AL-31F Engine Market and Prospects of Russian Arms Exports

Konstantin MAKIENKO

Over the four years that followed the 1997-1998 crisis in the system of its military-technical cooperation (MTC), Russia has been steadily boosting arms exports. While deliveries stood at $2.6 billion in 1998, they rose to $3.4 billion in 1999, $3.68 billion in 2000, and $3.7 billion in 2001. Preliminary estimates show that, in 2002, deliveries may surpass the $4 bil­lion mark for the first time ever.

Aircraft subsystems and components and Russian arms exports

Success over the past three years is owed largely to major contracts for deliveries of heavy fighter aircraft of the Su-27/30 series to China and In­dia. The annual export of such aircraft in 2001 and 2002 equaled 50-60 units, and brought in about $1.5 billion. The trend will continue for two or three more years as major delivery con­tracts with China and India are completed.

However, there is a common understanding in the community of Russian arms traders and ex­perts, that the market potential of the Su-27 and Su-30 will fall rapidly after the fulfillment of current contracts in 2004. The relative satu­ration of the air forces of Russia's two key cus­tomers on the world arms market - China and India - with heavy fighters and the completion of R&D on serious competitors such as the F/A-18E/F, Rafale and Eurofighter multi-use fighters will further aggravate the situation.

In general, it should be noted that the structure of international arms transfers will change sig­nificantly given the continuation of current ten­dencies. Aircraft assembly technologies are be­coming available to new aircraft-making coun­tries due to the spread of offset deals and li­cense agreements. For instance, the United States has agreed to share the production tech­nology of its most commercially successful F-16 fighter with Turkey, South Korea and Japan. Furthermore, Turkey was not only given the right to assemble fighters for its own Air Force but also to export them to Egypt and even Greece. In the hope of winning a Brazilian Air Force tender for 20-24 fourth-generation fight­ers, France has announced that, if the Dassault Company wins, Mirage 2000-5Br fighters will be manufactured at a facility of the Brazilian Embraer Company. The European consortium EADS, which produces the Eurofighter, does not even intend to manufacture warplanes in Europe if it receives export contracts for them. The consortium's business plans are based on the idea that the fighters will be assembled in the consumer-countries.

Simultaneously, major economic powers, espe­cially in East Asia, are trying to launch their own programs for designing and manufacturing warplanes, with or without foreign assistance. The greatest progress in this direction has been made by China (F-10, FC-1 and other projects), Taiwan (IDF/Ching-kuo), South Korea (KTX-50 Golden Eagle), and India (LCA). None of the fighters, except for the Chinese ones, have serious export potential, but the implementation of the projects will decrease reliance on imports and consequently lead to a certain contraction of the market.  

Russia is following the general worldwide ten­dency of the arms market. Having sold rela­tively small quantities of Su-27SK/UBK air superiority fighters and trainers and Su-30K multi-use fighters to China and India in the early- and mid-1990s, it signed license produc­tion agreements with both partners. In 1996, it concluded a $2.2-billion license contract that gave China the right to assemble 200 Su-27SK/J-11 air superiority fighters at its plant in Shenyang. In December 2000, it signed a $3.3 billion deal with India on the production of 140 Su-30MKI multi-use fighters at the HAL corporation plant in Nasik.

Thus Russia's export policy obeys the general world trend of transferring aircraft production technologies to clients who have acquired sig­nificant quantities of combat aircraft systems. If the tendency continues, the traditional warplane manufacturing countries will inevitably be ousted by new aircraft-making nations to more high-tech niches such as R&D, the production of high-tech assembly parts, subsystems and air-borne weaponry. This will be particularly ap­parent in Russia's case, since its main clients - China and India - already have relatively well-developed domestic aircraft industries.

It is likely that in the foreseeable future Russia will retain technological leadership in at least two market segments: the development and pro­duction of arms control systems for fighter air­craft and first of all the most complicated and essential system of advanced aircraft - the on­board radar system, and the production of fighter aircraft engines. India and, to some ex­tent, China currently lack the necessary scien­tific and technological potential and experience to achieve self-sufficiency in these spheres. Thus, the stability of Russian arms exports in the medium term will directly depend on ex­ports of radar equipment and engines, after the market potential of heavy aircraft platforms of the fourth generation starts declining and before R&D on advanced aircraft systems is completed.

