Government decides to take control of Aero from Boeing

The Czech government has decided to act to save the troubled aircraft maker Aero Vodochody, controlled by American Boeing, restructure the company and find a new strategic partner for it. However, the plan is not without a catch: although the government holds a majority in Aero, Boeign has a managerial control and the government cannot terminate their agreement unilaterally.

Government decides to take control of Aero from Boeing

Czech officials have repeatedly criticised Boeing over its role in Aero. Boeing is a minority owner in the state-run Aero but has management control. The state holds large debt guarantees in Aero and Aero's auditor recently said that without state backing the firm would go bankrupt. Nevertheless, Finance Minister Bohuslav Sobotka said the government, although holding a majority, had no other option than to pay the guarantees and negotiate with Boeing on solving the problem.

"We will negotiate with Boeing on possibilities of a debt for equity swap so that the government assumes control over the company. We must negotiate with Boeing on its departure, because the government cannot terminate the partnership by a unilateral act. Future development will depend on Boeing's reaction to this government decision."

L159 Alca

The government is disappointed that Boeing has failed to develop the joint venture successfully, and a new strategy for the company is needed. Aero is finishing the final batch of L-159 light combat aircraft for the Czech Air Force, but has no new jobs in sight. Aero also assembles Sikorsky helicopters and produces components for Boeing. After the collapse of its former Eastern Bloc market, Aero was forced to challenge major arms exporters for deals in areas such as India, Kenya, the Middle East and South America. This strategy has not been very successful so far and lay-offs in the firm have accelerated. The government now hopes to find a new strategic partner for the company.

"The government has decided to take active steps to find a new partner for Aero in the future and to create conditions for restructuring the company. The government has not decided and I do not expect any decision to participate financially in the restructuring."

According to previous reports, the government has already opened talks with some European aircraft producers on their possible entry to Aero. Finance Minister Bohuslav Sobotka put the blame for Aero's problems on a wrong decision by the previous government.

"The previous governments relied on Boeing to successfully develop Aero. This hope did not materialise and Aero's situation turned much worse than anyone would expect. We are now paying for an obligation that originated in 1998."