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| with delivery of the first two scheduled for 2007. The final three aircraft will be modified by Tusas Aerospace Industries in Ankara, Turkey. |
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| Turkey, Boeing Overcome Snag in AEW&C Deal By BURAK EGE BEKDIL, ANKARA Turkey and Boeing have overcame a major snag in the Turkish Air Force’s $1.5 billion airborne early warning and control aircraft (AEW&C) program, procurement officials here said. The problem between Turkey’s procurement office, the Undersecrateriat for Defense Industries, or Savunma Sanayi Mustesarligi (SSM), and Chicago-based Boeing surfaced earlier this year when the former insisted on amending the contractual clauses related to the escalation rate in the original 2002 contract, claiming it would work to Turkey’s disadvantage. The escalation formula — which specifies the rules for increasing costs in line with a pre-agreed payment timetable, delays and other financing costs — was revised “in a way closer to SSM’s demands,” the SSM official said. He said the revised formula will save Ankara up to $100 million. Also earlier this year, SSM suspended a milestone payment to Boeing, citing the dispute over the contract. In return, an SSM official said, Boeing unofficially threatened to take the issue to international arbitration. “But we and Boeing sought an amicable deal and reached one in November,” the official said. Turkey chose Boeing for the deal in 2000 and the two signed the AEW&C contract in 2002. |

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| The peace eagle has landed Tuesday, March 21, 2006 In an exclusive interview with the TDN, Boeing Peace Eagle program head Mike Brewer discusses the airborne early warning and control aircraft and its implications for the Turkish defense industry GÜRHAN GÜRKAN ANKARA - Turkish Daily News Boeing Co. last week brought to Turkey a 737-700 plane that is the second of a batch of four airborne early warning and control (AEW&C) aircraft, known as Peace Eagles, for the Turkish Air Force. The more than $1 billion Peace Eagle contract includes a ground support segment for mission crew training, mission support, system maintenance support and options for two more aircraft, and Turkish firms are extensively involved. The first plane is undergoing modification by Boeing in Seattle, Washington, where the Multi-role Electronically Scanned Array (MESA) radar antenna has recently been installed. The second plane was delivered to Ankara-based Tusas Aerospace Industries (TAI) for modification into an AEW&C platform. “The Peace Eagle has provided Boeing and the Turkish defense industry the opportunity to work together and strengthen our relationships, leading to future opportunities,” said Mike Brewer, Boeing Peace Eagle program manager, in an exclusive interview at the Turkish Daily News Ankara offices. One of the stated objectives of Turkish defense officials is to expand the capabilities of the local defense industry, and the Peace Eagle program is consistent with this policy. “With direct participation and offsets, there is over $900 million worth of work for Turkish firms,” said Brewer when asked about the Turkish contribution. “The arrival [of the second plane] marks the start of the program's production phase in Turkey, where TAI will transform a commercial plane into an AEW&C system.” Brewer said this state-of-the-art aircraft is often mistakenly referred to as an AWACS plane and wanted to emphasize the distinction. “Many people confuse the AEW&C with the older AWACS (airborne warning and control system). The AWACS has a rotating conventional radar, whereas the newer AEW&C has an electronically scanned radar system,” among other technological advancements. The MESA antenna atop the plane is the critical sensor and is designed to provide optimal performance in range, tracking and accuracy. Additionally, the radar is able to track airborne and maritime targets simultaneously. The antenna measures 35.5 by 11 feet and weighs more than three tons. TAI personnel will install a reinforced upper section where the aircraft's MESA radar will be attached. Other extensive installations and modifications to be carried out by Turkish firms include a new communications system, new power and cooling systems, mission consoles and modifications to the environmental control and hydraulic systems. According to a TAI manager, the Turkish defense giant will gain engineering, integrated logistic support, repair and maintenance as well as management capabilities on 737 AEW&C aircraft. Some other Turkish companies participating in the Peace Eagle program are Aselsan, SELEX, Havelsan, MiKES and Turkish Airlines (THY). Aselsan and SELEX will handle the communications equipment; Havelsan is responsible for mission system software, design and development of ground systems and the software support center; MiKES will oversee the integration of their ESM systems; and THY is in charge of the training of flight crews and aircraft maintenance training. The scope of the Turkish involvement is indicated by the fact that Turkish staff were assigned to the United States. “By nature of the project there is considerable technology transfer. … We have Turkish engineers working together with the Boeing team in Seattle,” said Brewer, adding that “the AEW&C will not only protect the airspace of Turkey but can be used in search and rescue and other non-military roles.” As a show of its commitment to the success of the program, Brewer said, “Boeing maintains a presence in Turkey for consultation and support to our Turkish industry partners.” Work on the other aircraft will begin in September 2006, and the final Peace Eagle will move into the TAI hangar in March 2007. Delivery to the air force of the four Peace Eagles is scheduled to be completed by the end of 2008. |
