Managing Change from fallout of Political Risk:
Russian Commercial Aviation

Background: Political risk realized.
Following the break-up of the Soviet Union in the early 1990s, a crippling paralysis rapidly settled over most sectors of the economy. The ultimate political risk to a national economy had been realized – the entire collapse of a centralized management paradigm. Even basic services halted – tomato farms as well as police services could not get deliveries from suppliers, make payrolls, or collect from customers. Even such mundane activities in relatively non-integrated industries could be struck and struck hard by the lack of capital and basic finance. Vastly more complicated and capital intensive industries such as shipbuilding and aircraft manufacturing were throttled the same, but have been destined to much longer and more complicated recoveries. The domestic aircraft industry has been targeted as a “national treasure” industry of focused investment and restoration.
In global terms, the Soviet Union was indeed an aerospace superpower. Its engineering ability, productive organization and domestic national market had achieved a vertically integrated and complex product line covering all facets of aircraft markets – light aviation, cargo, military, rotary wing and passenger. Only the United States as a sovereign achieved the same. Europe only managed to retain global competitiveness by massive trans-national subsidies and cooperation in the form of EADS. However, in a global industry of truly leviathan corporations, Russian enterprises were muscle bound in other ways, trapped with products of narrow appeal and lacking in some key technological components not as heavily stressed in their domestic industry. Also keeping them bound were inflexibility in their economic system. Curbing their product appeal was the fact that in western markets,