Bombardier and Russian state-controlled Rostekhnologii (Rostec) have signed a memorandum of understanding to “validate” the prospect of establishing a final assembly line for the Canadian manufacturer’s Q400 turboprop in Russia, the companies confirmed on Wednesday during the Moscow Air Show (MAKS). The MOU accompanies a series of preliminary agreements including an LOI for the sale of 50 Q400s to Ilyushin Finance Company (IFC) and a so-called market development agreement with Rostec and its leasing subsidiary, Avia Capital Services, to place another 50 Q400s in the region. Bombardier estimates the potential value of the Q400 orders to amount to $3.39 billion at list prices.

In a statement, Bombardier called the establishment of the Q400 assembly line in Russia a “key” commercial requirement and a fundamental component of the series of agreements. The sides hope to reach definitive agreements calling for the establishment of a joint venture by the end of next year, it added. Bombardier stressed that the assembly line would produce aircraft for Russian customers and that its assembly line in Toronto would remain the primary source for supplying the global market.

More than 120 Bombardier commercial aircraft operate in Russia and the Commonwealth of Independent States (CIS) and Bombardier forecasts a market demand of approximately 400 aircraft in the 20- to 99-seat market in the region over the next 20 years. Bombardier sees particularly strong potential for the Q400, which in June 2012 received type approval from the Interstate Aviation Committee (IAC)—commonly known by its Russian acronym, MAK—and subsequently entered service with Yakutia Airlines from that airline’s base in northeast Russia.

“We recognize this as a landmark opportunity for the Q400 NextGen aircraft program,” said Bombardier Commercial Aircraft president Mike Arcamone. “Developing local roots in strategic markets is at the core of Bombardier's strategic framework, and we have identified Russia as being key to our growth and sustainability. The agreements signed today are the next step towards ensuring our long-term competitive position in the Russian Federation and will help secure Rostec’s ongoing establishment of an aviation center of excellence.”