2016 Platforms - Clusters - Multinationals - Sub-Tier Suppliers Platforms - Clusters - Multinationals - Sub-Tier Aerospace - Defense - Original Equipment Manufacturers - Defense - Original Equipment Manufacturers Aerospace AEROSPACE & DEFENSE AEROSPACE TURKEY

TURKEY AEROSPACE & DEFENSE 2016

Distinguished GBR Readers,

Since the inception of the Undersecretariat for Defense Industries 30 years ago, significant steps have been taken to achieve the goals of having the equipped with modern systems and technologies and promoting the development of the Turkish defense industry.

In the last decade alone, the aerospace and defense (A&D) sector's total turnover quadrupled, while exports have increased fivefold, reaching $5.1 billion and $1.65 billion in 2014, respectively. The industry's investment in research and development (R&D) reached almost $1 billion in 2014. The total workforce in the A&D industry reached 30,000 personnel, of which 30% are engineers. Even more remarkable, Turkey is now at the stage of offering its own platforms for both the local market and to international allies, and has commenced a series of follow up local programs.

Although this progress has been achieved under the circumstances of a healthy and consistent political environment and in parallel with sustained growth in the Turkish economy, the proportion of expenditure for defense in the national budget and as a percentage of Turkey’s GDP has been stable.

With the help of the national, multinational and joint defense industry projects that have been undertaken in Turkey by the undersecretariat, the defense industry has become a highly capable community comprising large-scale main contractors, numerous sub- system manufacturers, small- and medium-sized enterprises, R&D companies who are involved in high-tech, niche areas, research institutes, and universities. Thus, we can proudly say that we have a constantly growing and ambitious defense sector that looks ahead to achieving even greater things.

Yours Sincerely,

Prof. Dr. İsmail Demir Undersecretary Undersecretariat for Defense Industries, Republic of Turkey (SSM) CONTENT

Introducing the Aerospace & Defense Making a Difference: Industry in Turkey Multinationals in Turkey

8. Ceaseless Search for Security: A Brief 44. Foreign Winds: International Players in Political and Economic Overview of Turkey Turkey 10. Interview with Undersecretariat for Defense 46. Interview with Investment Support and Industries, Republic of Turkey (SSM) Promotion Agency of Turkey (ISPAT) 11. On the Edge of Tomorrow: Turkey's 48. Interview with GE Aviation Aerospace and Defense Sector 49. Interview with Rolls-Royce 14. Interview with Turkish Armed Forces 50. Interview with Fokker Elmo Turkey Foundation (TAFF) 51. Interview with PFW Aerospace Turkey 15. Interview with Defense and Aerospace Industry Exporters’ Association of Turkey (SSI) and Turkish Defense Alliance (TDA) Securing the Supply Chain: 16. Expert Opinion by Global Risk Insights Turkey's SMEs

54. Into the Fray: The Importance of Sub-Tier Commanding from the Front: Suppliers Government, Clusters, and Associations 56. Interview with ASPILSAN 57. Interview with MilSOFT Software 20. Center of Gravity: The Role of Clusters Technologies Inc. and Associations in the Aerospace and 58. Interview with BITES Aerospace & Defense Defense Industry 59. Interview with ICterra Information and 23. Interview with Defense and Aerospace Communication Technologies Industry Manufacturers Association (SaSaD) 60. Interviews with Aycan Aviation and CNK 24. Interview with Teknokent Defense Industry Aerospace Ltd. Cluster (TSSK) 61. Interviews with Baturalp Taylan Ltd. and 25. Interview with OSSA Defense and Aviation Bodycote ISTAŞ Cluster

Into the Future: Domestic Drive: Final Thoughts Turkey's Aerospace & Defense OEMs 64. Final Thoughts 28. Leveling Up: Turkey’s Major Platforms and 66. Company Index and Credits Systems 30. Interview with Turkish Aerospace Industries, Inc. (TAI) 31. Interview with TUSAŞ Engine Industries, Inc. (TEI) 32. Interview with ASELSAN A.Ş. 34. Interview with HAVELSAN Inc. 35. Interview with Alp Aviation 36. Interview with Baykar 37. Interview with Defense and AYESAS 38. Interview with FNSS Defense Systems 40. Interview with Shipyard 41. Interview with Mechanical and Chemical Industry Corp. (MKE)

This research has been conducted by Irina Negoita, Neha Ghanshamdas, Edward Barss,

Edited by John V. Bowlus Graphic design by Gonzalo Da Cunha

A Global Business Reports Publication For updated industry news from our on-the-ground teams around the world, please visit our website at gbreports.com, subscribe to our newsletter by signing up to our VIP list through our website, or follow us on : @GBReports

TURKEY AEROSPACE & DEFENSE 2016 Exclusive Interviews Leaders from both the private and public sector delve into the nuances and nascent developments that are shaping the industry.

10, 14, 23, 30, 46, and many more

TOTAL TURKEY AEROSPACE & DEFENSE SECTOR EXPORTS BY COUNTRY, 2015 Source: SSM.

