For pennies, Boeing pulls out of Czech aircraft company

Aero Vodochody

After months of negotiations, American aircraft giant Boeing is ready to give up its share of Aero Vodochody, a Czech airplane manufacturer that has seen more than a decade of hard times.

Two crowns, or about seven U.S. cents. That's how much the Czech government has agreed to pay Boeing to abandon its one-third share of Aero Vodochody. Deputy Prime Minister Martin Jahn announced the deal on Wednesday.

The government has been trying to end its partnership with Boeing since early this year, saying that Boeing has failed to live up to its part of the bargain.

Deputy Prime Minister Martin Jahn
Although the state owns two-thirds of the company, the 1998 agreement gave the American firm managing power over Aero. In exchange, Boeing was expected to help the ailing Czech company secure sales abroad and improve its technology standards. The company has been floundering ever since losing Eastern-Bloc buyers after the 1989 fall of communism.

So far, the Czech military is the lone buyer of Aero Vodochody's flagship plane, the L-159 Alca, a light combat fighter. Other aircraft models have had worse luck, bringing the company heavy losses. The company has laid off nearly a quarter of its work force since early 2003.

Minister Jahn said the government hopes to find another strategic partner for the company in order to save it from eventual bankruptcy.

"I believe that after the restructuralization, Aero can become a competitive firm. It has a huge potential in its infrastructure and the people it has. It would be a shame for a firm like that to go bankrupt. This step means the firm can capitalize on the debts that are owed to it and it can start looking for a strategic partner."

Ironically, Minister Jahn said returning control of Aero Vodochody to the state, for the time being, will help pave the way for the company's eventual privatization.

> Few details have been released about the negotiations between the government and Boeing. The Czech News Agency reported that Boeing was originally asking for one billion crowns for its share of the company, so what is in this deal for Boeing remains to be seen.

No mention was made as to whether Boeing's decision to sell was related to state-owned Czech Airlines interest in buying 12 airliners. The airline has not yet decided whether it will buy planes from Boeing or rival Airbus, but it is expected to make the decision later this month.