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Czech Republic: Businesses Contest For Fighter Contract

Prague, 6 October 1997 (RFE/RL) -- The contest among Western companies to re-equip the Czech air force with supersonic fighter plans is a textbook example of how far big business must go in order to capture a contract potentially worth $1 billion.

Having a suitable product, in this case an advanced combat aircraft, is only the starting point in a sustained marketing effort stretching over years and involving major deals along the way with as many Czech companies as possible.

The pattern of activity now becoming evident in the Czech Republic is being repeated in other countries of the transition region, such as Poland and Hungary, where further thousands of millions of dollars are potentially to be earned as the region re-equips with NATO-compatible arms.

In the Czech Republic, the serious contenders for the supply of 36 fighters to the air force are Boeing and Lockheed Martin of the U.S. and a Swedish-British consortium consisting of Saab and British Aerospace (BAe).

Within the last week, both Boeing and Saab-BAe have announced deals with powerful Czech companies on industrial cooperation aimed at providing the highest possible local content to the aircraft they are offering.

Saab-BAe, which has the Gripen fighter, has teamed up with Chemopol Machinery, for what is described as wide-ranging collaboration in both domestic and foreign markets. Chemopol machinery, a subsidiary of the Chemopol group, has close links with the entire spectrum of the Czech military-industrial complex through the arms dealing company Omnipol.

BAe says in addition that it and Saab have opened discussions with other leading Czech companies -- Walter, LOM, Moravan and Letov among them -- with a view to cooperation. And last month the consortium hosted what it called one of the biggest-ever gatherings in Prague of directors of Czech manufacturing companies, to "identify new opportunities" for Czech industry.

A few days earlier, Boeing and the Czech heavy-industry concern Skoda Plzen announced that they would cooperate in activities on world markets, including in what is called the Hornet Industry Team. That's the name for a circle of high-tech companies involved in production of parts for the F/A-18 Hornet -- Boeing's candidate for Czech contract.

Boeing also has another ace up its sleeve, namely it is buying a large minority stake in the Czech state-owned aircraft manufacturer Aero Vodochody. Aero makes advanced jet trainers and light combat aircraft, and is in any case a valuable ally for Boeing in the international market for such aircraft. But industry analysts say Boeing has a clear eye on involving Aero -- a company with a long tradition in the Czech Republic -- as a partner in the manufacture of the F/A-18 Hornet. What Boeing is doing is crafting a package of incentives for the fighter contract which it hopes the Czech government will not be able to ignore.

An extravaganza of deals with local companies, such as undertaken by Boeing and Saab-BAe, are an essential part of winning any big defense contract these days: not only the product must be the right, but the competing companies have to offer the target country maximum participation in the manufacturing process, thereby transferring advanced technology, underpinning local industry, and creating new expertise and jobs.

Whichever company gains the main fighter contract, Boeing is set to win a piece of the action through Aero. Aero's marketing Director Martin Paloda said today that no matter which company supplies the fighters, Aero expects to be involved in manufacturing parts for them.