The segmentation of the AL-31F/FP en­gine market

The market for aircraft engines depends above all on the export of the aircraft themselves. Fi­nancial flows generated on the engine market are marked by high stability and inertia. We may assume the following about the segmenta­tion of the AL-31F engine market without tak­ing into account the price of maintenance ser­vices, repairs or upgrading:

First, AL-31F engines are delivered to China, India and Vietnam along with big batches of Su-27SK/UBK, Su-30K, Su-30MKK and Su-30MKI fighters.

Table 1. Estimated price of AL-31F engines delivered through 2002 under contracts for Su-27/30 series fighters*

Importer	Subject of transfer	Transfer year	Number of engines	Estimated price, mln USD
China	26 Su-27S?/UB?s	1992	52	145
China	22 Su-27SK/UB?s	1995	44	125
Vietnam	14 Su-27S?/UB?s**	1994-1995	28	80
India	8 Su-30?s	1997	16	45
India	10 Su-30?s	1999	20	56
China	28 Su-27UBKs	2000-2002	56	155
China	57 Su-30M??s	2000-2002	114	320
India	10 Su-30MKIs	2002	20	60
Total	175		350	986

Source: Konstantin Makienko, "Military-technical cooperation between Russia and China in 1992-2002: results, tendencies and prospects" (Report #2, Moscow office of the Center for Defense Information), Moscow, Gendalf, 2002.
Notes: * deliveries from Russian Defense Ministry stocks not included
** including the additional delivery of two Su-27UBKs to compensate for the ones lost in the crash of an An-124 aircraft in December 1997

Secondly, a certain number of reserve engines is generally delivered together with big consign­ments or shortly thereafter. Then, maintenance services and repairs and, after some time, engine replacement are demanded throughout the ser­vice life of the aircraft - up to three engines are usually changed during this term.

Thirdly, a separate and ample market will emerge with the beginning of licensed produc­tion of Su-27SKs in China and Su-30MKIs in India.

Fourthly, there is additional demand for engines in China for its program of developing the na­tional fourth-generation F-10 light fighter.

Engines delivered under large-scale con­tracts

Reports of deliveries made through 2002 and planned transfers of large quantities of aircraft of the Su-27/30 family permit a relatively ac­curate estimate of this segment of the AL-31F engine market. We use the average price of $2.8 million per engine. The actual price fluctuates between $2.7 million and $3 million, but some of the payments, especially in the early 1990s, were made by commodity deliveries or on a clearing basis. Twenty eight Su-27UBK combat trainers were delivered to China in 2000-2002 by way of payment of Russian government debts. We estimate the price of AL-31FP en­gines for Su-30MKIs at $3 million.

It should be noted that the standard interna­tional practice is to deliver 30% of reserve en­gines along with a commercial batch. There has been no information in the Russian press about such deliveries, but if we assume that engines were delivered on such a scale - either along with commercial consignments or shortly there­after - the delivery of the 350 AL-31F engines to China, India and Vietnam installed on air­craft would have been followed by the shipment of approximately 100 engines, a value of up to $280 million. With the engines being used in the mountain conditions of high humidity and temperatures, and with Chinese and Indian pi­lots currently lacking the necessary experience

Table 2. Estimated price of AL-31F/FP engines assigned for transfer under known delivery contracts*

Importer	Subject of contract	Year of contract	Assumed delivery year	Number of engines	Price, mln USD
China	28 Su-30???s**	2003	2003-2004	56	156
China	19 Su-30MKKs***	2001	2003	38	106
India	22 Su-30??Is	1996	2002-2004	44	123
Total	69			138	385

Source: Konstantin Makienko, "Military-technical cooperation between Russia and China in 1992-2002: results, tendencies and prospects" (Report #2, Moscow office of the Center for Defense Information), Moscow, Gendalf, 2002; Konstantin Lantratov, "Kitaisky flot budet usilen rossiskimi istrebitelyami", Kommersant, 25.01.2003.

Notes: * As of the beginning of 2003

** For PLA Navy

*** Remaining commitments under 2001 contracts

for piloting fighters of the Su-27/30 series, we may assume that the service life of the engines will be quite short. Thus we can be even more certain that additional engines will be delivered.

Engines delivered under license contracts

There is reliable information available about two agreements on the licensed production of fighters of the Su-27/30 series abroad: with China on the manufacture of 200 Su-27SKs in Shenyang and with India on the production of

140 multirole Su-30MKIs at the HAL corporation facility in Nasik.