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| The First Peace Eagle B737 AEW&C Aircraft Arrives at TAI (Source: TUSAS Turkish Aerospace Industries; issued March 29, 2006) On the occasion of the arrival of the Peace Eagle program aircraft to TAI facilities in Ankara and opening of the hangar built for this program, a ceremony was held at TAI facilities on 13 March 2006 at 15:30 hours. Chief of Staff of the Turkish Air Force (TuAF) Lt.Gen. Bilgin Balanlı, Undersecretary for Defense Industries Mr. Murad Bayar, Boeing Vice President Mr. Patrick Gill and TAI General Manager Mr. Muharrem Dφrtkaşlı delivered a speech during the ceremony. The prime contract, which was signed on June 4, 2002 between the Undersecretariat for Defense Industries (SSM) and the Boeing Company for the acquisition of B737-700 aircraft to be converted into Airborne Early Warning and Control (AEW&C) aircraft, became effective on July 23, 2003. Under the Peace Eagle program, considered to be one of the major defense industry programs of Turkey, a total of four B737 AEW&C aircraft (plus two optional) and one Ground Support System will be purchased from the Boeing Company. The subcontract between TAI and the Boeing Company, covering structural modification, systems installation, functional tests and delivery, was signed on January 28, 2004. The program will provide work share amounting to a total of 195 million U.S. Dollars to the Turkish Defense industry companies including ASELSAN, HAVELSAN, HAVELSAN Teknoloji Radar, MİKES, SELEX and THY. Of this amount TAI’s work share is around 49 million U.S. Dollars. A TAI team, composed of 35 engineers and technicians, has been participating in the modification activities of the first of the four B737-700 aircraft carried-out in Boeing Seattle facilities. In accordance with the program structural modification, systems integration, functional tests and delivery activities of the remaining three aircraft that will be flown to Turkey as green aircraft will be performed at TAI facilities. The first aircraft is scheduled to be delivered by July 19, 2007, the second by October 4, 2007, the third by February 13, 2008 and the fourth aircraft by June 18, 2008. Within the framework of the contract, the ground, functional and flight tests of the AEW&C aircraft will be performed for the functional systems (mechanical, electrical, electronic and avionic) that are to be removed, replaced and installed with the current operational systems. In addition, TAI will perform all the required periodical scheduled and unscheduled maintenance activities of the aircraft, during the modification period when the aircraft remains in operational. TAI is also responsible from 26 work packages, comprising manufacture of parts and components, required for the modification. These work packages include Tail Cone, Wing Tips, Dorsal Fin, Ventral Fins, ATB Fairing, Electrical Cabinets Components, Composite Ducts, fairings, wire splice kits and considerable amount of NC and sheet metal type parts. TAI will also provide integrated logistics support to TuAF after the delivery of the aircraft. The Peace Eagle program has a Direct Offset amounting to nearly 740 million U.S. Dollars to be exported from Turkey within ten years. Under the Direct Offset program the work package, that amounts to 500 million U.S. dollars, will be transferred to TAI in a period of ten years, covering the manufacturing and assembly of commonly used parts and components (6500 items) of B737, B747, B757, B7677 and B777 aircraft. With this program, TAI has gained a new hangar building, meeting international standards, with the capacity of storing two B737-700 or similar type military and commercial aircraft. With the Peace Eagle program TAI aims to gain engineering, fabrication, integrated logistic support, repair and maintenance as well as management systems capabilities on B737-700 AEW&C aircraft. Having gained these capabilities, TAI, in future will be ready with its experienced personnel and facilities, to meet the requirements of the Turkish Air Force AEW&C aircraft, in the areas of repair, maintenance, refurbishment, modernization and integrated logistic support services. -ends- |
