Page 86 - RusRPTAug19

on the year to 37mn people. International passenger traffic grew 12.2% to 17.4mn people, while domestic traffic rose 6.2% to 19.6mn people. Sheremetyevo’s traffic rose 15.5% to 18.5mn people, Vnukovo’s
Rostec wants budget support for aircraft manufacturer. Rostec is requesting 300bn rubles ($4.75bn) to pay off subsidiary aircraft manufacturer United Aircraft Corporation's (UAC) debt obligations and recapitalize the company. The debt overhang from past order cycles is a significant drag on defense manufacturing. It's notable that UAC needs so much less for civilian production lines, but not a good look. Without another order expansion and improvements to efficiency — not the strong suit of any defense manufacturer looking to maximize costs for state orders — lack of profitability is a structural issue this won't change. Sergei Chemezov has done well for himself in Moscow, and is likely to get this money. As the budget accrues more revenues, someone will pitch raising defense spending again. He'll be there with Rostec, looking to make money on costs. The company is requesting these funds as quickly as possible to be spent over the next 3-5 years to keep UAC running. UAC is responsible for production of Tupolev, Ilyushin, and Sukhoi airliners, cargo planes, and military platforms. Estimates for needed financial support for civilian production run at 100bn rubles ($1.58bn) and 200bn rubles ($3.17bn rubles) for military production. UAC has spent heavily on is MC-21 narrow body jet design for Aeroflot, with estimated costs through 2025 running at 50bn rubles ($791.5 mn). Defense subsidiaries are slated to provide various fighter platforms to the Ministry of Defense, but the projects are expected to generate returns of only 3-5%, requiring financial support. UAC's Sukhoi-brand civilian production subsidiary does not require budget support.
9.1.4 Construction & Real estate sector news
Output in construction remains nearly flat from last year, having added just +0.1% y/y in June.
The number of Moscow construction permits has dropped almost 75% y/y, and 28% in comparison with 1H17, to 86 YTD, according to CIAN The increase in the number of construction permits last year created a high comparison base and showed developers' attempts to secure pipelines under the previous regulations by launching projects and reaching a certain construction stage by 1 July 2019. The exemptions were set at 6-30% of completion and 10% of sales, implying that almost all existing commercial projects are able to avoid escrow regulations and so see a smooth transition process in the coming years. In 1H19, the share of construction permits for the state under the renovation programme was 34%, strengthening the aforementioned trends and indicating to us that there is a robust focus on this initiative (a 7.5X surge y/y).
Moscow real estate completions up tripled in the first half of this year to 2.2mn sqm. Housing completions in Moscow tripled to 2.2mn sqm year-on- year in the first half of this year, according to Sergey Levkin, the head of the urban development department of Moscow, VTB Capital (VTBC) said in a note. State officials forecast growth in the sector of 13% y/y fro the full year to 4mn sqm. As bne IntelliNews has reported Moscow’s real estate sector is coming back to life. Residential is leading the charge on the back of falling interest rates and a rush to start projects this year before new rules that will ban pre- selling apartments come into effect later this year Moscow still accounts for three quarters (72%) of all the investment in Russia into real estate followed by
86 RUSSIA Country Report August 2019 www.intellinews.com