Every year, transnational corporations engage hundreds of Ukrainian designers in their projects. How does the business of private designer bureaus operate in Ukraine?
Traveling in a comfortable Boeing-737, you, probably, could hardly imagine that some parts of the wings and fuselage of the world’s most popular airliner could be designed in Kyiv. Every year, Ukrainian designers earn tens of millions of dollars on selling their services to giants like Boeing and Airbus.
One of the largest players in this market is Progresstech-Ukraine. Seven hundred Ukrainian engineers design various parts for Boeing, Airbus and Bombardier aircraft.
Among the company’s customers from the automotive industry are Tesla and Daimler, while the aerospace industry is represented by NASA.
In his interview to LIGA.net, Progresstech-Ukraine CEO Andrii Fialkovskyi speaks about how Ukrainian private designer bureaus have learned to sell their services to foreign giants, is there any future for the Hyperloop project in Ukraine, and why our country is no longer building new aircraft.
How to become a partner of Boeing and Airbus
What is Progresstech Group today?
The history of our group began with the first company founded in 1991 during the Soviet time. Today, it includes companies in the United States, France, United Kingdom, Saudi Arabia, Poland, Ukraine, Armenia, Lithuania and Russia. Our company provides engineering services in the aircraft manufacturing and automotive industries and in airport, infrastructure, building and structure design.
In the aircraft manufacture, we design fuselage, wing, many units, fire extinguishing systems, networks, avionics – in fact, everything. Today, our key customer is Boeing Corporation, engaging almost 600 our engineers in its projects.
What is your share of the international engineering services market?
This market is too segmented. We work with almost all aircraft manufacturers in the world. In total, our group has over 2000 engineers. Ukraine is one of the largest centers. About 700 engineers work in four offices in Kyiv, Kharkiv and Lviv.
Who are your competitors?
We have no competitors in Ukraine. The entire competition comes mainly from the customer’s location. When we work with Airbus, our main competitors are in France and Germany. If we’re talking about the U.S. and Boeing, our main competitors are their domestic companies. Globally, the main competitors are Indians.
And what about China?
China wants to develop an own aircraft manufacturing industry. While India buys almost everything abroad, China is trying to build aircraft at home. As a manufacturer, it is poised to become a large competitor for the existing global aircraft manufacturers in the future.
How did Ukrainian designers learn to sell their services to companies like Boeing and Airbus?
It was a lengthy process. For example, it took us four years to sign a contract with Boeing: it wasn’t easy for us to convince the customer that our engineers could deliver a quality product and that our company would stay operational regardless of any political or economic upheavals in the country.
By the way, what really helped us establish a contact with Boeing was the existence of a strong engineering school in Ukraine, and also, two names: Sikorsky and Timoshenko. Igor Sikorsky was a graduate of Kyiv Polytechnic Institute and a world-renowned helicopter designer, while Stephen (Stepan) Timoshenko read lectures at Kyiv Polytechnic Institute and is the father of strength of materials, a science of paramount importance for aviation.
When Boeing’s Chief Engineer visited Ukraine, the first thing he did was to come to the monument to Timoshenko, because for them, he is a guru on whose calculations all modern airplanes are built.
Your website says that you are the sole “contract house” for Boeing in Ukraine. What does that mean?
According to our customer’s terminology, a “contract house” is a company selected in a particular region to handle projects in one or several areas of cooperation. Our engineers participate in creating new and supporting manufacture of the entire existing range of airplanes. We also help Boeing with servicing aircraft operated by airline companies worldwide, including maintenance, ongoing and urgent repairs.
Besides designers, we employ specialists in strength and fatigue calculations, electricians and technology specialists, specialists in materials science and in fire extinguishing systems, hydraulics and many other fields. Recently, we opened a new area: development of specialized software for aviation and air navigation.
How many centers like yours does Boeing have worldwide?
Outside the United States, there are not many large engineering centers like ours – a dozen at the most, in India, China, Australia, Russia, UAE and Brazil. But Boeing has a lot of providers of engineering services: in 2017, there were more than 15,000 active providers all over the world, and some of them provide engineering services.
When Boeing’s Chief Engineer visited Ukraine, the first thing he did was to come to the monument to Timoshenko, because for them, he is a guru on whose calculations all modern airplanes are built
You have been working with Boeing since 2013. How large is the Ukrainian component in Boeing aircraft today?
