While Western Europe moves towards an integrated European aerospace and defence company, manufacturers in former Communist Eastern Europe must decide how they will survive in a market dominated by giants.
Clearly, the companies cannot continue in their present form, and they cannot survive alone. In Poland and the Czech Republic, the question of whom to partner with has become all the more politically significant with these countries' acceptance - alongside Hungary - into an enlarged NATO.
Each of the new NATO countries wants new front-line fighters, and preliminary offers have come from Boeing, Dassault, Lockheed Martin and Saab/British Aerospace. Both Poland and the Czech Republic, with their excess manufacturing capacity, want to build these fighters. Their defence budgets are ultra-tight, however, and it may be years yet before a decision to buy is finally taken. This is time the hard-up Eastern European manufacturers do not have. Partnerships must be struck up regardless of the fighter issue, although this could become complicated if a country where Boeing, for example, owns a substantial stake in an aircraft manufacturer were to find that the Saab Gripen, say, was its preferred choice of fighter.
The Czech Republic has already chosen strategic investors for its two biggest aircraft manufacturers, Aero Vodochody and Let Kunovice - and Poland is heading the same way with the announcement of a plan to privatise its defence industry, including the PZL aircraft factories at Mielec, Swidnik and Warsaw-Okecie, as well as engine maker PZL Rzeszow.
The Polish plan was announced in July. It lists 30 strategic companies which should be privatised by 2001 on the basis of individual business plans.
Historically, the biggest Polish aircraft manufacturing plant is PZL Mielec, located in the south-east of Poland. Since its founding in 1938, the plant has produced over 15,000 aircraft, including licence-built Antonov An-2 and An-28 transports. It now produces the M-18 Dromader agricultural aircraft, the M-20 Mewa derivative of the Piper Seneca II, the M-26 Iskierka tandem seat piston-powered primary trainer, the M-28 Skytruck, a Westernised variant of the An-28, and the Iryda jet trainer for the Polish air force. Orders are being won, but only in trickles.
Towards the end of the Communist era, in the late 1980s, some 23,000 people were employed at the huge, state-owned WSK-PZL Mielec manufacturing complex, more than half of these at the aircraft division itself. Since then, with the loss of the Soviet market and guaranteed Government backing, the workforce has shrunk to a fraction of this figure, with about 3,000 still employed at the aircraft factory. By the end of this year, employment will most likely be cut by a further 600.
According to Ryszard Grochowski, president of the WSK-PZL Mielec holding company which owns a majority in PZL Mielec, the aircraft division needs a major partner to survive in the long term. Grochowski believes it would be wise for Mielec to become a part of a consolidated Western European aerospace industry.
The company is due to present its restructuring plan this month for approval by its supervisory board and the Warsaw Government. The plan includes a privatisation schedule and the latest job cuts. Whether the cuts will go ahead, however, depends on Mielec being able to afford redundancy packages, says company president Marek Woszczynski - the factory is still paying off the 400 workers it axed in 1997.
Chief among the potential investors is British Aerospace, with Boeing, Bombardier and Lockheed Martin also understood to be interested. In July, the UK company confirmed that it could become a majority shareholder in the Polish company when Mielec is privatised.
According to Julian Scopes, BAe's vice-president for Central Europe, the company has responded "with extreme interest" to a Polish Government letter about the privatisation. Details remain to be finalised, but Woszczynski confirms that the government may be satisfied with retaining only a minority stake in Mielec.
The announcement coincided with the selection of Mielec to build elements of BAe's Hawk, which the UK company is promoting as a solution to Poland's jet trainer needs. The package, which makes Mielec the sole supplier of certain fuselage assemblies, guarantees 50 Polish jobs.
While this is clearly a fairly modest start, BAe executives say that more work will follow if this programme runs satisfactorily. BAe stresses that this package, and any future work handed over to Mielec, is independent of any Polish decision to procure the Hawk. Should such a decision come, however, BAe would give Mielec final assembly of the aircraft, restoring to some extent the Polish company's credibility as a jet trainer manufacturer.
Mielec has been working on its own Iryda twin-turbojet trainer since 1977, and has run into a series of financial and technical troubles, with the aircraft coming under fire as being underpowered and hard to handle, with poor low-speed performance and outdated avionics.
The aircraft has gone through powerplant and avionics upgrades, but has failed to impress its only customer, the Polish air force . Since the loss of one operational aircraft and its two experienced pilots in January 1996, the military has grounded its Iryda fleet and lambasted the aircraft as a dangerous waste of money, despite Mielec's most recent upgrade efforts. Some industry observers feel the programme has stayed alive mainly because of a political desire to keep Mielec's head above water.
