State-led initiatives, Overseeing and Administration Committee (OAC) and the Ministry of Defense, to make state contract prices reflect realistic values.
United Aircraft Corporation (UAC) Increases Prices in Aviation Equipment to Address Loss-Making Contracts
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Hey there! If you're into football or aviation (or both), you'll be interested in this. United Aircraft Corporation, a part of the Rostec state corporation, is taking action to boost its profits in the aviation sector. The CEO, Vadim Babichev, revealed this during an interview with RBC.
UAC's product portfolio includes military aviation classics such as the Su-57, Su-75, and Su-35, as well as strategic and special aviation machines like the Tu-130 and Tu-95MS. The state defense order, which accounts for over half of UAC's revenue, is undergoing a price revision to bring it in line with reality and minimize loss-making contracts.
Babichev emphasized that the goal is to find the perfect balance between the Ministry of Defense's need to save and UAC's need to earn a profit. The corporation wants to generate a profit that can be re-invested in expanding production if required. He further explained that the state defense order operates on a cost-proving system, where the price accepted is based on the cost proven, not commercial mechanisms or investment potential.
Last year, Rostec CEO Sergei Chemezov pointed out the average profitability of enterprises working with state defense orders was only 2.28%, significantly lower than the desired 5-10%. UAC, too, has been struggling financially, with annual losses of at least 30 billion rubles since 2020. However, Babichev asserted that UAC's financial performance improved in 2024 thanks to increased exports, and the corporation aims to end 2025 around zero or close to it.
To enhance profitability and sustainable growth, UAC is implementing a large-scale program focused on increasing contract prices and reducing costs. The corporation is no longer covering excess costs beyond the baseline funding allocated to projects on its own, but rather setting strict limits to stay within the funds allocated.
So, if you're fascinated by aviation, keep an eye on UAC as they navigate this strategic pricing experiment in the complex global aerospace market. Until next time!
UAC, operating within the aviation and broader business sectors, is seeking to bolster its profits by increasing the prices of its aviation equipment, aiming to align with the state defense order and avoid loss-making contracts in the finance industry.
The corporation's strategy lies in finding a balance between the Ministry of Defense's need to save and its own need to generate a substantial profit, re-investing the earnings to expand its business operations in the industry.
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