600,000,000 2015 500,000,000 2014 400,000,000 $547,677,784.82 TOTAL TURKEY AEROSPACE & DEFENSE SECTOR300,000,000 EXPORTS BY COUNTRY, 2014-2015 200,000,000 $556,455,534.94 Source: SSM. 100,000,000 0 $120,076,047.46 $121,641,740.83

$27,610,081.69 Editorial United States $106,638,291.03 $49,595,273.92 Malaysia $103,024,587.29 $60,094,745.02 % $88,663,546.70 33.6 $106,580,591.78 7.3 Content $76,732,468.95 6.4 United States 6.2 $77,194,948.51 Malaysia 5.4 $57,886,751.63 Saudi Arabia 4.6 3.5 $87,746,508.37 Germany France 3.3 Global Business Reports’ journalists provide $53,967,305.53 U.A.E U.A.E 3.2 $77,108,051.53 2.3 2.3 Azerbaijan $53,254,751.01 on-the-ground analysis of the trends that are 1.9 $454,414.48 Kuwait 1.5 Spain $37,666,617.44 UK 1.4 Kazakhstan 1.2 shaping Turkey’s aerospace and defense industry. $35,525,587.92 15.9 Italy $37,318,899.96 Bahrain $11,231,296.64 Tunusia Others Kuwait $30,885,312.08 $21,896,696.03 UK $24,696,926.40 $18,729,883.40 Kazakhstan 8, 11, 20, 28, $23,427,481.62 44, 54 $25,671,368.51 48˚ 44˚ 46˚ Pakistan $19,607,958.71 42˚ 38˚ 40˚ $380,605,285.31 36˚ 32˚ 34˚ Bahrain $263,883,759.1628˚ 30˚ 24˚ 26˚ Tunusia 600,000,000 500,000,000 400,000,000 42˚ 300,000,000 Others 200,000,000 100,000,000 0

42˚

Quantitative İstanbul 40˚

40˚ Kazan

Eskişehir Data and Maps

38˚ Quantitative data help readers better understand

İzmir the position of Turkey, especially relative to its38˚ global competitors.

36˚

36˚ 9, 11, 12, 13, 21

34˚

46˚ 44˚ 42˚ 40˚ 38˚ 36˚ 34˚ 34˚ 32˚ 30˚ 28˚ 26˚ Supply Chain Over 2,000 SMEs are operating in Turkey’s aerospace and defense sector. GBR goes in-depth to describe how these companies are supporting manufacturers. 54-61

Future Outlook Aerospace and defense is at the cutting edge of technology and risk. Turkey’s established and emerging players share their visions for the future of the industry. 64-65 Image: Vestel Defense and AYESAS. GBR • Industry Explorations • TURKEY AEROSPACE & DEFENSE 2016 INTRODUCING THE AEROSPACE & DEFENSE INDUSTRY IN TURKEY

“The Turkish aerospace and defense industry produces roughly 60% of its own needs for defense, while 40% comes from international sources. TAFF aims to improve the share of local production within the next five years, including supporting Roketsan and Havelsan, so that they can become one of the top 100 global companies like Aselsan and TAI.”

- Orhan Akbaş, Lieutenant General (Retired), General Manager, Turkish Armed Forces Foundation (TAFF) EDITORIAL B lack Sea

Kırklareli Sinop

Edirne Bartın Zonguldak Artvin Ardahan Tekirdağ Samsun İstanbul Karabük Kastamonu THE CEASELESS Trabzon İzmit Düzce Rize Bolu Ordu Giresun Kars Adapazarı Çankırı Amasya SEARCH FOR Gümüşhane Bursa Çorum Tokat Çanakkale Bilecik Bayburt Iğdır Ankara Ağrı Erzurum SECURITY Eskişehir Kırıkkale Yozgat Erzincan Sivas Balıkesir A Brief Political and Economic Kütahya Kırşehir Tunceli Bingol Overview of Turkey Muş Uşak Afyonkarahisar Kayseri Van İzmir Elazig Aksaray Nevşehir Malatya Bitlis Siirt Diyarbakır Denizli Niğde Aydın Isparta Konya Adiyaman Batman Şırnak Hakkâri Burdur Kahramanmaraş Mardin Sanliurfa ğ Karaman Mu la Osmaniye Gaziantep Antalya Adana Mersin Killis

Hatay

0 50 100 Km M editerranean Sea

Since the beginning of the Cold War, Tur- TURKEY VISION 2023 - Selected National Targets for 2023 by Sector key has been a bulwark of stability in a dangerous and fracturing world. The Unit- ECONOMY ed States began in 1947 to provide aid to Become Top-10 Economy in World Turkey under the Truman Doctrine, as part of its grand strategy to contain the Soviet Acheive $500 billion in Exports Union and guard against Soviet encroach- Grow GDP to $2.064 trillion ment on the and the Mediter- Grow GDP Per Capita to $25,076 ranean. The end of the Cold War, however, did not reduce Turkey’s importance. As DEFENSE the United States opened a much wider Develop national rifle, cannon, tank, presence in the Middle East starting with helicopter, fighter aircraft the Persian Gulf War in 1990, Turkey re- mained a critical ally for regional security. Today, Turkey’s neighborhood is perhaps AVIATION more dangerous than ever before, as fires Domestically produce plane emanate from Syria and Iraq throughout Establish two aviation maintenance the Middle East while a revanchist flexes its military muscles. and training centers It is unclear what consequences Syria will Establish Turkish Space Institute have on the region, but Turkey’s role as a stabilizing force in the Middle East is un- est economy, according to the IMF, and has Russian fighter plane in November 2015 likely to change. Turkey stands out in a re- ambitions to reach the top ten by 2023, the are hurting Turkey’s exports and tourism gion of weak states because of its territorial centennial of the Republic. While growth figures. More than other countries,- Tur size, large and industrious population, and slowed during the global financial crisis in key relies on foreign investment to fuel its military strength. The latter is predicated 2008, Turkey was not exposed to the same economy and maintain its current account upon having a robust and technologically pressures as and the United States deficit, and policymakers have always advanced aerospace and defense industry. and vaulted out of 2009 into 9.2% and 8.8% had to perform a careful balancing act to By many economic indicators, Turkey has growth in 2010 and 2011, respectively. manage the country’s fiscal balances, but made impressive strides since the Justice Yet economic growth has slowed consid- today’s pressures make a challenging situ- and Development Party (AKP) came to erably from 2013 to 2015, and currency ation even more difficult. Low oil and gas power in 2002. On the back of 5% aver- depreciation is eroding the profitability of prices have provided some relief. age annual real GDP growth from 2002 to many industries. Russian-imposed sanc- Politically, the AKP has maintained control 2012, Turkey is now the world’s 17th larg- tions on the country after it shot down a over power since 2002. The party’s power

