DENIED BY MAJOR FOREIGN AERONAUTICAL COMPANIES, "Avioane" Craiova looks to the state for bailout

• The company is getting ready to enter a joint venture with a Romanian civil aviation company

After several major foreign aeronautical companies politely declined its proposals for cooperation, "Avioane" Craiova is putting its hopes in the state in 2010 as well, hoping the former would help it survive until its long awaited privatization. While waiting for the orders of the Ministry of Defense, the company survives from smaller contracts, which are not enough to keep the company"s 380 employees working.

Radu Costaşuc, the company"s general manager stated the following for BURSA: "Last autumn, we sent proposals for a joint venture to several fighter plane manufacturers of Italy, Sweden, Switzerland and Argentina, but all of them politely declined. Until the Romanian state finds a potential investor, the company"s situation will remain unchanged".

The manager of "Avioane" Craiova claims that any potential investors interested in taking over the company condition this on the answer of the Romanian state on the acquisition of multi-role fighter jets. Three major companies, (Saab, Alenia together with BAE Systems and EADS, and Lockheed Martin) have presented the Ministry of Defense with offers for the sale of fighter jets.

"The privatization of the company is conditioned by the Ministry of Defense decision on the purchase of multi-role fighter jets, but it"s hard to tell when the government will make a decision on this matter", Radu Costaşuc added.

The company currently has orders from the private sector and is negotiating a joint venture with a Romanian civil aviation company. "Avioane Craiova" is also negotiating with an Israeli aeronautical company, but the company"s officials were unwilling to provide more information.

"The current orders are small and don"t provide enough work for all of our available staff on the civil aeronautics side, and they only account for a small part of our turnover", said Victor Peţa, the leader of the Free Union of the company, for BURSA.

"Avioane" Craiova is controlled by the Romanian state through the ministry of the Economy, which holds 80.97% of the company. Romania made several attempts to privatize the company by selling it to a strategic investor, but negotiations failed both with the Czechs of "Aero Vodochody", in the autumn of 2008, as well as with Italian company "Alenia Aeronautica", in the first half of 2009. The company"s debt of 8 million Euros was one of the reasons which led to the interruption of the negotiations for the privatization of the company.

Even after the negotiations ended, "Alenia Aeronautica" said that it was interested in acquiring the company, as long as it wasn"t required to take on the company"s debt. The company owned by the current minister of Finance, Sebastian Vlădescu provided consulting for Alenia.

• Orders from the Romanian state could help the company"s turnaround in 2010

Currently, "Avioane" Craiova has 380 employees, after the company decided to layoff 270 employees at the end of 2009. The remaining employees have only been paid part of their wages over the last five months and were sent into technical unemployment in shifts.

Victor Peţa said: "The employees only received 50% of their wages for September, October and November. For the month of December they only received 25% of their wages, and for January they weren"t paid anything".

Even though the orders from the Ministry of Defense weren"t enough to provide enough work for the employees of the "Avioane", the union leader still thinks that orders from the state are the thing that could help a turnaround of the company.

"One alternative would be to have the Ministry of Defense modernize part of its aircraft fleet, as previously promised, or to resume production of the IAR -99 "Falcon", an advanced model used for pilot training", Mr. Peţa said, who added: "It is important that the Ministry help us, like it did last year, to prevent the company from going under. Even the officials of Alenia said that they couldn"t understand why the Romanian state doesn"t do its best to help a company it has a stake in by providing it with orders".