Production Issues in Aircraft Industry Highlight Degradation of Russian Military-Industrial Complex

Publication: Eurasia Daily Monitor Volume: 21 Issue: 13

(Source: United Aircraft Corporation)

Executive Summary:

  • The United Aircraft Corporation (UAC) achieved a net profit of 6.1 billion rubles in the first half of 2023, compared to a net loss of 13.3 billion rubles loss during the same period in 2022.
  • Increased UAC revenue and salaries were largely attributed to growing arms procurement spending and higher advance government payments, but the rise in wages failed to cover rampant inflation adequately.
  • Moscow will struggle to sustain increased production despite the UAC’s reported 30-percent increase in tactical aviation production and 20-percent growth in Il-76 transport aircraft production—numbers that benefit from UAC starting at a low base of production.

The United Aircraft Corporation (UAC), a subsidiary of leading state-owned Russian military-industrial corporation Rostec, has recently published some fragmented data on the Russian industrial sector (UAC E-Disclosure Portal, accessed January 29). This data provides a supplementary insight into Russia’s military-industrial complex as complete annual statistics have yet to be released. The UAC data demonstrate that Moscow’s efforts to increase production rates have had modest results, largely explained by the low-base effect. Russian industry has seen no increase in the number of employees, and growing salaries hardly cover the inflation rate. Considering that the aircraft industry is one of Russia’s most advanced sectors, problems in aircraft production are indicative of deeper issues in Moscow’s military-industrial complex.

According to UAC data for the first half of 2023, the Russian corporation has earned a net profit for the first time in several years of 6.1 billion rubles ($71.6 million), compared to the 13.3 billion rubles ($194.2 million) in net losses for the same period in 2022. Revenue also grew significantly during this period, increasing to 188 billion rubles ($2.2 billion), compared to 117.8 billion rubles ($1.7 billion) in 2022 (Vedomosti, December 5, 2023; UAC E-Disclosure Portal, accessed January 29). This increase mostly came as a result Moscow’s growing arms procurement spending and increased advance payments. Since 2022, the Russian government has paid between 30 and 90 percent of defense contracts in advance. Before 2022, typical governmental advance payments were significantly lower than 30 percent (, January 25). It is unclear whether the UAC maintained a net profit from July to December 2023. 

Average UAC salaries increased by 17 percent, and some factories increased wages by 20 percent. For comparison, the United Engine Corporation, another subsidiary of Rostec that produces aircraft engines, increased average salaries by 17 percent, with some employees receiving a 30-percent raise (, November 20, 2023;, December 29, 2023). Even so, these increases hardly cover the typical Russian employee’s expenses amid rampant inflation (, January 22). This means that Russia’s aircraft industry, and presumably the entire military-industrial complex, cannot attract many new engineers and workers due to low wages and shortages of technical expertise. The dynamics of employee turnover, which took place in previous years and has been analyzed as a grave problem for Russian industry, remains the same (see EDM, January 16).

The lack of technical specialists continues to stunt production in Russia. The UAC declared that 42,000 employees, or “almost every second employee,” received advanced training during 2023. Much of this training was likely rushed and may not lead to lasting technical knowledge and ability. Additionally, the total number of UAC employees was 90,192 in 2022, which means the corporation was unable to increase its personnel pool during 2023, likely experiencing a slight decrease (, December 29, 2023;, accessed January 25).

The UAC reported a jump in production rates for aircraft critical to Russia’s war against Ukraine. According to UAC statistics, production of tactical aviation increased by 30 percent and production of Il-76 transport aircraft increased by 20 percent. This growth, however, derives from the low-base effect, rather than any real improvement in Russia’s production capacity. For example, the 20-percent increase in production of Il-76s means that the UAC supplied six aircraft of this type in 2023, up from five in 2022. Moreover, the production of six Il-76s annually has been the Kremlin’s target production rate for years. The same rate was planned for supply in 2019, with the UAC struggling to reach that goal until last year (Interfax, April 2, 2019;;, December 29, 2023).

The production rates of Su-34 fighter bombers provide another example of the low-base effect. In 2023, the UAC delivered three batches of Su-34s to the Russian Ministry of Defense. The typical batch contains two to four aircraft. Even if all three batches of 2023 contained four aircraft each, the total amount would not have exceeded 12 Su-34s. This amount is slightly higher when compared to the ten, six, and ten Su-34 bombers delivered in 2020, 2021, and 2022, respectively. However, that rate is similar to the annual production of Su-34s during the 2010s (TASS, June 8, 2020;, January 18, 2023;, November 22, 2023;, accessed January 25, 2024). In reality, the UAC did not effectively increase production, but rather restored the average annual production rate of Su-34 bombers after a decrease in the early 2020s.

Moscow seems intent on further increasing production rates, and current rates may be surpassed in the future. Any additional increase, nevertheless, will take more resources, many of which are currently in short supply. Thus, maintaining increased production rates will remain a complicated task. For example, facilities involved in the planned increase of civilian aircraft manufacturing by 2030 urgently needs almost 284 billion rubles ($3.2 billion) from the National Wealth Fund in addition to the 770 billion rubles ($8.65 billion) set aside from the federal budget in 2022 to even come close to meeting the Kremlin’s expectations (, June 27, 2022;, January 15). Official demands to further increase the production of combat aircraft and arms will likely exacerbate the government budget, as each currently relies on a considerable amount of additional funding.