"Our goal is to sell a functioning company that will continue aircraft production," said Finance Minister Bohuslav Sobotka.

The Cabinet approved a two-round tender July 20 to sell Aero and its almost 10 billion Kč ($4 million) debt. During the first round of bidding, contenders must submit offers in line with criteria set by the finance, defense and industry and trade ministries.

During the second round of bidding, the company will be awarded to the highest bidder.

The ministries have until late August to develop criteria for the bidding and present them to the government.

Sobotka told journalists that the government plans to sell the giant aircraft maker in one piece to ensure that production will not be interrupted. This aspect of the sale is particularly important for the Defense Ministry, which is keen to keep Aero's military division afloat in order to secure maintenance for 24 Aero-produced L-159A aircraft the Army bought during 2000–04. The Army bought 72 aircraft during that period but only 24 will remain in its fleet. The remaining planes are slated for resale.

At the same time, Sobotka did not rule out that some of the company's assets could be transferred to the Defense Ministry.

"This issue is subject to further analysis," he added.

Possible risks

Aero Vodochody employs 1,600 people in three production programs, including military and civil aircraft. It is also engaged in a cooperative program encompassing production of Sikorsky helicopters for U.S.-based Sikorsky Aircraft, which accounts for 40 percent of Aero's 2 billion Kč annual turnover. Within this program the company produces the airframe for the S-76, a twin-engine helicopter used by a variety of customers across the world for off-shore oil transport, corporate transport, commercial service, emergency medical service (air ambulance) and search and rescue.

The privatization of the company has spiked concerns that Sikorsky may back out of its contracts with Aero if the Czech company were to be sold to a competitor. Aero Vodochody's spokesman, Vítězslav Kulich, admitted that Aero's privatization presents inherent risks to that contract.

"We are currently working on a proposal that would eliminate or minimize this risk," Kulich said, declining to disclose any details. Sikorsky spokesman Ed Steadham said in an e-mail that the U.S. company is satisfied with Aero's supplies and does not expect the privatization to affect the output of helicopters.

Indebted company

Aero Vodochody posted a 295 million Kč profit last year but is heavily burdened. It is almost 10 billion Kč in debt. In 2004, the firm issued about 5.5 billion Kč worth of euro bonds that will mature in November. The government plans to bail the company out but will transfer the claim to the state bailout agency, Česká konsolidační agentura (ČKA), along with a previous claim for paying the interest on Aero's revolving loan. Aero's financial problems stem from its failure to find a stable market for some of its products.

In 1998, a 35 percent stake in the company was awarded to Boeing. However, in October 2004 the government forced the U.S. firm to give up its stake for 2 Kč, claiming that Boeing had failed to restructure the company.

Sobotka declined to disclose how much the government expects to raise as a result of the sale but said the company is sure to attract suitors.