TURKEY AEROSPACE & DEFENSE 2016 - 8 - Industry Explorations B lack Sea EDITORIAL

Kırklareli Sinop

Edirne Bartın Zonguldak TURKEY AT A GLANCE Artvin Ardahan Source: CIA World Factbook Tekirdağ Samsun İstanbul Karabük Kastamonu Trabzon İzmit Düzce Rize Population: 79,414,269 (July 2015 est.) Bolu Ordu Land Area: 783,562 sq km Giresun Kars Adapazarı Çankırı Amasya Gümüşhane Official Languages: Turkish Bursa Çorum Tokat Capital: Ankara Çanakkale Bilecik Bayburt Iğdır Chief of State: Recep Tayip Erdogan (since August 2014) Ankara Ağrı Head of Government: Prime Minister Ahmet Davutoğlu Erzurum Eskişehir Kırıkkale Erzincan Yozgat Sivas (since August 2014) Balıkesir Growth Domestic Product: $1.515 trillion (2014 est.) Kütahya Growth Rate: 2.9% (2014 est.) Kırşehir Tunceli GDP per Capita: $19,700 (2014 est.) Bingol Economic Sector Breakdown: agriculture: 8.1%, Manisa Muş Uşak Afyonkarahisar industry: 27.6%, services: 67.6% (2014 est.) Kayseri Van Exports: $168.9 billion (2014 est.): apparel, foodstuffs, İzmir Elazig Aksaray Nevşehir Malatya Bitlis textiles, metal manufactures, transport equipment. Siirt Imports: $232.5 billion (2014 est.): machinery, Diyarbakır Denizli Niğde chemicals, semi-finished goods, fuels, transport Aydın Isparta Konya Adiyaman Batman Şırnak equipment. Hakkâri Burdur Kahramanmaraş Major International Trade Partners: Germany, Russia, Mardin , , Iraq, United States, Italy, France Sanliurfa ğ Karaman Mu la Osmaniye Gaziantep Antalya Adana Mersin Killis

Hatay GDP PER CAPITA 2014 est. 0 50 100 Km M editerranean Sea Source: CIA World Factbook

derives from its popular support from the cratic Party (HDP) crossed the requisite increasing its percentage of the vote from middle and lower classes, which have 10% threshold to enter the Parliament. 40.8% in June to 49.5% in November and struggled in the past to reap the benefits of The other established opposition parties – regaining enough seats to form a govern- the state under past regimes that were in- the Republican People’s Party (CHP) and ment on its own. Though there are grow- stalled by military coups. In no sector has Nationalist Movement Party (MHP) – also ing concerns about the authoritarian drift the average Turk benefitted more than in maintained enough support to block the of the party, the election provided stability health, as access to insurance and coverage AKP’s from retaining a parliamentary ma- and markets reacted positively, with the has greatly expanded. jority. The failure to form a government Turkish lira gaining almost 10% in value At the heart of the AKP’s popularity is its thereafter, however, stalled the political against the U.S. dollar. The lira, however, charismatic leader, Recep Tayyip Erdoğan. process. Meanwhile, a new round of vio- returned to the 3-to-1 rate in 2016. Erdoğan served as Prime Minister from lence broke out between the Turkish mili- Foreign policy provides the most uncertain- 2003 until 2014 and was elected Presi- tary and the Kurdish terrorist group PKK ty, as the so-called Islamic State is operat- dent in August 2014. His former Foreign that has plunged the southeastern part of ing next door in Syria, Kurdish militants in Minister, Ahmet Davutoğlu, became Prime the country into a war zone. Where previ- Syria are providing a safe zone for the PKK Minister. Although no longer in the consti- ously Erdoğan championed a set of reforms in Turkey, and Russia is now involved in tutionally most powerful office, Erdoğan is that would make the state more inclusive the Syrian morass. The next several years still the party’s leader. for its Kurdish minority, such measures are likely to be challenging ones for poli- The AKP met its first political stumbling will have to wait until later. cymakers. In a dangerous neighborhood, block during the June 2015 parliamentary Snap elections in November 2015 pro- Turkey’s search for security is ceaseless. elections, as the Kurdish Peoples’ Demo- duced the status quo ante, with the AKP The aerospace and defense industry is at the heart of Turkey’s domestic and foreign TURKEY GROWTH VS. INFLATION (2008 TO 2016) policy, and the AKP remains committed to Source: World Bank, International Monetary Fund its growth and development by offering in- GROWTH % INFLATION %

11 11 centives to bolster its indigenous original 10 10 equipment manufacturers and suppliers. 9 9 8 8 Turkey takes a great deal of pride in its 7 7 6 6 military, and the growth of Turkish Air- 5 5 lines over the past decade is nothing short 4 4 3 3 of remarkable. As the following pages will 2 2 1 1 reveal, Turkey is investing in its aerospace 0 0 and defense industry, and is already a re- -1 -1 -2 -2 gional leader. Only time will tell if it can -3 -3 become the global player that its aspires -4 FORECAST -4 2008 2009 2010 2011 2012 2013 2014 2015 2016 to. •

