Boeing faces Turk penalties Seeks compromise on AEW&C project delay By Burak Ege Bekdil, Ankara & Umit Enginsoy Defense News February 26, 2007 Turkey and Chicago-based Boeing, one of the country’s major weapon systems suppliers, appear to be drifting toward a contract dispute over delays in the delivery of airborne early warning and control (AEW&C) aircraft, with Ankara demanding large sums in penalties and the company seeking a way out of the crisis. “We are very much disappointed [by the delays],” Murad Bayar, Turkey’s defense procurement chief, told Defense News. It is almost certain that the delivery of the first aircraft will be delayed 18 months, a procurement official in Ankara familiar with the AEW&C program said, “and we don’t know how long the other deliveries will be delayed.” Under the original $1.6 billion contract, deliveries should be starting later this year. Boeing informed Turkey of the expected delays last summer, but subsequent talks to determine a renewed and concrete schedule have failed. Boeing and Bayar’s Undersecretariat for Defense Industries (SSM), Turkey’s procurement agency, signed their contract in 2002. The deal includes the Turkish Air Force’s acquisition of four 737-700 AEW&C aircraft, ground radar and control systems plus ground support segments for mission crew training, mission support and maintenance support. The Turkish procurement official said “SSM would go by the book” in efforts to clear up the dispute, which means that Ankara will be insisting on the penalties as specified in the contract. “That may mean Boeing having to pay over $100 million,” he said. Boeing officials said they are trying to sort out the problem stemming from the delay in Turkey’s AEW&C program, dubbed Peace Eagle. “Boeing is working with our customer to finalize a new, detailed schedule for Peace Eagle,” company spokesman David Sloan said. “We are committed to delivering an AEW&C system that meets Turkey’s operational requirements.” U.S. and Turkish industry sources said the delay mainly was a result of software production and integration problems. Boeing officials also admit that the development of Turkey’s Peace Eagle system has been a greater challenge than anticipated. One Turkish industry source in Ankara said Boeing, in an effort to avoid cash payment, might offer alternative methods, such as free servicing and parts or work for other procurement programs. Turkey’s 2002 contract came shortly after a similar but larger deal between Australia and Boeing. Under that contract, Australia has ordered six 737-700 AEW&C aircraft and related systems. But the Turkish procurement official said there also were delays with Australia’s program. A senior Turkish military official said Boeing’s failure to fulfill its contractual obligations could force the Air Force to divert from preplanned operational capabilities. “We have devised our operational planning for the years ahead on assumption that the AEW&C aircraft would be in service as scheduled,” he said. “The new situation may force us to make revisions.” An Ankara-based analyst said, “Increasing tensions in the region, especially uncertainties over Iran’s nuclear ambitions, and multiple asymmetrical threats surrounding Turkey would oblige for the imminent use of the AEW&C aircraft Turkey had ordered. Delays come at the wrong time and may weaken Turkey’s defenses.” The country’s planned AEW&C system, based on Boeing’s popular 737-700 commercial aircraft, should come with Northrop Grumman’s MESA electronically scanned array radar, an all-weather, 360-degree air and maritime mode system. An airborne early warning system is a radar carried by an aircraft designed to detect other planes. Used at a high altitude, the radar allows the operator to distinguish between friendly and hostile aircraft hundreds of miles away. AEW&C aircraft are used offensively to direct fighters to their target locations,and defensively to counter attacks. The program snag came at a time when Boeing also was seeking to market its AH-64D Apache Longbow attack helicopters to the Turkish Army. Despite staying out of an official Turkish tender involving Italian-British group AgustaWestland and South Africa’s Denel to co-produce at least 30 helicopter gunships worth about $2 billion, Boeing has offered an alternative solution: selling the AH-64 through a U.S. Foreign Military Sales scheme. Bayar has ruled out any purchase from a nonparticipant in the attack helicopter bidding, meaning Boeing, but many Army and military command officials favor the AH-64. (Archives)