Aero Vodochody Aerospace has been through two revolutions of its own since the political changes that swept eastern Europe after the fall of the Berlin Wall. The mid-1990s saw a Boeing strategic investment in the Czech aerospace champion – one of the first by a Western manufacturer in the former Communist bloc. There was also a joint venture with Taiwan’s AIDC to develop a passenger turboprop. They promised a new era for the then state-run company, but both were ill-fated.
The second, altogether more successful, revolution has been taking place since 2007, when Czech and Slovak investment house Penta Investments bought the business from the Czech government and began reinventing Aero Vodochody as an aerostructures specialist, winning major contracts for the Airbus A320, Alenia Aermacchi C-27J, Bombardier CSeries, Embraer KC-390 and Sikorsky UH-60M Black Hawk, among others.
The deals, which built on an existing partnership with Sikorsky to produce the integrated airframe of the S-76 helicopter, have seen the 95-year-old company push turnover to $270 million, with commitments in the pipeline set to increase that by another 50% by 2018. Employment is growing too and will reach 2,000 this year. While that is still well short of 1980s levels, when 5,000 people clocked in each day, it is almost double the workforce of four years ago.
It is a long way from the mid-2000s, a nadir for Aero Vodochody. Boeing walked away from its 35% stake in 2004; the Ae-270 turboprop, though completed, was shelved through lack of funds; and, equally damagingly, most of a consignment of 72 L-159 advanced jet trainer/light combat aircraft delivered to the Czech air force was shelved after Prague opted for the Saab Gripen as its flagship fighter. Aero Vodochody looked like a business trading on past glories.
At the time of re-privatisation in 2007, Aero Vodochody was still essentially a traditional airframer, although its main programmes, the L-39/59 jet trainer and L-159, had ceased production. Since its purchase by Penta, it has added one major aerostructures contract a year, including two risk-sharing packages where it has design-engineered fixed leading edges: for the CSeries, in partnership with Belgium’s Sonaca, and directly with Embraer for the KC-390.
Company president Ladislav Šimek says the move from being a maker of original equipment to a business based on designing and building-to-print structures for other aircraft has been a “cultural shock” for many in the company. “A lot of people took it as a matter of pride that we built planes,” he says. “People though this was, well, maybe less sexy. But participating with the best companies in the world has kept us in the first league.”
Šimek describes the Sonaca deal as a “game-changer”, as it saw Aero Vodochody take on its first engineering programme since the development of the L-159 in the 1990s. The company set up a separate engineering unit 18 months ago – alongside aerostructures and the legacy military maintenance, repair and overhaul division – to handle in-house projects and compete for third-party work, mainly from existing customers. “There are many engineering companies in Europe, but not many in eastern Europe, where costs are lower,” he says.
However, Šimek is wary about transforming the business too quickly. While design engineering can lead to higher and long-term returns, it means more investment and risk. “It’s a balance,” he says. The company has invested heavily in streamlined production methods for its build-to-print contracts, the biggest of which is the S-76, which has its own production line, the closest Aero Vodochody gets to building a complete aircraft. The company has produced 380 airframes since 2000 and will hit the 400 milestone this year.
You can see the investment, along with the cultural change, taking place, in a walk through the production halls in the company’s plant in the village of Vodochody outside Prague. Although there are still some ancient Russian-built hydraulic presses, most equipment, including five-axis milling machines, is new and Western. Japanese kaizen principles of continuous improvement are practised, and workers are rewarded for ideas that make the company more efficient.
The Communist-era factory has been designed around zones for each programme, with room to expand as more are added. A hall has been refurbished for the production of A320 landing gear for Messier-Bugatti-Dowty, a contract won in 2010. In another area, the second KC-390 rear fuselage – one of three build-to-print packages the company has on the Brazilian military transport – is set to be shipped. A sign in the part of the plant responsible for Boeing F/A-18E/F gun doors celebrates the completion of the 500th example since 2001.
Although Aero Vodochody is rapidly adding staff to meet its aerostructures commitments, Šimek and his colleagues are also aware of the need to streamline the business. To this end, the company has set up a strategic sourcing department to develop its supply chain in the Czech Republic and in countries such as Romania. “The ability to manage a supply chain in central Europe is not easy, but it is one of our capabilities,” he says.
Like most manufacturers of its era, Aero Vodochody had been highly vertically integrated, he says. “Now we know that without a very good management of the supply chain, we cannot grow that fast. Now we always consider what we do and what we outsource.” Customers, he maintains can source to the Far East, but “you will always need a second solution. Or you can go to the middle [central Europe], where you get the same products and the same solution [as the West] but with a lower cost, and with less risk than going further east.”
Although the momentum for Aero Vodochody’s recent success has come from aerostructures, the military side remains an important arm of its business, based mainly on support of the L-159 for the Czech air force and maintenance of and upgrades to the L-39 Albatros, which was sold to 30 countries. Around 700 examples of the Albatros are still in service, many operated by the likes of the Breitling display team and other private users.
The company is planning to announce a new version of the single-engine jet at the Farnborough air show called the L-39NG. It will include a new cockpit and several airframe changes, together with what is likely to be a new engine, although Aero Vodochody will not disclose details ahead of the show. First deliveries are expected in 2017. “Most L-39s were built in the 1980s. The aircraft is close to the end of its life and we are getting ready to provide a solution,” says Šimek.
Aero Vodochody has been looking for a buyer for several years for the surplus examples of the L-159, which are owned by the country’s government. Finally, after several close runs, a twin deal with US private operator Draken International and Iraq is close, with the former taking up to 28 aircraft, and Baghdad the remaining 12. Although the aircraft are not on its balance sheet, a deal would be symbolically important, completing the second revolution at Aero Vodochody from the legacy aircraft manufacturing business and entrenching its position in the global supply chain.
Speak to the boss of any aerospace company in a second-tier economy – from Jordan to Jamaica – and they will report that one of their biggest headaches is stopping staff – in whom they have invested money to train and develop – from leaving for higher-paid jobs abroad.
Aero Vodochody’s president Ladislav Šimek says the company’s 1,900 workers are “constantly training” and the country’s well-regarded universities and schools, and long heritage in aviation, mean it does not struggle to find good recruits.
Yet, because Czechs are free to work anywhere in the EU, Šimek says it is “a fact of life” that some of his employees will seek to further their careers in France, Germany or the UK.
However, the trend could be reversing. Lower living costs in central Europe and improving career prospects mean many young Czechs are coming home, “and for a career in aerospace, we are one of their best options”, he says.
And it is not just locals attracted by Aero Vodochody’s growing business. “We now employ a lot of expats too,” notes Simek.
Source: Flight International