Industry Explorations - 9 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

were seen as roadblocks for main contrac- for subsystems one year ago. With this new tors. Once SSM imposed these regulations department, Turkey can start indigenously on the industry, the defense sector began to designing subsystems like power transmis- reshape, and Turkish manufacturers started sion and generation for different platforms. developing. The driving force behind Tur- key’s success in defense industrialization is Do offsets play a role in R&D programs regulation. In general, Turkey contributes and the development of subsystems? approximately 70% of domestic value-added Offsets are helping, but Turkey needs tech- content in each contract. However, there are nology to build subsystems, which requires projects for which SSM does not want do- a greater focus on R&D. SSM’s R&D de- mestic value added because they are short partment, or technology management de- either in budget or in time. Other than that, partment, is launching many R&D projects. almost every project comes with industrial- A portion of the offsets that companies owe ization requirements. SSM is realized through SAYP, a program Over the last 10 years, many small compa- for educating and training researchers in the nies have grown into medium-sized compa- defense industry. Export-offset requirements nies, conducting business with foreign sup- are deducted from the money that companies pliers directly, even without SSM contracts. spend on these projects. Many universities Dr. Celal Sami Initially SSM required foreign contractors to have already signed onto the program, pro- work with these companies, resulting in the moting university involvement in defense Tüfekçi formation of longstanding relationships. To- projects and enabling the growth of indepen- day, foreign contractors are happy to work dent researchers. Another channel that SSM with these companies, like ALP Aviation in utilizes is the technology-acquisition re- Eskisehir for example, which works with the quirement, through which approximately 2% international helicopter giant Sikorsky. of contracts have to be dedicated to building Deputy Undersecretary, Industry Services new technologies. UNDERSECRETARIAT FOR How is this strategy reflected in the devel- DEFENSE INDUSTRIES, opment of tier-one, tier-two and tier-three While Turkey is strengthening its military REPUBLIC OF TURKEY (SSM) companies? Are you keen to grow the capabilities at home, the government has number of tier-ones? set its 2023 export target at $25 billion. Of course we would like to have more tier- How likely is the realization of such a tar- one companies, which will materialize in get? five to 10 years. In this timeframe, we will Turkey has set large and ambitious goals, grow Turkey’s very large companies due to which can be achieved through momentum. the number of projects coming up, including At present we have good momentum and What is SSM’s current strategy to support the Hürkus , ATAK helicop- support from the government to launch proj- Turkey’s defense industry? ter, and unmanned systems (on which TAI, ects, hence the large number of ambitious SSM has put forth a plan outlining its strat- Baykar, and Vestel have already progressed projects such as the T-FX fighter, which costs egy until 2016, but it is not static, and has well). A large number of frameworks have billions of dollars. Our advantage is the mo- changed repeatedly over the course of our been built in Turkey with minimal depen- mentum that we have gained in recent years, development. SSM is currently working on dency on the foreign market. Turkey has which will help us to encourage members the development of new strategies, and the achieved a great deal thus far, especially across the industry, including the smaller geopolitical events that are occurring around given external limitations, such as export re- companies that we are focusing on. We are Turkey are also affecting our work. We have strictions from larger countries. continuously strategizing with small players identified niche areas of importance and are There are of course key elements includ- so that they can evolve into more technologi- turning our attention to cyber security, bor- ing power generation and the drivetrain, for cally competent companies. When smaller der control, and unmanned systems. SSM which Turkey is still externally dependent. companies work on subsystem parts for a has established, and is very keen to grow, an Nevertheless, we support research and devel- larger platform they learn about the platform important new department called Cyber Se- opment (R&D) to overcome these deficits, and the technology, and can produce technol- curity. including engine-development programs for ogy faster than big companies. Big compa- both land and air platforms and transmission nies are integrators, whereas small compa- In recent years offset requirements have and power transmission projects. Today Tur- nies create technological value. SSM wants increased to upwards of 50% for large key is placing great importance on producing companies to gain technological advantages defense projects. What are current offset subsystems. When we began this journey we so that they can quickly elevate their reve- requirements and how are they being al- saw everything as platforms. As we started nues. It is still a question of whether or not located? to create platforms indigenously, we realized we will achieve this export level but pres- When offset requirements and regulations the importance of subsystem technology, and sure from all directions is compelling us to were put in place roughly 15 years ago, they about establishing a dedicated department achieve many things. •

TURKEY AEROSPACE & DEFENSE 2016 - 10 - Industry Explorations Global Business Reports EDITORIAL

ON THE EDGE OF TOMORROW Turkey’s Aerospace and Defense Sector

“One day, humankind will walk in the sky TURKISH AEROSPACE & DEFENSE INDUSTRY TURNOVER ($ BILLION) without airplanes, visit planets and, maybe, Source: SSM $ BILLION send us news from the moon… Our duty is to 5.5 5.5 ensure that we are not left far behind the West.” Mustafa Kemal Atatürk spoke these words in 5.0 5.0 1936 to inspire the people of the fledgling 4.5 4.5 nation of Turkey. Turkey’s aerospace and de- fense (A&D) sector has since progressed, but 4.0 4.0 remains far from its ambitious 2023 goal to become one of the world’s top ten defense pro- 3.5 3.5 ducers. 3.0 3.0 The resurgence of Turkey’s A&D industry be- gan in the 1980s at a time when the country 2.5 2.5 was heavily dependent on foreign countries 2.0 2.0 for critical technologies. An arms embargo prompted the government to rethink its poli- 1.5 1.5 cies and develop an independent A&D indus- try that could reduce Turkey’s dependence on 1.0 1.0 foreign technology. The guiding strategy was 0.5 0.5 to increase the share of local content in produc- tion, which was to be achieved by encouraging 2006 2007 2008 2009 2010 2011 2012 2013 2014 technology transfer, strategically allocating offset requirements—or portions of projects defense products to countries such as Azer- TURKISH DEFENSE INDUSTRY TURNOVER BY SECTOR, 2014 ($ MILLION) that required domestic development—to major baijan, Pakistan, and Malaysia and maintains Source: SaSaD projects, and procuring large A&D projects to strong ties with Middle Eastern countries, strengthen the local knowledge base. which will continue to serve as fertile markets. Yet even with the robust development of A&D While exports have been steadily increasing companies across the northwest of the coun- since the year 2000—totaling $1.65 billion in try, Turkey’s industry has a long way to go to 2014—the numbers remain far from the gov- realize its goals. The majority of the industry ernment’s lofty 2023 target of $25 billion. is driven by large defense projects such as the Approximately two-thirds of Turkey’s A&D Utility Helicopter, the A400M, the HÜRKUŞ companies are concentrated in the capital city trainer, the Anka of Ankara, where many of the small- and me- (UAV), and indigenous fighter and commercial dium-sized enterprises (SMEs), large defense jet programs. While generous defense spend- companies, and software development firms ing will ensure the continuation of these proj- are located. Turkey’s software development ects, their timelines and commercial viability firms are the most dynamic and primarily op- are questionable because many critical tech- erate out of Middle East Technical University nologies have yet to be developed to a level of Technology Park, ODTÜ TEKNOKENT, and sophistication that can reduce dependence on belong to the Teknokent Defense Industry foreign manufacturers. Cluster (TSSK). Companies within TSSK have $ MILLION % Meanwhile, export-licensing difficulties have a strong export focus, with products that range Land, Sea & Other 3,247 64% Air & Space 1,204 24% forced companies to focus on selling their from surveillance analytics and flight simula- Civil Aviation & Space 650 13% products to the Middle East, Central Asia, and tion to command-and-control systems. This Southeast Asia. As a result, Turkey exports its range is partly due to the cluster’s role in fos- TOTAL 5,101

