Boeing Delivers 1st Spy Plane To Turkey; Faces Penalties

Boeing Delivers 1st Spy Plane To Turkey; Faces Penalties

After several years of delays, Boeing has delivered an airborne early warning and control (AEW&C) aircraft to Turkey but faces penalties now being negotiated with the Turkish government.

The aircraft, the first of a batch of four, has arrived at an Air Force base in Konya in central Turkey for acceptance tests. A high profile inauguration ceremony for its official delivery is planned for Feb. 21, officials said. The aircraft will be deployed at the 3rd Main Jet Base in Konya.

Under a July 2003 contract priced at more than US $1.6 billion, Boeing was to develop and deliver four AEW&C aircraft to the Turkish Air Force in 2008. The program involved the delivery of the 737-700 airframe, ground radar and control systems, ground control segments for mission crew training, mission support and maintenance support.

Ankara said in 2013 that it would impose sanctions on Boeing “for major delays” in the spy plane program, a top Turkish official said.

Turkish Defense Minister Ismet Yilmaz said last April that major delays in the program were due to the company’s failure in developing the system as well as other uncontrolled events within the program.

“There will definitely be sanctions on the company for delays,” a senior procurement official said Feb. 1. “This is a complex legal/corporate matter now being negotiated.”

The official would not mention any specific penalty or even if the penalty would be a fine only or a blend of fine and other compensatory action by Boeing. The official cited the commercial secrecy clause in the contract for not elaborating on the penalty.

GTC Iletisim Danismanligi, an Ankara-based public relations firm that handles media queries for Boeing in Turkey, referred questions to Turkey’s procurement authorities.

In December, Turkish media widely speculated that Boeing would be fined about US $600 million for the delays, but the procurement official denied these reports. “It would not be accurate to mention any figure at this stage,” the official said.

Another procurement official familiar with the program said the negotiations centered on Boeing’s proposal that offered some free spare parts, including for ground station equipment, maintenance, extended guarantees and extra local work share.

Turkish companies that work as subcontractors on the program, dubbed Peace Eagle, include Havelsan, Tusas Turkish Aerospace Industries, Mikes, Aselsan and Turkish Airlines.

“We hope that there should be a compromise point satisfying both sides at some stage of negotiations,” the second procurement official said. He could not disclose anything further because “that would mean a breach of the contract.”

The generic compensation in any major Turkish defense contract is 0.03 percent per day, but different contracts can have lower or higher percentages and different rules of application.

Both procurement officials said delays resulted from Boeing’s failure and “force majeure.” They said Turkey would sanction Boeing only for its own failures. “It is not always too easy to understand which factor caused how much delay,” the senior official said.

The “force majeure” refers to delays outside Boeing’s control, such as a now-defunct Israeli blockade of some parts in the program.

A clampdown by the Israeli Defense Ministry on the delivery of subsystems for the Turkish AEW&C program was only recently removed. Elta, the Israeli maker of the electronic support measures systems for the 737-700 serial, had since autumn 2011 been lobbying to remove the MoD licensing block preventing the delivery of the systems to Turkey.

Elta is a subcontractor of Boeing in this program and was building the electronic support measures for four aircraft under a subcontract worth more than $100 million.

The support measures are a passive, purely defensive system that does not enhance the firepower of the Turkish Air Force. The AEW&C system can be used offensively to direct fighters to their targets or defensively in order to counter attacks by enemy forces in the air and on the ground.

The Israeli MoD, in December 2011, refused to allow Elta and Elbit, another Israeli company, to complete deliveries of long-range aerial photography systems to the Turkish Air Force.

The clampdown on the Boeing-led program marked the first Israeli government decision to force a US weapons-maker to fail to fulfill its contractual commitments to a third country governmental buyer — and at a time when the program itself faced major delays.

An industry source said part of the delays was because the Turkish Air Force demanded extra features to be installed on the aircraft. “These features were not part of the original contract, so they can be viewed as force majeure too,” said one source familiar with the program.

The 737-700 aircraft are to be used as part of Turkey’s NATO capabilities.


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