It’s hard to tell how large the component is… In terms of the number of people involved in the creation of Boeing aircraft worldwide, it’s not more than 1%.
There is another way of assessing it: engaging Ukrainian engineers helps reduce aircraft design, manufacturing and maintenance costs. To get the same profit but without the Ukrainian component, the corporation would have had to sell some 20 aircraft of the simplest, 737 series more per year.
Why does Boeing want to outsource the engineering work to Ukraine?
We were able to convince them that, given the global shortage of engineering resources, they can receive services of the same quality in Ukraine as in the United States, but at a lesser cost. It’s not a secret that all aircraft manufacturers employ a lot of Ukrainian engineers, and they do a very good job. So, why would they want to emigrate, if they can easily do this job at home?
Who’s more expensive: Ukrainians, Indians or Americans?
How much more expensive is an American engineer than a Ukrainian one?
Several times more. But the comparison is not quite correct, because there are various fields of specialization, engineering experience, employment terms, different taxation and different economies in our countries.
You said that Indian engineers are your main competitors. Are your services more expensive?
Yes, the cost of services in Ukraine is higher than in India, as well as the salaries and qualification of our engineers.
How specialists are trained? Where do you get your personnel?
When we started in 2007, we were looking for specialists in the market. And I mean “market” in the literal sense. They were former Soviet engineers who had to work outside the field of their expertise: as market vendors, making furniture… We even took a few guys from McDonald’s.
At the second stage, we began bringing back engineers who once emigrated. We brought back a lot of people who went to work in Russia’s aerospace industry. Today, about 70 out of the 700 persons working at our company have foreign work experience.
The third, educational area was launched six years ago, when we began rapidly growing. Today, we have three academic classes at Sikorsky Kyiv Polytechnic Institute, a dual master’s program, an academic program at Kharkiv Institute of Aviation; also, we are in talks with the National University of Aviation, and have our own courses for graduates of our programs at universities and for other engineers we hire.
How much do you spend on education programs?
About a million hryvnias a year.
Do you lure people over from Antonov?
Our stance is that luring people over from our aviation giant is wrong, so we don’t do it.
We often subcontract Antonov for certain orders. For example, we might have short-term projects for half a year or a year. In that case, it doesn’t make sense to hire people. We invite companies like Antonov and outsource part of the work to them. That’s why we don’t need to lure people over – we think it’s wrong.
We often subcontract Antonov for certain orders. Our stance is that luring people over from our aviation giant is wrong, so we don’t do it.
What projects are you working on together?
We are friends with that company, but for the moment, we have no joint contracts.
What is your largest expense item?
Labor, amounting to 70% of all costs. And our people also pay taxes and spend their earnings in Ukraine.
What salary can an engineer count on at your company?
A competitive one. The base salary starts at 15,000 hryvnias. We’re talking about a university graduate starting to work on the first project. As his competence grows, his salary would, as a rule, double over 3-5 years.
How a Ukrainian company can join Elon Musk’s projects
Is working for Boeing your main area of activity?
No. We work with other aircraft manufacturers as well, for example, Airbus. Also, we provide similar engineering services in other industries, such as mechanical engineering.
Our group has a Ukrainian company providing research and engineering services to a number of projects for NASA. In the automotive industry, we work with Daimler and Tesla.
We also have a large design department specializing in design of airports, aerodromes and their infrastructure, but in addition, it handles a lot of civil and industrial construction projects. We have a laboratory, the only one of its kind in Ukraine, that measures strength and evenness of aerodrome surfaces using a nondestructive testing method.
What do you do for Tesla and Daimler?
Seatback strength calculations. We were tasked with creating a structure preventing fractures and cracks in the event of a collision. This technology is currently used in Tesla vehicles.
As for Daimler, we have developed the radiator part and body elongation for the new Sprinter model.
How you were able to reach Elon Musk’s company? Or it were them who found you?
As a rule, contacts are established at various trade fairs or in the course of communication. If we are capable of solving nonconventional problems, why wouldn’t we talk about it?
Did ZAZ ask for your help with designing a new car?
No, but we tried to do business with KrAZ. Wanted to use their production base. The idea was to create a modular bus that could be assembled, like a construction set, in various configurations depending on customer’s requirements. But after the outbreak of conflict in Eastern Ukraine, the idea, unfortunately, went for naught. KrAZ received government orders and focused on their area of specialization, even though we were prepared to invest in a prototype and then in the production process.
