The Government is considering setting up a Crown-owned company to complete the upgrade of the Air Force's C130 Hercules.
However, a decision is unlikely to be made for several months.
On Tuesday, Defence Minister Wayne Mapp announced that the Government had reached a deal with the US main contractor L3 Communications to finish the upgrade after one of the main sub-contractors, Air New Zealand subsidiary Safe Air, pulled out of the work.
Delays mean the upgrade is now at least two years behind schedule.
Under the deal, the Government takes over the work Safe Air was responsible for.
A project management team will be appointed to run the contract and that could eventually be transformed into some sort of Crown-owned company.
However, it is also possible a public-private partnership might be set up to finish the work.
Finding engineers may be tough - union
The Engineering, Printing and Manufacturing Union says it will be difficult finding the 50 engineers needed to upgrade the Air Force's Hercules fleet.
The Blenheim-based Safe Air pulled out of the contract and laid off nearly 100 engineers it had employed to do the work.
The EPMU says finding the engineers needed to do the work will not be easy, because many of those laid off have left either Blenheim or the country.
However, union president Andrew Little is commending the Government for putting the deal together and says it is keen to work with it to attract the engineers to do the job.