It is important that the license agreement with China does not provide for the transfer of AL-31F engine production technology. Hence, J-11 fighters of Chinese make will be equipped with engines delivered from Russia. Some easy calculations show that, without taking reserve stocks into account, the assembly of 200 units requires at least 400 engines. Assuming that the average price of an AL-31F engine is $2.8 million, the program as a whole is worth $1.12 billion.

It is much more difficult to evaluate the AL-31FP engine deliveries to India under the license contract. In the first place, we do not know the price of this engine, which has a deflecting thrust vector and a new control system, and is therefore more expensive. More importantly, under the license contract, India received the right to manufacture the engine at its own facilities. The Ufa Engine Production Association is responsible for this part of the contract. The price of the engine component of the contract is unknown. Theoretically, it should constitute no less than 20% of the entire contract. In this case this should be about $600 million. If the agreement implies a deep transfer of technology, assistance in organizing production, and the delivery of equipment, the actual sum is likely to be larger, since it is more difficult to organize engine production than aircraft assembly. The depth of the license is also unknown, adding to the uncertainty. If the period during which India receives engines directly from Ufa is long, and production is limited to screwdriver-type assembly, the added value generated in India will remain insignificant.

Thus, even the most conservative estimate of the engine deliveries and the transfer of technologies and components under the two license contracts runs to $1.7 billion. We can assume with a high degree of certainty that the actual figure will be much bigger.

Engine deliveries for national programs

The third, and potentially largest market segment of the AL-31 series engine market, is the delivery or licensed production within the framework of China's and India's national programs to develop light fighters meeting fourth-generation requirements.

We already know that China has chosen the AL-31F engine modification with the low-set unit arrangement - the AL-31FN - for its J-10 light fighter, developed from Israel's Lavi project. The Russian press has reported a contract for 300 such engines. Sometime in 2005-2007, when the fleet of Su-27/30/J-11 heavy fighters reaches 350 units, China will need to manufacture 600-800 fourth-generation light fighters to balance its Air Force, not counting probable exports (primarily to Pakistan and Iran). This means that total demand will reach 1,000 AL-31FN engines at the nominal price of $2.8 billion. It is clear that China is unlikely to import such quantities of engines, especially after the license for their production has been sold to India. Therefore, we can expect that, within a few years, when the question of launching the large-scale production of J-10 appears on the agenda, China will want to acquire the right to assemble AL-31F or AL-31FN engines at its own facilities. A less favorable option for Russia is that China will manage to develop its own analog of AL-31. However, even in this case, Russia will be able to deliver up to 300 contract engines and probably individual high-tech components for the Chinese analogs.

It is less likely that AL-31Fs will be installed on India's LCA fighters. First of all, India is trying to develop its own Kaveri engine. Its chances are poor, but that does not greatly improve the outlook for AL-31F. The problem is that the LCA project has dragged on for too long and, as a result, the prototype has grown obsolete before the beginning of its serial production and even before the end of its testing. Given India's plans to import large quantities of Su-30MKI multi-use fighters, MiG-29K naval fighters and Mirage 2000s, the scale of funding for the LCA project rules out the possibility of any serial production in the near future.

Thus, if reports about the contract for 300 AL-31FN engines are true, at present we can assume with a high degree of certainty that deliveries of engines and their components, combined with the possible transfer of documentation and technologies for the production of AL-31Fs in China for its national J-10 fighter, may reach $800-850 million.

Market of AL-31F upgrading

The AL-31F engine was developed in the mid-1970s for fighters with a takeoff weigh of 23 tonnes and maximum takeoff weight of 28 tonnes. Hence two engines with a maximum thrust of 7.8 tonnes and afterburning thrust of 12.5 tonnes guaranteed Su-27 interceptors a fairly good thrust-to-weight ratio. Later the Sukhoi Design Bureau derived a number of upgraded modifications with greater capabilities from the basic model. Moreover, in this sense Su-27 not simply shared the fate of the majority of successful fighters of the third and fourth generations that went through several stages of upgrading but proved to be a very flexible aircraft with a relatively ample advancement potential. Traditionally such advancement implies the enhancement of the strike potential and the addition of a second pilot. Clearly this implies an increase in the regular and maximum takeoff weight of the aircraft. On the average during the lifetime of a fighter family the weight grows at the rate of one percent a year and the Su-27/30 series definitely fits the pattern. The general parameters of aircraft of this series are shown in Table 3.