Industry Explorations - 11 - TURKEY AEROSPACE & DEFENSE 2016 EDITORIAL Global Business Reports

TURKISH AEROSPACE & DEFENSE TURKISH AEROSPACE & DEFENSE tering collaboration, which is generally lacking IMPORTS, 2014 ($ MILLION) IMPORTS BY SECTOR, 2014 ($ MILLION) Source: SaSaD in Turkey. Source: SaSaD “It is important to facilitate synergies between $ MILLION 1,440 those conducting research and development 1,430

(R&D) at universities, companies conducting 1,420

R&D, and large-scale firms outside the science 1,410 and technology parks. Hence TSSK’s main 1,400 purpose is to increase synergies between vari- 1,390 ous players of all sizes between the university 1,380 and industry,” said TSSK’s chairman of the 1,370 board, Fatih Ünal. 1,360 1,350 Outside of the technology cluster there are 1,340 major aerospace platform-and-missile systems 1,330 $ MILLION % producers as well as software and electronics 1,320 Land Vehicles 134 10% developers, the majority of which are man- 1,310 Sea Vessels 87 6% aged by the Turkish Armed Forces Foundation. 1,300 IT 25 2% Aerospace 428 32% The industry’s largest players include Turkish 1,290 Electrical and Electronics 445 33% Aerospace Industries, Inc. (TAI), Aselsan, Ro- 1,280 Other 232 17% ketsan, and Havelsan. 1,270 2012 2013 2014 TOTAL Outside of Ankara, the northwestern city of Es- 1,351 kisehir is home to a specialized cluster, Eskise- Fokker Elmo and Lisi Aerospace are located. of medium-sized enterprises will be the devel- hir Aviation Cluster (ESAC), whose member The majority of companies in Izmir are SMEs opment of subsystems and critical technolo- companies focus largely on engine and heli- in the Ege and Izmir Free Zones that work in gies. Managing partner at Herdem Attorneys at copter-related production and design. In addi- the fields of fasteners, electrical systems, and Law Şafak Herdem agrees: “To achieve further tion to a long industrial history and specialized fuel tanks. consolidation, effective guidance from both university programs for aeronautics, Eskisehir The overall composition of the industry is the government and businesses is required, and hosts both Tusaş Engine Industries, Inc. (TEI), both bottom- and top-heavy, with limited de- is only possible through offsets.” a major engine producer and joint venture velopment of medium-sized companies. The The lack of specialization in these areas is with General Electric (GE), and Alp Aviation, growth of stronger supporting companies has being addressed by the Undersecretariat for a joint venture with Sikorsky. An additional been hampered by the low volume and high Defense Industries (SSM), an institution estab- technology center and aviation hub is located specialization typical of A&D products. Yet lished to draft defense policies. Today SSM is in Istanbul, where several software develop- the knowledge SMEs gain from working on working to implement policies to correct this ment firms are located in Teknopark Istanbul, defense-related aerospace products should al- imbalance, including research support and off- one of Turkey’s two technology development low them to more easily start contracting with set requirements. zones with an A&D focus. Turkey’s fourth foreign firms like Airbus and Boeing for civil Regardless of these challenges Turkey re- center for A&D production is Izmir, where aviation projects. Key to growing the number mains active in avionics and software, with

TURKISH AEROSPACE & DEFENSE EXPORTS ($ MILLION) TURKEY FOREIGN SALES BY Source: SSM REGION AEROSPACE & DEFENSE, $ MILLION 2014 ($ MILLION) 1700 1700 Source: SaSaD

1600 1600

1500 1500

1400 1400

1300 1300

1200 1200

1100 1100

1000 1000

900 900

800 800

700 700

600 600

500 500

400 400 $ MILLION % United States 581 31% 300 300 Europe 418 23% 200 200 Other 856 46%

100 100 TOTAL 1,855 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

TURKEY AEROSPACE & DEFENSE 2016 - 12 - Industry Explorations Global Business Reports EDITORIAL

TOTAL TURKEY AEROSPACE & DEFENSE SECTOR EXPORTS BY COUNTRY, 2014-2015 TOTAL TURKEY AEROSPACE & DEFENSE Source: SSM. SECTOR EXPORTS BY COUNTRY, 2015 2014 2015 Source: SSM.

