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2008 Revenue Up 21% at Russia’s UAC

MOSCOW --- The House of the Government housed a meeting of the Board of Directors of the United Aircraft Corporation that was led by Sergei Ivanov, Deputy Chairman of the Russian Government, and Chairman of the UAC’s Board of Directors. Topics on the agenda included UAC 2008 operational results, production plan for 2009-2012, technical renovation of UAC enterprises, among others.

In view of the impending UAC Annual Shareholders Meeting, the Board of Directors preliminarily approved the UAC’s 2008 annual report and respective financial accounts, and recommended the shareholders of the Corporation to approve these documents as well.

The Board of Directors expressed satisfaction with the fact that the companies fully integrated into the UAC’s corporate structure increased their production output in 2008 and raised their consolidated income by 21%.

According to preliminary data by Russian accounting standards, in 2008 the group of companies generated income of Rouble 85.174 billion against 70.592 a year before. Importantly, the dynamics of UAC’s growth exceeded the industry average. This fact is due to both high volumes of military exports and improving efficiency of UAC’s industrial system.

The Board of Directors has also positively noted a considerable growth in income of UAC as the head company, at Rouble 2.47 billion in 2008 against Rouble 27.1 million a year before. This rise is largely attributable to the more active part that UAC had played in research and development programs on future aircraft projects initiated by the Ministry for Industry and Trade of the Russian Federation.

Among other topics on the agenda was the new production plan for 2009-2012 for UAC member enterprises. It calls for construction of 118 regional jets, 58 narrow body airliners of the Tupolev Tu-204/214 family and 9 Ilyushin Il-96 wide body quads.

UAC member enterprises should assemble a total of no less than 196 civil aircraft in 2009-2012, including 22 this year. The need to revise existing production plans was caused by the impact of the world-wide financial crisis. Continuing downturn in passenger traffic by air leads to lesser number of orders being placed for new passenger and cargo aircraft. Despite cuts, the revised UAC production plan provides for an increase in output of new jetliners this year in comparison with the previous one. Furthermore, figures for military and special purpose aircraft in the UAC product range were not changed.

The Board of Directors also addressed technical renovation issues, with the respective program covering the period from 2009 to 2015. The main goal of the program is to provide for fulfillment of the production plans on new jetliners, air lifters, combat and special purpose aircraft, as well as plans on modernization and repair of the Strategic Aviation assets. Besides, the program provides for improving economic efficiency and competitiveness of local manufacturers. The technical renovation plan is put together taking account respective plans prepared earlier by all UAC member enterprises.

When discussing the revised production plan, members of the Board of Directors expressed their concern over existing risks pertaining to the financial side of the program. They instructed responsible UAC departments to put together a system of measures that would tackle impacts of the world-wide crisis. The Board of Directors acknowledged the need to introduce necessary corrections into production plans of UAC member enterprises on a yearly basis, and the need to follow a one-year planning practice. UAC’s top management was instructed to prepare, in February 2010, a report on execution of the 2009 plans, and a draft plan for 2010-2013.

The Board of Directors has also approved a number deals with interest with VEB and VTB banks. Materialization of these deals will allow UAC to resolve issues with funding on credit agreements entered earlier.

Targeting a quality optimization of UAC’s organizational structure and making it better suited to new challenges, the Board of Directors approved an updated organizational structure of the Corporation. The position of Executive Vice President for Corporate Development has been abolished. At the same time, the following new positions have been introduced: Vice President for Corporate Development and Control, Vice President for Control Over Programs and Developments, Vice President for Corporate Finance and Vice President for Administrative Issues. Eight departments in the corporate structure were abolished, three newly created and six changed their way of reporting.

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Meeting of the Board of Directors of UAC