It is paradoxical that while the combat capabilities of Su-27/30 fighters have been dynamically boosted, efforts to enhance the thrust of AL-31F engines have been lagging behind badly. As a result such a crucial parameter for aircraft of the fourth generation as thrust-to-weight ratio is unsatisfactory in the latest modifications of Su-30. Moreover, the fact that in India and China Su-30MKI and Su-30MKK are used in a hot and humid environment and often in mountainous conditions makes things even worse. These conditions further undermine the thrust-to-weight ratio of the aircraft delivered of foreign customers.

This alone creates sufficient prerequisites for replacing AL-31F engines with more powerful ones in four plus generation fighters delivered to China and India in the foreseeable future. Such a replacement may be conducted simultaneously and in a package with building up the computer capabilities of onboard radioelectornic systems and offering new air-borne weaponry. Russian upgrading programs should offer an edge over Israeli projects sponging on Russian platforms.

In addition to adjusting Su-30MKI and Su-30MKK to modern thrust-to-weigh ratio requirements the engine thrust enhancement may come handy in the context of the probable integration of longer range and consequently heavier weapons, especially of the air-to-surface class. The PJ-10 3-tonne anti-ship missile may become such a weapon for the Indian fighters and the air-borne version of the Moskit (SS-N-22 Sunburn) ship-to-ship missile for Chinese. In general Russia should launch work now to offer competitive packages of upgrading fighters delivered to China and India with the enhancement of their energy capabilities as their crucial component.

The market of AL-31F engines with an enhanced thrust is not limited to the Su-30MKI aircraft sold under delivery or license contracts. It seems that one of the greatest technical risks of China's ambitions program of developing the F-10 light fighter is the insufficient capacity of the AL-31F engine. Its takeoff weight should amount to 12-13 tonnes. There have also been reports that its maximum weight may reach 20 tonnes. If the former reports are true, F-10 will come dangerously close to the niche already occupied by the cheaper and fairly successful fighter FC-1 secured by Pakistani orders. However, if the latter reports are true the thrust of AL-31FN is absolutely insufficient to guarantee a proper thrust-to-weight ratio to F-10 at the very beginning of its life while its future development will imply the growth of its weight. Being an approximate analog (in fact a deep overhaul) of the American F-16 fighter the Chinese plane should also have engines comparable in thrust. It should be said that the latest modification of F-16 block 60 with a maximum takeoff weight of 23 tonnes will use

Table 3. Parameters of Su-27/30 family aircraft

Source: A.V. Fomin. "Su-27. Istoriya Istrebitelya,"Moscow, Intervestnik, 1999, p. 251.

F100-PW-229 or F110-GE-129 engines with a thrust of about 14.5 tonnes. In the future the F-16C/D block 60 aircraft may employ the Enhanced Fighter Engine developed under the F110-GE-129EFE program with a thrust of about 15.4 tonnes and the possibility of further raising it to 16.3 tonnes.

Thus there are at least two market niches for more powerful engines of the AL-31F family - the latest and heaviest export modifications of Su-30MK - Su-30MKK (76 units ordered and delivered) and Su-30MKI (10 delivered, 22 ordered under a delivery contract and 140 under license agreement). In addition the vast market of domestic single-engine fighters is also quite likely to respond positively to the appearance of a more powerful Russian engine than AL-31F.

Conclusions

The following conclusions can be made about market volumes of these engines in the 1990s and in the near future, based on the most conservative estimates of the price of the AL-31F and its modifications, and the demand of the Chinese and Indian Air Forces for aircraft of the Su-27/30 series: 

• The nominal price of engines transferred in the framework of contracts completed in the 1990s was $980 million. The price of engines transferred in addition to the delivery contracts is estimated at up to $280 million.

• According to open sources, delivery contracts provide for the transfer of 138 AL-31F and AL-31FP engines, worth up to $385 million, in 2003-2005.

• The biggest revenues are expected from the license contracts for the production of J-11s in China and Su-30MKIs in India. The minimal price of the engine component of the deals is about $1.7 billion.

• China's minimal need for AL-31FN engines for launching the production of the J-10 light fighter is 300 units, worth $850 million. Production on a larger scale will require the acquisition of a license for the manufacture of AL-31FN engines at local facilities or the development of a Chinese analog of the engine.

• Thus, even according to the most conservative estimates, the AL-31 engine market in the coming decade may run up to some $3 billion.