How Israel Aerospace Went From Sky High to Free Fall – Haaretz

On paper, the idea sparkled. Israel Aerospace Industries, maker of smart weapons and systems, would make state-of-the-art executive jets for Americans. It has the know-how and the Americans have the money and the desire, IAI figured.

So, in the 1970s, IAI began to make executive jets. It would hand them “bare” to Gulfstream, which would accessorize them and sell them to rich people. In 2016, these jets generated 8% of IAI’s revenue — but they weren’t profitable. Over the years the Israeli company lost tens of millions of dollars on Gulfstreams, about 1 million shekels ($292,500) per plane.

IAI’s 2016 financial report doesn’t disclose the losses specifically on Gulfstreams, but its Business Jets Division lost $20 million that year. (Other divisions were profitable).

In December 2014 State Comptroller Joseph Shapira revealed that IAI had accrued losses of tens of millions of dollars.

Company executives admit IAI loses money on the executive jets and should close the division. It helped depress the company’s profits to 1% of sales in 2016 (the last year for which a financial statement exists).

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Other Israeli defense companies, such as Rafael Advanced Defense Systems and Elbit Systems, strive to surf the wave, changing with the world. But IAI has floundered in the face of mounting competition from U.S. companies as well as India’s new “buy-at-home” policies. Its problems were aggravated by the powerful union cowing the management.

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