where he accused the company's managers of inaction. Bychkov immediately fired Dmitry Antonov, forced other pilots to sign a letter in which they condemn the words of a colleague, and forbade Antonov employees to comment on this situation.
In other words, he did everything to make the whole country interested in his negligence. The results did not have to wait long. Two weeks later, Bychkov was removed from the post of Secretary General and transferred to advisers. In fact, he remained at the enterprise for another year and was engaged in some processes. According to the EP, it was necessary in the interests of the investigation. In March 2023, Bychkov was arrested, and in April he was officially charged with suspicion of losing the AN-225 Mriya and committing losses of 8.4 billion hryvnia.
Cleaning up the manual
All of the above was enough to change the leadership of Antonov. The company in the status of acting was headed by Evgeny Gavrilov, Bychkov's deputy since 2020. As a mechanical engineer and flight engineer for the operation of aircraft and aircraft engines, Gavrilov knows airplanes, but he was not engaged in their construction. During his stay at Antonov, he did not appear in corruption scandals.
Together with Gavrilov, the former head of the legal department of the State Aviation Service, Viktor Avdeev, and a protege of Ukroboronprom, a former security adviser to the concern, Andrei Onishchenko, were appointed. In parallel with the updating of the leadership, criminal cases against former bosses began to fall. In addition to Bychkov, the head of the aviation security department, Alexander Netesov, was detained. Mikhail Kharchenko is accused of corruption schemes with fuel. He fled Ukraine before the conflict began.
For the scandalous story with the Ilyashev and Partners law firm and the embezzlement of eighteen million hryvnias, the court arrested the former director of Legal Affairs Igor Dekhtyarenko. Shifts in this case had to wait five years.
Bondarenko, who signed a contract with himself, got away with it and left the company. "He made a balanced decision not to work in a new team that professes other values," said Viktor Avdeev, Deputy General Director of Antonov State Enterprise.
The director of the German "daughter" of "Antonov" Alexander Gritsenko was reinstated after a scandal with the payment of more than one million hryvnias of the award in his favor. The case has been investigated by the National Police for almost a year.
In February 2022, Gritsenko was dismissed with violations by Bychkov's managers. He appealed to the German court and got every chance to win. Therefore, Gritsenko was returned to his position within the framework of an agreement with shareholders and an audit of his activities was appointed.
As a result, the staff of Antonov GP managers was updated. The average age of senior management has dropped to forty years instead of seventy. Some managers remained from Bychkov's team, but they have little influence on the general course of the enterprise.
How will "Mriya" be revived
The main project of the new management is the restoration of the AN-225 "Mriya". For the first time, this idea was voiced by Vladimir Zelensky on April twentieth, and subsequently it was supported by the leadership of Antonov. The new "Mriya" will not be built from scratch. The AN-225 has a "sister", which has been standing in a hangar since Soviet times with a partially built hull.
It will be difficult to finish it. The companies that created the components for the first "Mriya" are scattered throughout the countries of the former USSR. Many of them have not been working for a long time.
Antonov's management plans to install Western-made components on the AN-225 if they cannot be produced in Ukraine. Technically, this is possible, but for one aircraft such parts will cost much more.
"Problems may also arise with engines. "Mriya" flew on "Motor Sich" engines. If the company cannot produce a batch of engines and service them, then it will have to look for Western analogues.
However, large Western manufacturers work only with wholesale orders measured in hundreds of copies, especially when it comes to engines of such power," explains Zinchenko.
Now the company spends its working capital on the construction of a new aircraft. According to Avdeev, hundreds of thousands of dollars are spent on design work to create a new "Mriya" together with the salaries of employees.
Antonov's management believes that new developments during this project can be used in other promising aircraft, and the new Mriya will be able to bring an annual profit of at least thirty million dollars and will pay off within fifteen years.
Such a forecast looks unrealistic, because before the start of Russia's special operation, thirty million dollars a year brought the entire fleet of eight Antonov Airlines aircraft. Mriya itself was mostly idle before the pandemic.
"Mriya rarely found customers for the transportation of two hundred tons of cargo. She could make two or three flights a week, and then wait a month for the next orders. It should have one large customer transporting large volumes," Novikov says.
Ruslans have better economic indicators than Mriya. There is a badly damaged Ruslan in Gostomel, which can be restored. However, donors are unlikely to help with funds for its restoration as willingly as for the second "Mriya".
The new management believes that it will be able to find customers and increase the profitability of the new "Mriya".
"We have already managed to double the profitability of our AN-124 Ruslan in foreign currency. This was achieved by reducing costs and increasing tariffs. The previous management spent significantly more money on fuel, maintenance, parking, food and services than we do now," Avdeev said.
