Ball in gov’t court after Onex makes EAB offer
After state-owned companies Hellenic Defense Systems (EAS) and the Hellenic Vehicle Industry (ELVO), the next in line to be restructured or shut down altogether is likely to be the Hellenic Aerospace Industry (EAB), as the representatives of Greece’s creditors are adamant that any state firms that are not sustainable in their current form must be closed.
EAB’s official function is to provide the state and other domestic and international clients with products and services including aircraft projects, aviation upgrades and defense systems in the defense, security and civil sectors. However, its debts and its particularly limited recent activity have made it a candidate for a drastic restructuring that would entail closure.
Just as EAB appeared doomed, a proposal came earlier this week from a company that claims to have the support of the Greek-American community, bringing some hope for the sector in Greece. At a press conference on Tuesday, Onex SA CEO Panos Xenocostas presented a five-year plan for a public-private partnership that would involve EAB equipment and facilities such as aircraft maintenance units.
While clarifying that he does not want to buy out EAB and its accumulated debts, the Onex CEO asked the state to launch a tender process for the creation of a new aerospace firm in which his company would hold a majority stake and the management, with the state retaining a minority holding with veto rights on issues of national interest. Onex intends to invest $100 million in five years, drawing on capital from US private equity funds, said Xenocostas. The investment plan for the first five years provides for sales of between $520 million and $1.1 billion, with exports accounting for 52 to 61 percent of the total. Regarding any possible reaction by the EAB union, Xenocostas stated that “the average EAB employee can only expect a better professional future,” adding it would accept it if the state made a guaranteed number of jobs a condition.
“It would be premature to judge the proposal, to issue our verdict on it, but this is the first time any proposal has been tabled regarding the future of the aerospace sector in this country. We still have to see what the government says about it, and of course what the troika will say about EAB’s future,” defense expert Vangelis Pagotsis, editor of specialist publication Elliniki Amyna kai Technologia (Hellenic Defense and Technology), told Kathimerini English Edition.
“It was not clear how the necessary funds will be drawn, while Onex has no presence in the industry, except for the supply of some lubricants for aircraft,” argued Pagotsis, noting that “Xenocostas referred to four sources of funding, and this is the first time an interest in the sector has been expressed by Greek Americans.”
The Onex proposal effectively means the end of EAB as we know it so that it can be replaced by a private company in which the state holds a stake. Is that the only alternative? “EAB cannot possibly continue as it is today,” responded Pagotsis. “The only logical solution would be for EAB to operate as a smaller unit that will be associated with the supply chains for fighter jets – an industry that is shrinking – and civil aviation and become a risk-sharing partner. That would indeed be viable and potentially prosperous.”
“A smaller EAB could then be sold to a company such as EADS. It has no future as a company only for maintenance, as that will not create any jobs or have any real prospects for growth,” stressed Pagotsis, adding that the government must now respond to that challenge.
