KAI considers price cut of T-50 unit to win bid: new CEO

SACHEON, South Gyeongsang Province -- As part of efforts to secure a multibillion dollar trainer jet project in the United States, South Korea’s sole aircraft manufacturer is considering ways to cut expenses including labor costs, said the new chief of Korea Aerospace Industries on Friday.

At a press conference held at KAI’s headquarters in Sacheon, South Gyeongsang Province, the company’s new President and CEO Kim Jo-won said KAI is seeking ways to adjust the unit price of the T-50 advanced trainer jet at the request of its US partner Lockheed Martin, he said.

“To win in the bidding competition with Boeing, Lockheed Martin is demanding its partner KAI cut the cost,” he said. “It’s a life or death opportunity for KAI and we have been making efforts by transforming the management and cutting costs including labor costs.”

The comment came amid intensifying competition for the US Airforce’s advanced pilot training project, known to be worth some 17 trillion won ($15 billion). The final result is expected to be revealed in the first or second quarter of next year, according to the company.

KAI also plans to push ahead with entering the maintenance repair business, an attempt to stabilize its sales in the long term. The government is expected to give business approval by January, and KAI is likely to launch an affiliate to run the business, said Kim.

The former bureaucrat, who spent most of his career at the nation’s audit agency, was appointed as the new head of KAI in October, filling a management vacuum triggered by the alleged corruption and embezzlement involving top officials including the former head.

Despite suffering damage to its reputation and operations, the company will seek a turnaround next year. It has resumed deliveries of its rotorcraft and is making efforts to secure additional orders overseas.

In the third quarter of this year, the company posted a year-on-year sales decline of 92.1 percent in aircraft exports and 34.5 percent in its military business, largely due to provisioning and suspended trading.

KAI will deliver around 30 Surion helicopters to the military, Korea Forest Service and police starting next year.

Last week, the company signed a $780 million deal with the Philippine government to deliver the FA-50PH training simulator by March 2019.

According to Kim, in 2018, KAI will develop talks further with countries such as Argentina, Botswana, Indonesia and the Philippines to export its trainer aircraft FA-50PH. He added that the company is expected to clinch at least two deals from countries with which the company is currently in talks. 

By Shim Woo-hyun (ws@heraldcorp.com)