ONE OF THE MOST important promises of the so-called "peace dividend" for Western aircraft manufacturers was to be their ability to sell their products to the old Warsaw Pact countries in Eastern Europe. In fact, one of their greatest burdens may turn out to be the need to purchase most of the old Warsaw Pact manufacturing industry first.
When the Iron Curtain was swept away, both Western manufacturers and Eastern air forces hoped that old Soviet combat types could be replaced by Western types. That this has not happened is down primarily to one simple fact: none of the target countries can afford it.
The Eastern European countries such as Hungary, Poland and Czechoslovakia used to acquire their combat aircraft exclusively from the USSR, sometimes on favourable terms, often by barter. Today, that supply chain has been cut, and Hungary, Poland and the Czech Republic face paying the market price for equipment, whether it be from Russia or from the West. That is clearly not a viable option, even when some of these countries are talking penny numbers of aircraft (the Czechs, for instance, are initially being offered a lease of seven, which hardly constitutes a credible modern fighter force in any circumstances).
The front runners in the supply race are the Americans: Lockheed Martin with its F-16; McDonnell Douglas with its F-18. While both, in the Czech case, are reduced to talking initially of interim lease deals rather than purchases, each must hope to sell new aircraft there eventually. Both are involved in speculation about the future of the principal Czech military aircraft manufacturer, AeroVodochody. Whoever finally supplies a limited number of new fighters to the Czechs will, inevitably, have to agree to at least partial assembly of those aircraft in-country, and therefore at Aero Vodochody. It follows that whoever puts up the best offer for a stake in that company is the most likely to be allowed to also spend a lot of its own money supplying the aircraft type which it will later assemble.
Even though, so far, the ambitious (though not necessarily realistic) plan to bring some of these countries inside the boundaries of NATO has made little progress, the US Government is firmly behind these offers. (They are, of course, offers of aircraft which have already served their first lives with the US Air Force and US Navy.)
While the cost of supplying these first lease aircraft themselves may be borne by the US Government, the cost of updating the manufacturing industry of the customer country will lie firmly with the Western manufacturer. Turning round an outdated company offering largely outdated products to an uncertain market does not figure high on the priorities of many Western manufacturing companies, most of which see themselves more as market capitalists than as venture capitalists. Most such companies obviously are attracted by the concept of establishing a presence (albeit a small one) in a new market, and will bear a reasonable cost to establish that presence.
To invest vast amounts long term in modernising an industry which, in the medium term, may end up being able to offer little more than licence-built older Western technology to customers no better off than its own government may not seem all that reasonable a cost for such a company to bear. This market may, in the end, be one in which the big Western companies cannot afford to invest.
What, then, is the prospect for the Eastern European industry? It was largely held back by the acquisition policies of the old Warsaw Pact, and now finds itself faced with home markets which can afford very little, and export markets which are denied to it because they are too sophisticated. This industry desperately needs investment in new products and machinery, but that investment can only be justified if the end result is a product as least as good and as cost-effective as its Western competitor.
No Western company is going to go that far in creating new competitors for itself: the Eastern governments will have to decide how far they can afford to go, even with minority external investment. The answer may be: far enough to rebuild this industry as a credible, competitive subcontractor, but no further.
Source: Flight International