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| Australia Rips Boeing for Delays on AWACS Project By REUTERS Australian Defence Minister Brendan Nelson blasted Boeing Co. on June 28 for what he called significant delays on a $3.5 billion new Airborne Early Warning and Control (AWACS) aircraft it is building for Australia. "We are very disappointed with Boeing’s performance on this project," a terse Nelson told a joint news conference with U.S. Defense Secretary Donald Rumsfeld. "I think Boeing has let the Australian government down, and I think they’ve let themselves down," he said, underscoring the importance of the program to Australia. Nelson said he met top officials of Chicago-based Boeing, the No. 2 U.S. defense contractor, including Jim Albaugh, who heads the company’s defense business, to discuss the latest delays in the program. He said senior Australian defense officials would spend the next weeks negotiating a new schedule for the "Wedgetail" program with Boeing, adding, "What I intend to do is to make damn sure that Boeing delivers on the project." Ultimately, he said he expected the project to succeed. "I’m confident we’ll get the capability and the outcome that Australia needs and has signed up for," he said. Boeing spokesman Dan Beck said the company was discussing the schedule with Australia "in light of the achievements to date and the balance of work to go," but remained "fully committed" to delivering an AWAC system that met its needs. Boeing is building six early warning aircraft, which are based on its 737-700 aircraft, for Australia. Los Angeles-based Northrop Grumman Corp. is building the Multi-role Electronically Scanned Array (MESA) radar for the planes. Nelson did not say exactly how long it would now take to field the new planes, but Australian news reports put the delay at 18 months and blamed it on testing problems with radar and sensor computer systems. Another Boeing spokesman, Dave Sloan, said the company was building two Wedgetail aircraft for Australia in Seattle, and two of four more were already under construction in Australia. In January, Boeing said the six planes would be delivered in 2008. |
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| Boeing to Take Charges in Second Quarter for Airborne Surveillance Program and Previously Disclosed Tentative Legal Settlement (Source: Boeing Co.; issued June 29, 2006) CHICAGO --- The Boeing Company announced today that it will recognize charges related to delays on an international airborne surveillance program and a previously disclosed tentative legal settlement with the U.S. government when it announces second-quarter 2006 results July 26. Boeing expects to record a charge of between $300 million and $500 million pre-tax due to delays related to its Airborne Early Warning & Control (AEW&C) program for Australia and Turkey. Additionally, the company expects to recognize a $615 million charge to reflect a tentative settlement with the U.S. Justice Department related to the hiring of a former Air Force official and handling of a competitor's proprietary information. The expected charge for AEW&C program delays will be finalized after ongoing reviews and will be recorded in the Precision Engagement & Mobility Systems segment of Boeing's Integrated Defense Systems business. The actual amount of the charge will be determined over the course of the next few weeks as the recovery plan is better understood and will be disclosed when Boeing issues its second quarter financial results. This international airborne surveillance program, known as Wedgetail in Australia and Peace Eagle in Turkey, consists of the 737-700 aircraft outfitted with highly complex, integrated command and control and advanced radar systems. Australia has purchased six AEW&C aircraft and Turkey has purchased four. Delivery of the first two Wedgetail aircraft and that effort's flight test schedule have been delayed up to 18 months because of development and integration issues with certain hardware and software components. Boeing now plans to deliver all six Wedgetail aircraft by the end of 2008 and is developing the Peace Eagle schedule with its Turkish customer. "We regret the impact that these program delays are having on our customers," said Boeing Chairman, President and Chief Executive Officer Jim McNerney. "However, we are fully committed to a recovery plan that will deliver systems that meet their operational requirements." IDS has reorganized the AEW&C program, strengthened the management team and put additional oversight in place. The team is working with the customers and suppliers to implement a go-forward plan. That plan will target the talent and resources necessary to develop Wedgetail and Peace Eagle on realistic schedules compatible with the team's ability to deliver reliable, mission-ready systems. Separately, the tentative agreement with U.S. Justice Department announced on May 15, 2006, resolves all potential civil and criminal claims and includes a monetary penalty. While the agreement is still being finalized, the charge will be recorded in the second quarter. Boeing will update its 2006 and 2007 financial guidance, including the impact of these charges, at its next scheduled quarterly financial performance announcement on July 26. -ends- |

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