*

Russia has repeatedly missed its plane-building targets

*

Western sanctions have starved Russia of spare aircraft

parts

*

Moving to domestic production will take years, says source

*

Russian industry is struggling with high interest rates

By Gleb Stolyarov and Alexander Marrow

Aug 8 (Reuters) - Russian aircraft makers have delivered

only one of 15 planned commercial jets this year, data from

Swiss aviation intelligence provider ch-aviation shows, as

sanctions on foreign components stall production and high

interest rates crimp investment.

Since Russia's February 2022 invasion of Ukraine, Western

sanctions have cut off access to foreign-made aircraft and spare

parts. With a fleet of more than 700 planes dominated by Airbus

and Boeing ( BA ) jets, Russian airlines now rely on

complex, indirect import routes to source critical components.

"There is no component base, no technology, no production

facilities, no engineers," said one Russian aviation industry

source, who declined to be named due to the sensitivity of the

matter. "To create all this from scratch takes years, if not

decades."

Given Russia's geographical challenges as the world's

largest country, it depends on commercial aircraft for domestic

freight and passenger transport across its 11 time zones.

Recent major incidents highlight an urgent need to prevent

the fleet degrading. In late July, a Soviet-era Antonov An-24,

built in 1976, crashed in the country's far east, killing all 48

people on board. Days later, flag carrier Aeroflot

grounded dozens of flights following a crippling cyberattack.

The aviation sector's struggles to become self-sufficient

are part of a broader industrial slowdown. Russia's factory

output contracted at its fastest pace since March 2022 in July,

according to Purchasing Managers' Index data, and industrial

growth continues to decelerate.

High interest rates have played a part in dwindling car

production, coal sector bankruptcies, slowing export volumes of

commodities like metals and oil products, as well as the missed

plane-building targets, officials and businesses have said,

contributing to slowing economic growth.

"Industry is being hit faster and harder by tight monetary

policy," said Dmitry Polevoy, head of investment at Astra Asset

Management, warning that the industrial sector was on the brink

of recession.

PRODUCTION DELAYS AND NEW TARGETS

In 2021, Russia added 52 new commercial aircraft to its

fleet - including 27 from Airbus, three from Boeing ( BA ), and 22

Sukhoi Superjets built with imported parts - for airlines

including Aeroflot, S7, Red Wings, Rossiya, and Ural Airlines,

data from ch-aviation shows.

Since then, only 13 new planes have been added: 12 Superjets

used by several Russian airlines and one Tupolev Tu-214, a

twin-engine, narrow-bodied jet designed for medium-haul flights,

the data showed.

The Tu-214 is being used by First Deputy Prime Minister

Denis Manturov, according to a person familiar with the matter,

FlightRadar24 data, and Russian media reports.

The government has repeatedly revised its production goals.

In mid-2024, it cut the 2024-2025 delivery target to 21 from 171

aircraft. Last month, officials said targets would be revised

again, citing high interest rates, which have made financing

more expensive and slowed production.

State conglomerate Rostec, which oversees production of the

Superjet-100s, Tupolev Tu-214s, Ilyushin passenger planes and

the new Yakovlev MC-21 jet, has struggled to meet deadlines.

Rostec CEO Sergei Chemezov told Reuters last year that

Russia would produce its own passenger planes, but delivery

dates have repeatedly slipped.

The MC-21 aircraft, built entirely with Russian-made parts,

was much heavier than the version built with imported parts,

reducing range and fuel efficiency - so airlines have been

reluctant to adopt it, according to the Russian aviation source.

On Tuesday, Chemezov told Prime Minister Mikhail Mishustin

that serial production of the MC-21, SJ-100, and IL-114 jets

would begin in 2026, two years later than originally planned.

United Aircraft Corporation, the Rostec subsidiary that

manages all the conglomerate's aircraft production, did not

respond to a request for comment.

SANCTIONS AND SUPPLY CHAIN

Despite efforts to localise production, Russia continues to

rely on foreign suppliers.

Customs data seen by Reuters shows that parts worth at least

$300,000 were imported in 2024 via intermediaries in Turkey,

China, Kyrgyzstan, and the UAE. These included components from

France's Safran, U.S. Honeywell ( HON ), and Britain's

Rolls-Royce. There is no evidence of these companies

having violated sanctions.

Russia has developed a system of parallel imports, allowing

goods to enter the country through third parties without the

manufacturer's knowledge or consent.

Safran and Rolls-Royce did not immediately respond to

requests for comment.

Honeywell ( HON ) said it is not providing any equipment, parts, or

products to any company in Russia and is "actively working to

identify and interrupt any possible diversion of our products

into Russia via third parties."

Russia is trying to solve a unique and "hypercomplex"

problem, Industry and Trade Minister Anton Alikhanov said last

month.

"No other country in the world produces fully

import-substituted planes," Alikhanov said.

Reduced aircraft supply while demand remains high is pushing

up prices for consumers, with ticket prices rising steadily

throughout 2023 and 2024, Rosstat data shows.

Meanwhile, Moscow has been forced to get creative, asking

airlines from Central Asian countries like Kazakhstan and

Uzbekistan to run domestic Russian routes.