BAE Systems’ deal to develop Turkey’s first home-built fighter jet has been delayed as the UK assesses the aftermath of the attempted coup against President Recep Tayyip Erdogan, according to people familiar with the situation.
Formal details of the cooperation with Turkish Aerospace Industries on the jet, dubbed the TF-X, may be announced only toward the end of the year, the people said. The agreement had originally been expected within the next few weeks, two of the people said.
BAE is competing with Airbus Group for the right to help design and develop the plane, which is targeted for completion by 2023, according to one of the people. A deal would help the UK defence industry push into new export markets, an effort that has gained importance since the June vote for Britain to exit the European Union. For Turkey, a home-grown combat aircraft would help reduce dependence on Germany and the US for military equipment.
Last month’s failed coup probably increased Erdogan’s determination to complete the fighter jet project, said Richard Aboulafia, a Fairfax, Virginia-based analyst with Teal Group. “Historically, indigenous fighter jet projects have been driven by a mix of nationalism and paranoia, and Turkey under Erdogan checks both boxes,” he said.
The delay comes as the UK government keeps watch over Erdogan’s response to the coup, the people familiar with the talks said. It’s another example of how relations between Turkey and its western neighbours have soured. NATO was even forced to issue a statement last week saying Turkey’s membership in the military alliance is not in question. Still, Turkey’s trade with the EU was worth $147 billion last year, underscoring the depths of its ties to the bloc.
Turkey could buy about 250 of the TF-X aircraft, Aboulafia said. The country, which has the second-biggest air force in the North Atlantic Treaty Organization, already ordered 100 Lockheed Martin Corp. F-35 fighter jets, due for delivery starting in 2018.
BAE rose 0.2 per cent to 522.50 in London. The shares have climbed 4.6 per cent this year, giving the contractor a market value of 16.6 billion pounds ($21.6 billion).
BAE is “supporting pre-contract studies with Turkish industry and government” after a request for proposals for collaboration on the TF-X program, the company said in an e-mailed statement. BAE said it can never comment on the next stage of a customer’s program.
“The UK continues to support the modernisation of the Turkish armed forces as a key member of NATO,” the Ministry of Defence said in a statement. The ministry said it could not comment on specific programs but the government “remains supportive of UK companies working in Turkey in line with European consolidated export control criteria.”
The Turkish jet will help BAE broaden its military-air division beyond the Eurofighter Typhoon, which entered service in 2003. The Eurofighter accounted for about 17 per cent of the UK defence contractor’s total sales last year, according to Sandy Morris, a London-based analyst for Jefferies International.
Based on similar Korean and Japanese indigenous fighter jet programs, Turkey will spend about $11.7 billion on the TF-X’s development costs, said Ben Moores, an analyst with IHS. BAE stands to reap at least one-quarter of that amount, or $2.93 billion, as well as additional revenues from potentially helping to make the aircraft, plus maintenance agreements and export opportunities, Moores said.
Turkey first signaled its interest in working with BAE in December, Turkish Aerospace said. A spokeswoman for the company didn’t respond to requests for comment on the delay.
The deal is in part a government-to-government agreement, according to the people familiar with the project. The UK is negotiating with Turkey’s Defense Industries Secretariat, a co-owner of Turkish Aerospace that oversees military projects and is chaired by the prime minister.
An airstrip the company rents from the Turkish Air Force and used for testing was destroyed during the 15 July coup attempt. Erdogan’s forces bombed the runway to prevent the coup’s coordinators from sending more of the state’s F-16 warplanes into the skies.
The aircraft were being used to bomb Turkey’s capital, targeting buildings including the parliament and producing low-altitude sonic booms over both Ankara and Istanbul. The Akinci airstrip, which lies just west of Ankara, is due to start repairs next week, according to one of the people.
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