The latest M-96 upgrade of the Iryda involves the addition of wing leading-edge root extensions, leading-edge slats and Fowler flaps to improve low speed performance, an enlarged fin to improve yaw stability, and a new avionics suite from France's Sextant Avionique. But the air force seems to have run out of patience, and arguments between Mielec and the defence ministry over certification and the funding of flight tests have kept the one M-96 prototype grounded since August 1997.
Woszczynski says that the programme will continue to the completion of current plans to upgrade all 17 existing aircraft to M-96 standard, and he even sees the possibility of producing 24 more to meet the full air force requirement. He admits, however, that the aircraft has no future beyond this. "We would like to go ahead with series production, but in business there is no room for sentiment," he says.
Mielec admits it is suffering severe liquidity problems and has had difficulties finding financing for aircraft orders already booked. Financial institutions have been reluctant to back the company because of a scandal earlier this year which led to the resignation and subsequent arrest of former WSK-PZL Mielec president Wieslaw Pastula, along with two other senior PZL Mielec directors. Also arrested were seven officials of Grand, a Cayman Islands-registered consultancy hired by Mielec, which investigators believe was illegally given 30% of the manufacturer's stock by the holding company as payment for its services. The 10 remain in custody awaiting trial.
Whatever the results, Mielec's credibility - already shaky in the light of of the controversy surrounding the Iryda programme - has taken a severe beating. The management hopes that BAe's public demonstration of faith will help restore the confidence of both potential customers and financial institutions.
Helicopter manufacturer PZL-Swidnik - originally established in 1951to manufacture components for Polish-built MiG-15 fighters - is searching for a strategic partnership with a major Western helicopter producer which could lead to licensed Polish manufacture of an unspecified helicopter type, and possibly later to the sale of a stake in Swidnik.
Talks are understood to be under way with Franco-German comoany Eurocopter and Italy's Agusta, although Swidnik itself remains reluctant to confirm the identity of any potential partners. The Polish manufacturer is already producing components for both of these companies. Boeing is also understood to have an eye on Swidnik's privatisation.
For the moment, early steps towards privatisation have left the company's share structure as follows: National Treasury 60%; Swidnik employees 15%; the Depozytowo Kredytowy Bank 14%; PZL Rzeszow 6.4%; the State Fund for the Handicapped 1.7%; Swidnik town council 1.5%; and Lublin town council 1.4%.
Swidnik is looking for new business in the face of repeated delays to the Huzar battlefield helicopter, a development of Swidnik's established W-3 Sokol. The company's financial state is worsening, Swidnik having been waiting since 1995 for the Government to provide development funds to kick off the 100-unit Huzar programme for the Polish army.
Most recently, the Warsaw Government has recommended the launch of a new tender for the helicopter's avionics and weapon systems, a contract previously "awarded" in a government memorandum of understanding (MoU) to an Israeli consortium comprising Elbit and El-Op, together with missiles supplier Rafael.
The MoU was signed by a minister in the previous, ex-Communist, government in his final days in office after losing the last election. The new government refused to ratify the MoU, and called its legality into question. Now, after months of investigations and recriminations, the MoU has been thrown out.
Poland remains committed for the moment to the Rafael NT-D anti-tank missile. Demon-strations of the missile in Israel seem, however, to have failed to convince Polish defence officials that it truly meets the requirements of the Huzar programme - particularly the need to kill a moving target at 6km (4 miles) range. So Poland is insisting on a new series of tests, on its own soil and under its own conditions, before it confirms its intention to buy the missile.
Some industry sources in Warsaw suggest that the conditions for the tests may be difficult for Rafael to meet, and that this is simply a face-saving way to back out of Poland's commitment to the NT-D. Should the missile fail to satisfy the test conditions, the competition will be re-opened to the Boeing Hellfire 2, Euromissile HOT 3 and GEC-Marconi Brimstone.
The Huzar risks losing export customers as the programme launch shifts further to the right, as exemplified by Czech interest earlier this year in South Africa's Denel CSH-2 Rooivalk attack helicopter. The Czech Republic has already ordered W-3 Sokols for its army, and has up to now been seen as a possible export customer for the Huzar.
Meanwhile, sources close to the company say that Swidnik has identified a market in Poland and beyond for a successor to the ageing Mil Mi-2, which the company builds under licence. Swidnik is planning to bring a helicopter in this class on to the market at the beginning of the next decade, but "can't do this alone,"says one source. Eurocopter is understood to be emerging as a promising potential partner.
PZL-Swidnik's own light helicopter, the SW-4, remains grounded for now while the company installs hydraulically boosted controls into its two flying prototypes. The company decided to do this after 80h of flight trials proved the original controls were too heavy.
Flight testing is to begin again by the end of this month, with a 150h programme scheduled for each of the two flying prototypes. Swidnik hopes for certification at the turn of the year, and has signed an MoU for the sale of one SW-4 to the Polish army for training, and one more to the country's Ministry of Internal Affairs.
