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Economic Analysis: Theory and Practice
 

Diversification of Aerospace corporations

Vol. 14, Iss. 9, MARCH 2015

PDF  Article PDF Version

Available online: 8 March 2015

Subject Heading: ANALYSIS OF COMPETITIVE ABILITY

JEL Classification: 

Pages: 2-14

Sobolev L.B. Moscow Aviation Institute (State University of Aerospace Technology), Moscow, Russian Federation
sobolevLB@yandex.ru

Kuprin I.L. Moscow Aviation Institute (State University of Aerospace Technology), Moscow, Russian Federation
tenoz@mail.ru

Importance The article includes a comparative analysis of diversification processes in aerospace corporations of the EU and Russia. It shows that EU corporations, as a rule, specialize in one of civil aircraft engineering sectors (the core business), have the combat air force division and a hi-tech business. This structure provides for economic stability of such corporations in the global highly competitive aviation market, growth of labor productivity and stock value. Furthermore, the governments of European States, despite the availability of serious American competitors, support competition, first of all, in the combat air force sector, ensuring the economy of budget resources of their countries. We propose to make use of this experience for structural reforms of the United Aircraft Corporation (UAC).
     Objectives The objective of the study is to increase the economic efficiency of the UAC.
     Methods We performed a comparative analysis of leading corporations' activity of the EU and Russia that are engaged in development and manufacture of aviation equipment.
     Results The analysis demonstrated that Western aerospace corporations, owing to competition and well-considered diversification provide a stable growth of economic indicators (total revenue, shareholder value, product modernization).
     Conclusions and Relevance We conclude that in conditions of tough competition in the global aircraft engineering market, it is necessary to refuse monopolization of Russian aircraft engineering, maintain internal competition, apply more serious approaches to diversification of aviation holdings, and to increase the transparency of the aviation business. Comparing the UАC with European aerospace corporations, it becomes obvious that the UАC has fulfilled its function as a collector of aviation assets, and, in its current role of the Russian monopolist, can hardly become competitive in the global aviation markets in the coming decade. We suggest creating two or three competing companies instead of the monopolist UАC. The core business of these companies should include manufacture of civil aircraft that are in demand in the domestic market, the combat air force division, and one highly profitable business, if possible.

Keywords: diversification, aerospace corporation, restructuring, shareholder value, United Aircraft Corporation, network enterprise

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