0 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000

$547,677,784.82 United States $556,455,534.94

$120,076,047.46 Malaysia $121,641,740.83

$27,610,081.69 Saudi Arabia $106,638,291.03

$49,595,273.92 Germany $103,024,587.29

$60,094,745.02 France $88,663,546.70

$106,580,591.78 U.A.E $76,732,468.95

$77,194,948.51 % Azerbaijan $57,886,751.63 United States 33.6 Malaysia 7.3 $87,746,508.37 Saudi Arabia 6.4 Spain $53,967,305.53 Germany 6.2 France 5.4 $77,108,051.53 Italy U.A.E 4.6 $53,254,751.01 Azerbaijan 3.5 $454,414.48 Spain 3.3 Kuwait Italy 3.2 $37,666,617.44 Kuwait 2.3 $35,525,587.92 UK 2.3 UK $37,318,899.96 Kazakhstan 1.9 Pakistan 1.5 $11,231,296.64 Bahrain 1.4 Kazakhstan $30,885,312.08 Tunusia 1.2 Others 15.9 $21,896,696.03 Pakistan $24,696,926.40

$18,729,883.40 Bahrain $23,427,481.62

$25,671,368.51 Tunusia $19,607,958.71

$380,605,285.31 Others $263,883,759.16 Turkey Aerospace and Defense Total Exports 0 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 2015 its technology companies leading the industry there is little civil aviation platform devel- be done in order to grow the local civil avia- forward. Companies such as BITES, for ex- opment within Turkey. This is due in part to tion sector, which today represents just 13% of ample, are investing in new technologies like World Trade Organization restrictions that total A&D turnover. But as defense production augmented reality (AR) for the future of the prohibit offsets from being applied in this grows, so will the number of civil applications industry. “Military operations are becoming area, unlike in the defense industry. Nonethe- for technologies and products. increasingly diverse in their nature. Many of less, driven by GDP growth, Turkey’s passen- Turkey’s A&D sector is on track to grow with- the new and more demanding military require- ger, international, and overflight markets are in the next five to ten years, largely thanks to ments have specifically driven development of improving. These trends are driving airport government support. Major projects like the augmented reality systems and we see that as construction and increasing aircraft purchases. ATAK and general utility helicopters, indig- a big growth area. AR technology is also used , for example, recently placed enous fighter planes, Anka UAV, and de- by the defense platform manufacturers in their an order with Airbus for the purchase of 117 sign and production will drive the industry for- advanced factories and assembly lines. For new planes. While domestic platforms such ward and allow it to develop key competencies example, Lockheed Martin engineers are us- as the regional jet are still in early phases of in critical technology and import-dependent ing augmented reality glasses and educational development, Turkish A&D companies are areas. Furthermore, a targeted export strategy software that provide real-time visual content beginning to work in civil aviation as well. that focuses on developing markets should during the assembly of F-35 Aircraft,” said Consequently, flight simulation, composite offset current restrictions on exports by larger Ihsan Yusuf Akbuğa, international business de- materials machining, and engine-part produc- countries. If Turkey’s aerospace industry can velopment director at BITES. tion are finding their foothold among Turkey’s overcome its current obstacles, its future will Despite its growing defense sector, presently civil aviation exports. More work will need to truly be in the skies. •

Industry Explorations - 13 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

and the Turkish Armed Forces Foundation a total of four facilities in technology devel- (TAFF) was established. The main mission opment zones and ten R&D centers, where of the foundation is to enhance the warfare they employ total of 4,890 R&D engineers. capability of the Turkish Armed Forces Moreover, Aselsan, TAI and Roketsan were through the development of projects in new chosen as the best R&D centers by the Min- defense-industry fields and through the pro- istry of Science, Industry and Technology curement of equipment using the financial in 2013. Our vision is to establish five re- and moral support of Turkish citizens. But search and development centers in Ankara this foundation works like other companies and another 15 smaller centers within our and is not a government organization as the companies. foundation’s income comes from the Turk- TAFF group companies accounted for 52% ish people. Given the nature of the indus- of all R&D expenditure in the industry in try, however, the Board of Trustees is com- 2014. TAFF currently monitors and keeps prised of the Minister of National Defense, tabs on the R&D projects of its subsidiaries. who is also the chairman, the Deputy Chief The foundation recently improved its inno- of Turkish General Staff, the Undersecre- vation and R&D organization by establish- tary of the Ministry of National Defense, ing a new section responsible for following and the Undersecretary for Defense Indus- global technological advances, preventing Orhan tries. redundancies between TAFF’s subsidiaries, To give a brief overview, Aselsan special- and providing coordination with institutions Akbaş izes in defense electronics, TAI is a leading such as Turkish General Staff, TUBİTAK, company in aeronautics, Roketsan develops and universities. missile and rocket systems, and Havelsan focuses on command and control systems TAFF’s strategic management is critical and other defense software. for setting objectives for performance. Lieutenant General (Retired), The foundation works as a group of compa- What is your strategic vision for the fu- General Manager nies, six of which are subsidiaries, and eight ture? TURKISH ARMED FORCES of which are affiliates. In 2014 the - Turk TAFF has a five-year strategic plan to cre- FOUNDATION (TAFF) ish Armed Forces Foundation subsidiaries ate a systematic approach for the future, comprised 45% of net sales, 56% of exports, manage our subsidiaries by setting objec- 52% of research and development (R&D) tives and evaluating their performance, and expenditures, and 39% of all employees for promote cooperation as the leader of TAFF the entire Turkish defense and aerospace in- group companies. dustry. Additionally, these companies cur- The Turkish defense and aerospace indus- rently export 25 products to 45 countries. try produces roughly 60% of its own needs The Turkish Armed Forces Foundation is TAFF subsidiary companies are leaders for defense, while 40% comes from interna- the largest actor in Turkey’s defense in- in Turkish Defense Industry and world- tional sources. TAFF aims to improve the dustry besides the government. What is wide. The Istanbul Chamber of Industry share of local production within the next the history of the organization and what (ISO) 500 2014 listing, which rated Turk- five years, including supporting Roketsan role in the market does it play today? ish companies by net sales, ranked Aselsan, and Havelsan, so that they can become one After the 1964 Cyprus crisis, the need for TAI, Roketsan, Havelsan 33rd, 50th, 128th, of the top 100 global companies like Asel- Turkish-made military equipment became 244th respectively. Furthermore, according san and TAI. In addition, we also want to a national priority. By 1974 an embargo by to a Defense News Top 100 listing, which provide logistics support for our products the United States and other allies on mili- also ranked companies globally based on and systems internationally as well as our tary exports to Turkey following the Cyprus net sales, they found Aselsan and TAI to be current products used by the Turkish Armed Peace Operation accentuated this need. The ranked 62nd and 78th respectively. Forces. overreliance on foreign equipment showed Part of the strategic focus is on aerospace, a key strategic gap, leading Turkey to con- The defense industry often has sophisti- command and control systems, and simula- sider developing an independent defense cated requirements, especially in aero- tors. There are also several exciting projects industry. In order to achieve these goals space where safety, reliability, and flex- under development, particularly the heli- Turkish Land, Naval and Air Forces Sup- ibility for products are a major concern. copter and fighter jet projects, which will port Foundations were formed in 1960s and What is the R&D environment like for extend for the next 10 to 15 years. Energy 1970s with the donations of Turkish Armed Forces Foundation com- efficiency and production will be another that established companies for the produc- panies? major focus, especially to meet the needs tion of defense equipment, such as Aselsan, Research and innovation is a primary focus of the Turkish Armed Forces. The industry TAI, Roketsan and Havelsan. for TAFF, roughly 7% of our yearly income is growing, and the foundation plans to ex- In 1987, Turkish Land, Naval and Air Forc- is allocated for research and development. pand current export levels of around $1 bil- es Support Foundations were integrated, Aselsan, TAI, Roketsan and Havelsan have lion to $5 billion by 2023. •

