Can Ukraine's aviation giant airlift the nation's economy out of crisis?

The aircraft-maker Antonov is the closest thing Ukraine has to an industrial 'national champion' that might achieve worldwide success. But the hurdles it faces are many.

Dmytro Kiva has spent his life designing those gargantuan and ultra-rugged Antonov transport planes, the kind that always seem to get summoned when anyone in the world has a load that's too big, or too heavy for any other aircraft to haul.

Now the eagle-eyed, gray-haired president of the Antonov company has been handed a task that seems even more daunting than his fleet's heavy lifting. As ties with the company's traditional partner, Russia, go down the drain, he needs to take Antonov's sheaf of tried-and-true Soviet-era designs, plus some exciting new projects, and find new markets and investors for them in the West.

"We really need the West to turn its face to us. We understand that we urgently need to change the vector of our cooperation," Mr. Kiva says.

Antonov is the closest thing Ukraine has to an industrial "national champion" with international appeal that could help pull the entire country into the global economy. It not only has a venerable history, it also possesses a few cutting-edge, but largely untested designs that Kiva insists could find a solid niche in a crowded aviation market.

Most Western countries tend to favor their own producers, with tax subsidies, political support, and military contracts. And until recently Kiev-based Antonov, like most Ukrainian military manufacturers, had been somewhat joined-at-the-hip with the Russian defense complex, and therefore shunned in the West as an "eastern bloc" producer.

Hence, Kiva argues, if the West truly wants to pry Ukraine from Russia's embrace, it should give Antonov a political leg-up in its drive to find new markets. If a company like Antonov can't make it, he implies, what hope is there for Ukraine?

A manufacturer on the skids

Antonov has fallen on hard times since its Soviet-era heyday, when it built the world's largest transport aircraft, such as the An-124 Ruslan, which was the USSR's answer to Lockheed's C-5 Galaxy. The Ruslan is still the world's biggest cargo plane. Its would-be successor, the humongous An-225 Mriya – only one of which exists – is so powerful that it can sling more than twice the maximum load of a C-5.

Today the company survives by renting out its fleet of transport planes, and selling as yet small numbers of its new mid-range, short-take-off-and-landing An-248 passenger plane, which it hopes could put it into competition with companies like Canada's Bombardier and Brazil's Embraer.

But some of its most promising projects have been derailed by the near state-of-war that now exists between Russia and Ukraine, and the Kiev government's order to halt all military cooperation with Russia. Earlier this year Antonov swallowed a $150 million loss by tearing up a contract to supply the Russian Air Force with a military version of its medium-range An-148, in protest over the annexation of Crimea.

Then there was the now-defunct joint venture with Russia to build a new military transport plane, the An-70, that could haul troops and armored vehicles over thousands of miles and land on grass airstrips. It had been hoped the project would create tens of thousands of jobs in both countries, and provide Russian and Ukrainian armed forces with world-class airlift capabilities.

That's a vanished dream now, but Antonov owns the design for the An-70, and Kiva hopes it can be improved and offered to Western air forces. "This plane is unique," he says.

The Ukrainian Air Force has lost several of its Soviet-era transport aircraft – including at least one Antonov – in the fighting against rebels in the east. But that hasn't triggered any new orders, says Kiva. "The Ukrainian army needs this plane too, but I fear our state can't afford to buy it now. Serious production would require serious investment."

What options for Antonov?

Some cooperation with Russia survives. Civilian versions of Antonov's mid-range passenger planes are being produced under license in Russia, and Antonov still provides spare parts, for non-military use only, to Russian industries. But in the current climate of acrimony, marketing passenger planes to Russian airlines is a hard sale, especially now that the Russian-built Sukhoi Superjet-100 mid-range airliner is in production. And further fallout between the two countries could trigger Ukrainian sanctions on civilian aircraft. 

"It doesn't profit either Russia or Ukraine to end this cooperation, but the logic of sanctions is in the driver's seat right now," says Nikolai Sungurovsky, a military expert with the independent Razumkov Center in Kiev. "This crisis was a wake up call. All these industries need to develop a new model of working, and start to reorient themselves on new markets in the West."

One thing that might help military companies like Antonov, he says, is Ukraine's recent decision to seek membership in NATO. "A lot of Western military buyers only deal with NATO arms producers. As we move away from Russia, and closer to NATO, they may take a new look at Ukrainian military products," Mr. Sungurovsky says.

Refitting a company

Critics say Antonov, a state-owned company, is old-style industrial behemoth that needs sweeping reforms. So far the Ukrainian government has talked about supporting Antonov through its painful transition, but not ponied up much cash. Experts say foreign buyers would be reluctant to buy a plane like the An-70 if the country's own air force isn't using it. And Western governments also want to steer business to their own manufacturers, rather than a struggling Ukrainian competitor. 

Kiva says there are plans to transform Antonov into a Western-style corporation, and maybe even launch an IPO in London. "We hope we can raise the value of our company, and attract new investment," he says.

But he shrugs, and admits that none of that is on the company's short-term agenda. "Frankly speaking, as long as this war goes on everything will remain up in the air. No one wants to invest in an unstable state. What we need is peace."