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KAI reaffirms bid for U.S. Air Force contract

Nov 11,2017
Korea Aerospace Industries, the country’s largest defense contractor, is pursuing a 17 billion won ($15 million) deal to supply training aircraft to the United States Air Force, the company’s chief executive said Friday.

“Among the five bidders, the competition has narrowed down to Boeing and Lockheed Martin, to which we are a supplier,” Kim Jo-won said during a press conference in Seoul. “The essence of the competition is pricing, and we’re still in discussions to cut down the bidding price but to a level where we don’t see losses.”

In March, KAI, as a supplier to Lockheed Martin, joined a bid to replace about 350 outdated planes in the U.S. Air Force’s Awaiting Pilot training program.

The contract would be a windfall for the company in terms of earnings and reputation as a supplier to one of the largest militaries in the world.

But a corruption scandal in September threatened to blow KAI’s chances in the bid. Nine executives, including the chief executive, Ha Sung-yong, were detained by prosecutors on charges of accounting fraud and negligence in several supply deals.

Kim, who formerly led Korea’s Board of Audit and Inspection, was appointed to take over KAI in October and restore its image.

His remarks on Friday were meant to assuage concerns that the collaboration with Lockheed Martin might be in jeopardy.

The CEO also hopes to resume supply of the company’s Surion helicopters to the Korean Army.

KAI had invested 1.3 trillion won to develop the helicopter, but the Defense Acquisition Program Administration, which manages procurement for the Korean military, halted the order in June after the Board of Audit and Inspection reported the model had defects, including ice forming inside the helicopter when the weather drops to minus 30 degrees Celsius (negative 22 Fahrenheit).

KAI had delivered only 66 of the 210 helicopters ordered.

While Kim acknowledged that the model did not meet the government’s standards in ice formation, he believed it was 95 percent there, and promised to resolve the problem and supply the rest of the helicopters this year.

During the press conference, Kim also announced the company’s goals of ranking among the world’s top five aerospace companies by 2030 and pursuing development of civilian aircraft in 2022.


BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]