TURKEY AEROSPACE & DEFENSE 2016 - 14 - Industry Explorations Global Business Reports INTERVIEW

creasing its sectoral efficiency. In this sense, Our goal is to exist amongst the the participation of companies operating in major global suppliers of defense civil aviation, security and maintenance and industry. Today, as a country that repair in our association will surely help us manufactures its own satellites, meet our goals. unmanned air vehicles, training The defense industry has an integrated struc- aircrafts, helicopters, infantry rifles, ture. A single product’s supply chain is com- battleships, armored vehicles, missiles posed of many companies and thousands of and rocket systems. We develop sub-products. At the same time, the indus- simulations and software, build try has a wide logistical network that covers the stages from design to production, from partnerships in worldwide projects small- medium-sized enterprises (SMEs) to such as F35, A400M, construct lobbies. And presently, this network covers satellite manufacturing and test the whole world. International cooperation centers, initiate satellite-launcher is crucial and indispensible for our sector. base construction, and launches indigenous helicopter projects. What activities does SSI undertake to support Turkey’s relationship with the Latif Aral international aerospace and defense mar- al, prestigious events organized towards tar- ket? get markets. Aliş It is not easy to survive in an environment with such tough competition and exist in Given the high value-added nature of its the vendor/supplier list. At this point, in- products, increased research and devel- ternational relations and promotion are as opment (R&D) investments, and sizable important as production. SSI is conducting employment, how will the defense indus- Chairman efficient activities for the promotion of the try take its success to the world market? DEFENSE AND AEROSPACE sector, and will continue these. The term Will the industry be able to transfer this INDUSTRY EXPORTERS’ ‘export’ lies undergirds the sustainability success into reaching the 2023 goals of ex- ASSOCIATION OF TURKEY and strengthen of the sector, so we are striv- porting $25 billion dollars? (SSI) AND TURKISH DEFENSE ing in all available environments to increase The Turkish defense and aerospace industry ALLIANCE (TDA) recognition and awareness of Turkey’s ex- gained a considerable impetus in exports, ports capacities. especially in the last few years. In a sense, One may put forth great products without we are ‘producing in Turkey, becoming faults or production delays, yet if one is not a brand in the world’. Our defense sector, recognized, this will not be noticed at all. growing as a result of the intensive R&D ac- As the premier organization for defense The Defense and Aerospace Support and tivities and great technological investments, exporters in Turkey you present the Promotion Group of the Turkish Defense is now capable of exporting a considerable world with an image of Turkey’s defense Alliance (TDA) was established in 2013 proportion of its production. In such a com- industry. What about Turkey’s defense and has been working to establish a global petitive area, we are together taking the sector makes it attractive to foreign gov- Turkish brand in defense industry. It has steps towards becoming a brand in defense ernments and companies? also been serving as an intermediate agency and aerospace industry and increasing our A relatively young sector, the defense indus- that promotes Turkish companies. market share. try is critical for Turkey as well as the world. In cooperation with Undersecretariat for Our goal is to exist amongst the major glob- No matter how young, it is one of the fastest Defense Industries (SSM), we are organiz- al suppliers of defense industry. Today, as growing sectors. In the past nearly 50 years, ing national participations to international a country that manufactures its own satel- our sector achieved great success, especially defense industry exhibitions. These events lites, unmanned air vehicles, training air- in the last 10 years, when it became one of gather the whole sector and bilateral nego- crafts, helicopters, infantry rifles, battle- Turkey’s strongest. We are increasing this tiations between delegations are conducted ships, armored vehicles, missiles and rocket force through our export volume, which are between government officials and military systems. We develop simulations and soft- growing every year. representatives. The exhibitor companies ware, build partnerships in worldwide proj- The defense and aerospace industry contains are quite sensitive about these negotiations, ects such as F35, A400M, construct satel- both military and civil components. Al- as strategic partnerships and cooperation lite manufacturing and test centers, initiate though it appears to be an intergovernmen- amongst countries play a significant role satellite-launcher base construction, and tal sector, civil companies are also among its in procurements. Thus, the number of our launches indigenous helicopter projects. We customers. Participation from all segments participant companies and therefore Turkish are able to reach these goals because of our of such a dynamic sector is of vital impor- defense and aerospace industry’s efficiency qualified human resources, research -insti tance for us. The Defense and Aerospace has been increasing. For this reason, we are tutes, R&D laboratories, SMEs, and major Industry Exporters’ Association (SSI), is in- continuing to participate to the internation- companies. •

