from the September 2017 issue

Israel Aerospace wins NIS 390m Hercules maintenance contract

The follow-on agreement between Israel's Defense Ministry and IAI for the transport carriers is for five years.

Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) has been awarded a five year contract worth NIS 390 million by Israel's Ministry of Defense to continue maintenance of the air force's fleet of Hercules (Karnaf) transport aircraft. For the most part these are aging aircraft, which have been part of Israel Air Force since the 1970s.

In the past two years, the Israel Air Force has received eight new Super Hercules Shimshon (C-130-J) model aircraft, which were procured from Lockheed Martin for $65 million per plane. A ninth such aircraft will be delivered to the Israel Air Force in 2018.

IAI Bedek Division head of the Israel Air Force planning administration David Pollack told "Globes" that the new deal is a follow-on contract on a ten year agreement which expired at the end of 2016. The previous agreement was worth $250 million.

The new deal is only for five years because it is unclear how many new aircraft for missions like midair refueling will be delivered to the Israel Air Force. Delivery of these aircraft would alter the volume of work required and thus the structure of the contract between IAI and the Ministry of Defense.

The maintenance contract also includes Knafaim Holdings Ltd. (TASE: KNFM) unit Kanfei Maintenance as a subcontractor undertaking work worth NIS 52 million.

Pollack said, "In maintenance of these planes there are many challenges with a large part of them very old, having served the air force for decades. Production lines for spare parts for these planes have already closed down and one of our challenges is to find spare parts and suitable components and provide them quickly for fully servicing the planes."

Maintenance services will be provided by IAI and Kanfei Maintenance at the Nebatim air base in the Negev, which houses the transport carriers.

Knafaim won a contract several months ago to maintain the Israel Air Force's Nachshon intelligence gathering aircraft. Defense sources estimate that contract as being worth $10 million.

Reprinted from the Israel High-Tech & Investment Report September 2017

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