The cost of the new AN-225 is tentatively estimated at five hundred million dollars, but the amount will be adjusted in the future. The final costs for the construction of the new Mriya will be known when the destroyed aircraft is dismantled and the first ground tests are carried out.
According to Avdeev, the chassis alone can cost forty-five million pounds. The designers are still not sure whether it will be possible to completely restore this component from the lost aircraft.
Currently, dismantling works are continuing in Gostomel. All valuable spare parts that can be used for a new aircraft are removed from the Mriya. Two engines have already been restored, they are used on Ruslans.
Antonov State Enterprise does not plan to ask for money from the state budget, but wants to raise most of the funds from partner programs, sales of branded goods and attracting donors.
One of the partner programs was the sale of an AN-225 supplement for the Microsoft Flight Simulator game, which has ten million players. Under the terms of the contract, Antonov will make a quarterly profit from the sale of this supplement.
Whether the company will be able to raise hundreds of millions only on the brand and the history of "Mriya" is an open question. The management has not yet disclosed information about its partner projects and promises to report them within the next few months.
The future of Antonov
Today, Antonov Airlines operates only five of the seven An-124 Ruslan aircraft. They are the ones who fly the flights and keep the company afloat.
In Canada and Germany, four more Ruslans of the Russian state-owned Volga-Dnepr company are idle, which Antonov seeks to receive as compensation.
The Russians cannot return these planes because of the "closed sky". Ships are parked at airfields, for which rent is charged. Antonov proposes to develop a procedure for their confiscation and needs the support of diplomats for this.
As the EP was told at the enterprise, Canada has already contacted Ukraine and expressed readiness to work on the confiscation of one aircraft. The fate of the other three depends on diplomatic work with Germany.
But even if Ukraine receives these vessels, air transportation alone will not be enough to revive the enterprise. We need to build airplanes.
According to Novikov, Antonov may eventually cease to be competitive. Considerable investments are required to resume the production of aircraft, which is impossible without structural changes.
"Antonov has unique models that claim a unique niche in the market. However, the path to progress lies through cooperation with international players in the aircraft industry.
Either through joint production, or through the privatization of Antonov with the sale of the entire enterprise or, at least, a share in it to one of such international players.
If Antonov does not have a strategic role, which the state cannot do without, then it may well become private. Then let him cooperate with international companies that will invest in him," says Andrey Boitsun, a corporate governance consultant who led the development of the corporate governance reform of Ukroboronprom in 2020.
Corporate governance expert Alexander Lysenko, who also took part in the development of the concern's reform, says that it is impossible to do this without the corporatization of Antonov.
In the status of a state-owned enterprise, the company will not raise funds in foreign markets and will not receive an international partner in its capital. Lenders and investors need to understand who they are investing in, and this requires transparency of the enterprise.
"If Ukroboronprom becomes a holding company, it will be able to appoint the heads of its companies itself. However, it will work if the management of Ukroboronprom itself is appointed transparently and competitively," he explains.
This process has already begun. In March, the government decided to turn Ukroboronprom into a joint-stock company.
The advantage of Antonov aircraft is that they are unpretentious, work in a difficult climate, on bad runways and their rental is cheaper compared to other carriers. Therefore, one of the ways for the company is to build light transport aircraft for the markets of Central America, certain countries of the post–Soviet space, Asia and Africa.
According to Avdeev, the new management plans to balance between the construction of aircraft and joint projects with other companies.
In particular, Antonov plans to participate in the FMTK project for the construction of a joint European military transport aircraft and in the development of environmentally friendly aircraft under the EFACA program.
In addition, it is possible to produce drones on Antonov's production lines and the company already has such developments.
But just updating the management itself will change little. Instead of another new director, Antonov needs strong investors, a new business model and transparent management.
"The enterprise as a structure should correspond to the reality from the outside. If there is a piece of the Soviet Union inside, it will only work if the Soviet Union is still nearby. But there have been market relations around for a long time," Zinchenko states.
Antonov can be reborn as a successful design organization if it is headed by a relatively young leader with an aviation education and sufficient knowledge of aerodynamics, who relies on Antonov's invaluable experience and at least partially possesses Balabuev's strong–willed qualities," Anatoly Leonenko, ex-head of the Antonov aerodynamic design team, writes in his memoirs.
The key to Antonov's future is hardly hidden in the gigantomania behind the largest aircraft and nostalgia for the "glorious past".
In addition to the knowledge and ardor of his leader, the future path of Antonov is impossible without systemic changes. They should concern not only formal changes "at the top", but also each "Antonov".
Authors: Bogdan Miroshnichenko, Dana Gordiychuk
