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What happens when competition heats up? When it happens to a private firm or public company, it is forced to become more efficient, to make structural changes, to slash costs, to close units and departments and to dismiss managers and staffers.

The layoffs are, of course, the hardest cut of all. The company has to dig deep into its pockets and take out the cash that it had put aside for such an occasion (in pension and redundancy funds) in order to offer the staffers a fair package.

In the defense industry, however, it's another story. There, they have been quite cut off from the State of Israel for the past 20 years. In that period, every two or three years, they declare a "recovery program." But, instead of digging into their own pockets, they dig deep into ours - the taxpayers' pocket.

Now Israel Military Industries (IMI) is in a crisis. As part of its recovery plan, it needs to lay off some 650 workers out of a workforce of 3,000. To do this, it has demanded NIS 750 million from the government to finance the early retirement packages. The treasury refused to pay up. First it wants to privatize IMI, and while they are cleaning out the stables there, it will be possible to sit and talk about early retirement packages.

In comparison, Israel Aircraft Industries (IAI) is not in a crisis, although it also wants money. It needs a recovery plan to save itself from falling into losses, so it plans to lay off 600 staffers, and wants the treasury to pay around NIS 700 million. That's the company's reaction to the treasury asking for a dividend. Yesterday, for the first time, defense company Rafael paid a handsome NIS 40 million to the government in dividends.

Proper management would have the company managers putting money aside into a special fund to finance early redundancies. And, to finance that, the companies should chop their expenses, become more efficient, cut pay from the top - and with the money saved, pay into the fund's coffers. But that would be too difficult. Better to live well, like lords, and when it comes to the crunch go running to the government and demand a hundred million or two.

Is the blood of Israel Aircraft workers redder than that of others? Or do they exercise greater political power in the guise of party central committee members or an MK like Haim Katz?

Now and again IAI publishes figures from its financial report. Sometimes it'll show revenues, another time, its profit (if it has one). The report itself is not published. The public cannot read it or check it, but one thing they can be sure of: The managers have made no provisions for early redundancy or pensions.

The treasury wants IAI to float 20 percent of its shares on the stock exchange, which would thrust the defense firm into a new era of management disclosure - like what happened to Bezeq. But CEO Moshe Keret is not crazy about the idea. Keret has proved himself a good CEO, but after so many years at the helm of a company with turnover of $2 billion, the time has come to move over.

Israel Aircraft Industries needs a new CEO and chairman (not political appointees and not former army generals), who will promote this new era of privatization. It is illogical for Keret to fill the post of chairman after being CEO for so long. He is not the one to lead the change in culture and management that is so sorely needed - even if Haim Katz, MK and head of the workers union, so badly wants him.