Is there future for Ukrainian aircraft manufacturing?
Why Ukraine does not design new aircraft anymore?
Most likely, it all began with the rupture of economic ties after breakup of the Soviet Union and the subsequent economic collapse that “zeroed out” orders for our aircraft. Another reason is that Ukraine by itself is economically weak to maintain the aircraft manufacturing industry on its own, without participating in international cooperation.
How do you see the future of Ukrainian aircraft manufacturing?
Differently. There is the foresight methodology that takes into account various scenarios of how events would unfold, and unfortunately, the probability of us losing our aircraft manufacturing industry is very high.
Antonov has historically been building aircraft according to the principle: “make first, then see how it sells”. The world doesn’t use this approach. The company needs to change its mindset, not just taking pride in its past but also integrating into the present and thinking about the future.
On the other hand, Ukraine successfully builds small aircraft and, given certain legislative changes, may become a serious player in the aircraft maintenance, modernization and conversion market. And of course, our country is one of the leading providers of engineering services.
Your opinion: what prevents Antonov Company from launching serial aircraft production?
Antonov has several problems. Going by an old Soviet habit, the company tries to do all work by themselves. No international cooperation of any kind was ever on the agenda. Boeing has 20,000 providers, Airbus up to 18,000. Antonov has between 160 and 210. The thought about a risk-dividing partnership has never crossed anybody’s mind, either.
How does global aviation cooperation work? Marketing specialists, working jointly with airline companies, find a niche for a particular aircraft type. Then, they decide on what technical characteristics an airliner must have to fill that niche. They devise a concept and run it by airline companies – potential customers. Contracts are signed for several dozen aircraft worth several billion dollars, stating that the aircraft will be delivered in 7-10 years. And only after that would a manufacturer start designing it, and at the same time, while working on the design, selling it to other airline companies.
As for Antonov, they have historically been building aircraft according to the principle: “make first, then see how it sells”. The world doesn’t use this approach.
Another problem is that Antonov offers almost no maintenance service for its old aircraft flying all over the world, and when it does, the service is bad. Even though there is a very large number of these aircraft. All countries with highland areas use Antonov aircraft, but to repair and maintain these airplanes, an extensive network of service centers is required. Antonov has very few of these centers.
Unfortunately, the probability of Ukraine losing its aircraft manufacturing industry is very high.
Do you have a recipe how to revive Antonov?
If Antonov were to place emphasis upon maintenance and modification of the existing fleet, it would’ve helped the company generate a steady cash flow, establish production of spare parts and create bases of presence worldwide. After that, the company could use these bases to negotiate with companies already operating Antonov aircraft the creation of a new aircraft design these companies need. And only after that should they start building a new aircraft, jointly with the future operators.
Antonov needs to change its mindset, not just taking pride in its past but also integrating into the present and thinking about the future. They have to change procedures, both at the company and at the government levels, because the bureaucracy there is so rampant it might seem that the Soviet Union is still alive. They need to offer competitive servicing prices, so that the aircraft operators wouldn’t have to face a dilemma: to buy a new Embraer or repair an old AN. Surely, to repair an AN. Today, these prices are quite comparable in many countries.
Do you see this business approach in actions of new managers who came to Antonov after 2013?
The company’s presidents come and go too frequently, so they simply have no time to make some fundamental changes.
Does the new AN-132 project with Saudi Arabia have prospects?
I will be very happy if it sees the light. We participated in the tender for design of the manufacturing plant in Saudi Arabia. Currently, the project is on hold and the timeframes have been postponed. If they announce the second tender, we’ll participate.
About the prospects of Hyperloop and Ukraine
The Minister of Infrastructure has announced the construction of a Hyperloop in Ukraine, and promised that this mode of transportation would be operational in five years’ time. Is it real? Were you engaged in this project?
No, we weren’t engaged in it. We are not specialists in railroad design. But during one meeting, I showed Vladimir Vladimirovich (Omelyan – editor’s note) a book titled The Arctic Bridge. It was published in 1959, and describes a train traveling between New York and Moscow inside a tube laid under the Arctic ice pack. It was almost 60 years ago (smiling).
Seriously, I’d be happy if it comes true. As part of the international cooperation, when Ukraine would be required to provide connection stations, power supply and land, it could be a strike of fortune. As experience proves, everything Elon Musk undertakes becomes a reality.
Denys Katsylo, Transport and Auto columnist
The article was originally published on Liga.net