State Comptroller Scores Iai

The government-owned Israel Aircraft Industries, one of Israel’s largest industrial enterprises and long regarded as one of its most successful, came under scathing criticism by the State Comptroller in a report released here today. The report prompted demands in the Knesset for an immediate investigation of IAI which employs some 18,000 workers.

The report, by Comptroller Itzhak Nebenzahl, primarily questioned the wisdom of the company’s investment in two commercial aircraft–the Arava short-take-off-and-landing (STOL) transport plane and the Westwind executive jet. According to the report, IAI invested IL 250 million in the Arava and IL 350 million in the Westwind, but sales so far have brought in only IL 57 million. Economists maintain that 217 Arava planes must be sold in order to recoup the investment but 39 have been sold so far. Al Schwimmer, managing director of IAI is abroad and unavailable for comment on the report.

The Comptroller’s report charged that IAI poured its profits, derived mainly from repair contracts with the Defense Ministry, into the development of the Arava and Westwind which the report said, was bad business.

The Comptroller rejected IAI’s contention that the investments in the two civilian aircraft were useful in the later development of the “Kfir” jet fighter, the first combat plane designed and produced in Israel. On the contrary, the report said, the development of the “Kfir” was slowed down because manpower was assigned to the Arava and Westwind. The Comptroller also questioned why 70 of 200 former IAI employes who left their jobs last year received higher than usual severance compensation. He said that in half of the personnel files he could not find any reason why employment-was terminated or an explanation for the unusually large compensation.

Likud MKs Yosef Tamir and Akiva Nof said they would call for an immediate review of the report by the Knesset committee on State-controlled corporations. They said the report indicated that the IAI management had presented exaggerated profit estimates for the two civilian aircraft in order to get large budgets approved for their development. According to Simha Saddan, a Tel Aviv University economist. “The idea was to develop the aircraft at almost any costs, even by presenting inaccurate facts.”