Russian Executives Spend Big on Luxury Planes

By Lyubov Pronina

Bloomberg

Published: August 28, 2007 (Issue # 1301)

MOSCOW — Russian executives may spend $2.5 billion on business jets over the next two years, an aviation trade group said, prompting companies including Bombardier to chase contracts in a country with 60 billionaires.

“It is just the beginning,” Christophe Degoumois, Bombardier director for business aircraft sales in Russia and other former Soviet countries, said at the MAKS 2007 air show. Russia is Bombardier’s largest European market, and the Montreal-based company says it is the top private jet purveyor in the country.

France’s Dassault Aviation and Brazil’s Empresa Brasileira de Aeronautica are among the aerospace companies joining Bombardier in seeking business jet buyers at the biennial air show.

Wealthy Russian individuals and corporations have about 300 executive jets and will have about 100 more delivered by the end of 2008.

Russians bought executive planes valued at $1.5 billion in the last two years, triple the amount spent in the previous two years, Yevgeny Bakhtin, deputy head of the Russian Business Aviation Association, said in an interview last week. Of the $2.5 billion in spending expected by 2009, $1 billion is already contracted.

The most popular models are Bombardier’s Global Express, Boeing’s Business Jet, Hawker Beechcraft’s Hawker 850XP, the Gulfstream V from General Dynamics and the Legacy 600 made by Embraer, according to Bakhtin.

Representatives of all the companies are working the tarmac at MAKS 2007. All but Boeing brought planes to display.

Growth in private jet sales in Russia is “unrestrained,” Bakhtin said.

Customers in Russia and other former Soviet countries placed 90 orders with Bombardier in the last three years for Learjet, Challenger and Global business jets. In the first half of 2007, the company has taken 30 business jet orders from the countries, spokeswoman Danielle Boudreau said.

Dassault has booked orders for 40 aircraft in Russia, Ukraine and Kazakhstan in the past three years, Alain Aubry, sales and marketing vice president, said Thursday at the show. Half of the planes have been delivered, and Dassault is currently negotiating the sale of 10 private jets, he said.

Boeing has interest from private clients in the 787 Dreamliner, said Craig Jones, vice president for commercial airplanes. The 787, which enters service in 2008, can carry as many as 330 people in a commercial configuration.

Bombardier’s Degoumois said he had set up 15 meetings with customers during the show, which ends Sunday, and that he hopes to sign more contracts than two years ago. Bombardier is the top seller of executive jets in Russia and other former Soviet countries, said Bob Horner, Bombardier vice president for international sales.

The client list is hush-hush, Horner said. Customers are concerned about privacy, and at least a dozen have outfitted planes with missile defense systems, Bakhtin said.

“Take the list of Russia’s 100 richest compiled by Forbes, and they all have a private jet or a helicopter, often more than one,” he said.

Roman Abramovich, owner of Chelsea Football Club and the country’s richest man, outfitted a Boeing 767 for private flying and installed an anti-missile system in 2004, newspaper reports said.

Oleg Deripaska, the country’s second-richest man and owner of the world’s biggest aluminum producer, cruises the world in a Gulfstream V. Billionaire Vladimir Yevtushenkov, with interests ranging from oil to telecommunications, rides in a Legacy. Alexei Miller, chief executive officer of Gazprom, the world’s largest natural gas producer, prefers a Dassault Falcon 900.

“You know, if you have $100 million or $1 billion, it doesn’t create a big difference,” said Felix Lubashevsky, chief executive officer of oil-field-services provider Integra Group Holdings. “You may get some Global Express jet for $40 million if you’re a billionaire,” and people with less money may “get some cheap plane for $6 million.”

Some Russians don’t consider a jet a luxury.

“There are things that are necessary, and there are so-called toys,” says vodka billionaire Rustam Tariko, who owns a Boeing jet.

“Security has become tighter, you are losing time, there may be no seats left, so I wouldn’t view a plane as a piece of luxury if you are doing business around the world.”

Russians who buy flying offices usually go for the best and biggest, fitted with the most sophisticated facilities and technology, Bakhtin said. The customers spend up to 20 percent more on top of the jet’s original price for the interior and communications package, he said.

While private jet clients ask about security equipment, they don’t display over-the-top fashion ostentation in outfitting planes.

“There is no intention to have gold all over, like with Arab sheiks,” Bakhtin said. “It has to be high-quality and very functional.”

Bombardier’s Horner agrees: “They are extremely tasteful and sophisticated. Some of the very nicest completions I have seen have been for Russian customers.”