But Iran Sanctions May Pose Problem

It's no secret the costs of materials used to build airliners are shooting up higher than FL430... so it stands to reason manufacturers are looking at ways to reduce those costs where they can. To that end, Boeing announced Friday it has signed an agreement with Russia's VSMPO-Avisma aimed at cutting the cost of making titanium parts for its upcoming 787 Dreamliner.

Under terms of the agreement, the companies will manufacture those parts in Verkhnaya Salda, where VSMPO is based. Bloomberg reports the agreement with the world's largest titanium supplier is part of the $18 billion Boeing expects to spend on Russian titanium over the next 30 years.

Both Boeing and rival Airbus are already big customers for VSMPO -- with Airbus currently receiving about 60 percent of its titanium from the Russian company, and Boeing getting about 40 percent before the agreement.

"This agreement is beneficial for both companies," said Kirill Chuiko, a metals analyst at Moscow's UralSib Financial Corp. "They are key partners and a deeper cooperation will give Boeing a longer-term contract for cheaper titanium, while VSMPO will get technology."

The agreement isn't without potential complications, however... as it comes one week after the US State Department imposed sanctions on Rosoboronexport, which is in the process of buying out VSMPO, for breaking a US regulation on trading with Iran.

When factored in with strained political ties between the two countries -- as well as a similar US sanction on Russian jetmaker Sukhoi over fighter jets -- some fear Boeing may not be able to reap the benefits of the agreement with VSMPO right away.

Officials on both sides downplayed any negative fallout from the deal, however. Boeing commercial chief Alan Mullaly met with Vladimir Putin after the agreement was signed... and the Russian president reaffirmed his support for Boeing's ventures in Russia.

"We will, from our part, support the development of your business in Russia," Putin told Mullaly, according to Interfax news agency. "Your company has always demonstrated itself as being a very reliable partner."

VSMPO Chairman Vyacheslav Bresht said the agreement with his company marks the first time Boeing has entered into such an in-depth agreement with a subcontractor outside the US... and that the joint venture could save Boeing as much as 20 percent in the cost of machining and processing titanium.

FMI: www.boeing.com, www.users.globalnet.co.uk/~chegeo/vsmpo-eng.htm