OREANDA-NEWS. May 24, 2011. Voronezh Aircraft Production Association (VASO), the Russian producer of AN-148 regional jet cut its production target to 5 planes in 2011, local media reported on May 23. In a separate news, the CEO of the Siberia Airlines (Russia) rejected the recent information that it had signed a letter of intent with Ilyushin Finance Company, the principal leasing company for AN-148 program, for the delivery of 15 AN-148.

Millennium Capital considers the news as slightly NEGATIVE for Motor Sich which is a principal engine supplier for the AN-148 program. With production cut first at Antonov and now at VASO the near-term outlook for the program has deteriorated but that could have been expected given the unfortunate crash of one of the planes earlier in the year and inability of Antonov to close its WC shortfalls. Previously we expected 12 AN-148 aircrafts to be build in 2011 but that number will have to go down to just 8 units now. This, in turn, imprints on the LT prospects of the program as sluggish production ramp does not bode well for the commercial appeal of the plane since it implies higher cost of maintenance for the carriers and high risks for aftermarket. Meanwhile, high lease payments continue to be a problem for AN-148 producers. Nevertheless, our outlook on MSICH does not suffer much from the news flow as believe we have assumed a properly conservative stance on the AN-148 program before.