Korea Aerospace Industries Ltd. (KAI) is on the verge of losing a chance to bid for what would be its biggest defense contract worth 17 trillion won ($15.1 billion) amid ongoing investigations by the South Korean prosecutors over alleged corruptions in the company.

In a press conference held at the National Assembly building in Yeouido, Seoul, on Thursday, the labor union of KAI urged for a swift normalization of its business irrespective of the prosecution’s investigation into alleged corruptions related to defense procurements. The KAI union demanded a new KAI chief should be named as soon as possible to resolve liquidity issues and put business back in order. It also asked for the government and the President to help prevent its plan to bid for the Advanced Pilot Training (APT) project, a mega project by the U.S. Air Force to replace 350 aged trainer jets with next-generation fleet, from falling through.

KAI has teamed up with U.S. Lockheed Martin to win the APT deal, which would be the biggest contract in the Korean defense industry if they win. It involves 17 trillion won worth of defense supply and the total is projected to go up to 100 trillion won when including 33 trillion won worth of follow-up airframes such as imaginary enemy aircrafts and 50 trillion won worth of supply to third marketplace. KAI has upgraded Korea’s indigenous T-50A jets for the APT competition, gearing up its efforts to bag the order.

But the plan recently hit a snag after the country’s prosecutors early last month began probes into the country’s largest defense and aircraft company on a series of alleged collisions with the military and corruptions related to defense procurements. Since then, the company’s CEO resigned over the corruption scandals and its stocks have plunged amid growing concerns over the company’s management and business prospect.

Also the prosecutors’ investigation soon raised questions about whether KAI would finish the race for the APT project because the U.S. authority that will decide on the trainer model takes account of ethical issues of its contractor when making a decision. Under U.S. Federal Acquisition Regulation, a bidder or government contractor will have limited qualification when irregularity showing lack of integrity is found.

Without an early termination of the investigation, KAI would be disqualified from a bid for the APT project, an unnamed official from the global defense industry warned.

Currently, KAI and Lockheed Martin are competing against the Boeing-Saab consortium and U.S.’s DRS Technologies that also submitted final bids to participate in the U.S. Air Force trainer auction up for grabs. The supplier will be named in December.

By Kim Jung-hwan

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]