You're reading: Antonov CEO clings to job as crisis deepens at aircraft firm

On Aug. 4, employees of Antonov, a state-run aircraft engineering firm, staged a protest near its headquarters on Kyiv’s Tupoleva Street after the government dismissed company president Dmytro Kiva on May 26.

Kiva was replaced with Sergiy Merenkov, a former Antonov employee and principal expert on the An-140 cargo and passenger model.The decision came from the Industrial Policy Ministry, a unit within the Cabinet of Ministers that is currently being merged with the Economy Ministry.

On Aug. 1, Merenkov tried entering the company’s corner office, but security guards didn’t let him in.

It wasn’t the first time that Antonov workers, led by the corporate trade union, publicly disagreed with Prime Minister Arseniy Yatsenyuk’s plans to replace Kiva.  On June 19, approximately 300 of the company’s reported 13,000 employees rallied near the Presidential Administration on Bankova Street.

One of Ukraine’s best known brands worldwide, Antonov has employed Kiva, 71, since 1964, and promoted him to his first senior position in 1979.

In company news releases, Kiva has contested his dismissal, citing a technicality whereby the Economy Ministry can only remove him from his executive chair. However, the Cabinet’s press service in an emailed statement emphasized that the Industrial Policy Ministry has all the power to make decisions regarding Antonov’s management. Kiva’s dismissal is shrouded behind a confidentiality agreement.

“Kiva has muddled three (executive) positions at Antonov – general director, president and chief constructing engineer – occupying all of them so it would be impossible to dismiss him. He made the management system extremely complicated,” a Cabinet member told the Kyiv Post, requesting anonymity because he is not authorized to speak publicly on the issue.

Kiva, whose son Oleksandr Kiva is his deputy, retained Roman Marchenko, a senior partner at Ilyashev & Partners law firm, to help him stay in office.

Oleg Malsky of Astapov Lawyers estimated Marchenko’s fee at $200-$400 per hour, while Sayenko Kharenko’s counsel Leonid Antonenko thinks Ilyashev & Partners charges as much as $15,000-$20,000 for a single court case.

As of now, it remains unclear whether Kiva pays Marchenko as a private citizen or as a company official, including the anti-Merenkov blogs published under his name on Ukrayinska Pravda, a popular news and opinion website.

Ilyashev & Partners, Antonov and Kiva failed to reply to the Kyiv Post’s inquiries on the issue. However, the official registry of Antonov’s procurements has not published any records of legal services being purchased since the beginning of the year.

Overall, Antonov had $400 million of revenue, but only $4.7 million of net profit last year after reporting very similar figures in 2012. 

Therefore, net profit margin – the share of income in company’s sales – hardly exceeds 1 percent.“This is a critically low figure,” comments Oleksiy Andriychenko, an aviation industry analyst at Art Capital, an investment house. “At this point, Antonov does not produce enough airplanes to stay afloat.”

For instance, major global aviation trend-maker Boeing’s net profit margin last year reached 9 percent with $7.9 billion in operating earnings.

“The (Antonov) plant is not working at full capacity,” Kiva told the Center for Transport Strategies, a web-portal covering the transportation industry. “That’s why we are working on improving the situation.”

Meanwhile, Merenkov, whom the Industrial Policy Ministry wants to take over the giant airplane producer, stated his plans to increase production by 10 times, betting on the company’s key models, such as An-148 and An-140.

Ilia Kenigshtein, senior partner at Hybrid Capital, a venture fund, has often criticized the generation of Soviet-era managers who still run companies today, referring to them as “red directors.”

“I’m glad that epoch of inarticulate collective farm managers is coming an end in the big-money sector. They’ve never changed their Soviet attitude, they’ve always been wearing rural-style Brioni suits and black patent leather shoes with white socks and clap (their hands) during private concerts of Russian pop-music star Philip Kirkorov,” he says.

What later became Antonov was launched in 1930 as an engineering bureau, while a 2009 merger with Aviant, a Kyiv-based aircraft producer, became a landmark move in the corporation’s history, whose premises is still surrounded by barbed wire and hosts a big statue of Vladimir Lenin, as well as vast amounts of apple trees and greenhouses.

Editor’s Note: The story has been updated to clarify Ilia Kenigshtein’s employment place.

Kyiv Post associate editor Ivan Verstyuk can be reached at [email protected].