Swidnik says it is scheduled to produce 13 Sokols, one Mi-2 and one Kania this year, with the possibility of one more Kania order. Most recently, the company received two orders for transport Sokols and one for the maritime variant, the Anakonda, in mid-July.
Boeing's recently founded Czech subsidiary Boeing Ceska will soon take a 35% stake in jet trainer manufacturer Aero Vodochody. The long-awaited deal is now in the final stages of approval in the Czech commercial courts.
Boeing Ceska is 90% owned by the US manufacturer and 10% by Czech Airlines (CSA), and was created earlier this year after the selection in May 1997 of the Boeing/ McDonnell Douglas/-CSA team as the strategic partner for Aero. Under the current agreement, the remaining 65% of the company will remain in Government hands, the stake being divided between the National Property Fund and the state-owned Konsolidacni bank.
Boeing is the prime avionics contractor for Aero's flagship L-159 Advanced Light Combat Aircraft (ALCA) programme, and has been using Aero as a subcontractor since 1996 to manufacture Boeing 757 door skins as part of an offset deal linked to CSA Boeing 737 orders. The Czech company also manufactures some Boeing 747 components via a subcontractor agreement with Northrop Grumman.
Boeing says its stake in Aero is a step towards "-establishing a formal presence for Boeing in the Czech Republic that reinforces our long-term commitment to the region". It also clearly makes Boeing's F/A-18 a leading candidate to meet the Czech Republic's front-line fighter requirement, for which it is competing against the Dassault Mirage 2000-5, the Lockheed Martin F-16 and the Saab JAS39 Gripen - the same aircraft being offered for the Polish and Hungarian fighter requirements.
The L-159, powered by the AlliedSignal/ ITEC F124-100 turbofan, reached a new milestone with the maiden flight of the single-seat second prototype on 18 August. This is the first L-159 in this configuration - the first was a two-seater L-159T - and the first with the full avionics suite for the Czech air force.
Aero says the aircraft made two successful flights with two different Aero test pilots on its first day of testing, and will now begin avionics trials. The company had hoped to show the aircraft at Farnborough, but now says it cannot afford to interrupt the test programme.
The first of 72 production aircraft is to be delivered to the Czech air force next year. The L-159 is to make up about three-quarters of the air force's combat strength, fulfilling close air support, tactical reconnaissance, air defence and border patrol roles.
Aero says the development programme should cost about $50 million, while the Czech air force order is worth about $1 billion. The price of the aircraft - formerly quoted by Aero as "half that of a Hawk" - will not perhaps be as low as initially predicted, but the manufacturer says it remains cheaper than its British rival.
The Czech company says it is also on schedule to fly the Ae 270 Ibis in 1999. The aircraft is being produced with Aerospace Industrial Development (AIDC) of Taiwan, in a 50-50 joint venture called Ibis Aerospace.
The Ae 270 is a single-turboprop aircraft designed to carry six to nine passengers. It will be available in two versions: the pressurised, Pratt & Whitney Canada-powered Ae 270P; and the unpressurised, Walter-powered Ae 270W designed for customers looking for a rugged, low-cost aircraft. The two powerplants selected are the 625kW (840shp) P&WC PT6A-42 and the 580kW Walter M601E.
Most of the design work has been done by Aero, although AIDC is carrying out some of the wing design, and will produce the wing for the first prototype. At first, final assembly will take place at Aero's factory near Prague, although a Taiwanese production line could follow.
After almost a year of talks, US agricultural and utility aircraft manufacturer Ayres has completed its takeover of a 93% controlling stake in Czech regional aircraft manufacturer Let Kunovice, approved in late April.
Let is already manufacturing the wing, empennage and elements of the rear fuselage of Ayres's LM-200 Loadmaster utility aircraft. The Czech company is incorporating elements of its own L-410 twin-engined, 19-seat turboprop into the US aircraft and will be providing "about 50% of the aircraft" by value.
Ayres says it was initially interested in Let purely as a parts manufacturing facility for the Loadmaster, but later found that the L-410, improved L-420 and 40-seat L-610G aircraft "perfectly complement" its products. The L-420 is a Westernised version of the L-410 which received US certification in May, while the General Electric CT7-powered L-610G is expected to be certificated "within a year".
"The L-420 and L-610G when combined with the LM-200 Loadmaster will provide us with a great product line of rugged utility aircraft from about $4.5 million," says Ayres' director of international sales, Tex Guthrie.
Ayres is moving Let's product support, sales and marketing operation to its Albany, Georgia, site. The company says this will improve its spares support capability and cut response time for its customers. The US manufacturer estimates its combined revenues together with Let will exceed $100 million.
Source: Flight International