Industry Explorations - 15 - TURKEY AEROSPACE & DEFENSE 2016 EXPERT OPINION Global Business Reports

TURKEY’S DEFENSE INDUSTRY: A BURGEONING POWERHOUSE By Iain MacGillivray, Analyst, Global Risk Insights

The Turkish defense industry stands as a burgeoning powerhouse and find new sources of foreign capital and technological improve- in the regional and international defense market as the Turkish ments. It was also in 1985 that a policy of offsets for military Armed Forces (TAF) has played an influential role in the economic procurements was initiated in the domestic arms trade. The first and political development of Turkey. The country is a central mem- offset contract was with General Dynamics for the production of ber of NATO, a dialogue partner in the Shanghai Cooperation Or- F-16 parts but has since led to many more lucrative contracts with ganization (SCO), and a potential candidate for EU membership. regional and international players such as the EU and Israel. The Turkey is situated in a unique geostrategic and economic position current policy prefers local development of military equipment, but that is unrivalled in the region with access to European and Middle if a task is too large for local defense firms, co-development or Eastern markets. According to Global Firepower, its military popu- coproduction/co-licensing agreements with international consortia lation totals approximately 411,000 active troops with an aircraft are pursued. fleet of 1,020 items and tank core of 3,778 vehicles. Due toits Turkey’s defense industry today is booming, characterized by a role as an independent arbitrator throughout Turkish history, the steady growth over the last five years. In 2014 alone it achieved Turkish military has maintained a unique and autonomous position $11 billion in orders for military equipment and a growth rate of regarding access to political and economic opportunities. 21%. With Ankara spending over $1 billion on defense research The Turkish military and defense sector are intrinsically tied to and development (R&D) in 2014, Turkey is aiming for its defense arms imports from the United States and Europe, providing the companies to be among the top 100 major firms in the world, ac- Turkish military with unrivalled access to cutting-edge technolo- cording to an industry report from the Defense and Aerospace In- gies in land warfare and aerospace. Turkey consistently spends dustry Manufactures Association (SaSaD). Turkey has been a ma- the highest percentage of its military budget on equipment and jor supplier of military equipment and arms to countries in Central weapons. In fact, since the end of the Cold War, Turkey has spent and South Asia such as Turkmenistan, Pakistan, and Azerbaijan, nearly twice the NATO average on military equipment—averaging markets that are set to grow exponentially. While domestic projects around 30% of its defense budget—unlike its European allies that currently consume a high percentage of growth, export and inter- have cut defense spending to levels sufficient to maintain forces national cooperation projects will determine the sector’s evolution with no major increases. in the future. Turkey’s procurement policy is a source of national pride and mili- Turkey’s defense aviation industry has seen a steady increase in tary budgets have consumed a substantial slice of the country’s exports, totaling $1.7 billion in 2014, an 18% increase from 2013. GDP. According to Strategic Defense Intelligence (SDI), the Turk- Turkey is involved in many significant international-production ish government will boost the country’s military expenditure over and joint-design programs including the A400M Transport Air- the next four years with an increase from $14.9 billion in 2015 to craft and F-35 Joint Strike Fighter. In 2014, a major order worth $21.1 billion in 2019. This equates to around 1.7% of GDP with a $6.9 billion was placed for aircraft parts. According to SSM, 90% set increase to 2.3% in the coming years. Turkish military equip- of equipment development comes from coproduction technology ment and procurement processes are channeled through the Under- with international consortia or domestically based Turkish defense secretariat for Defense Industries (SSM), which was established in firms. These co-development projects have left room for greater 1985 as a means to reorganize and integrate the existing defense spending in R&D and potential defense contract opportunities in industry to encourage new enterprise, satisfy defense requirements the future.

TURKEY AEROSPACE & DEFENSE 2016 - 16 - Industry Explorations Global Business Reports EXPERT OPINION

The AKP has placed a strong emphasis on updating its military hardware and promoting domestic production and self-reliance. While the Turkish domestic market may start to compete with European and U.S. companies in individual weapon and equipment sectors, it will still have to rely on foreign armaments and equipment to reinforce its national defense systems.

Over the last ten years, Turkey has embarked on a defense pro- Turkish defense company ASELSAN to manufacturer EJ200 en- curement policy aimed at manufacturing and development. These gine systems in cooperation with Eurojet for Eurofighter Typhoon policies have been designed to help the Turkish military become combat planes. As of now, however, the F-16 fleet remains the self-sufficient, with a strong domestic supply base, and strengthen backbone of the and Turkey continues to upgrade its position as a regional and international defense powerhouse. As these fighters in tandem with Lockheed Martin while it pursues its a result, there has been a pursuit of technological transfers and co- own domestic fighter fleet. production contracts, as well as a rise in foreign defense equipment Turkey’s military modernization also comes as the country finds being built locally in Turkey. This has led to a steady increase in itself in an increasingly isolated position in the Middle East. On the arms exports in the last five years, development of UAV technol- country’s southern border, the Syrian civil war has started to impact ogy, and a military modernization process within Turkey’s navy Ankara’s ability to maneuver. Russian involvement in the war has and air force. Turkey is currently managing over 600 moderniza- also exacerbated problems with Turkey, especially after the shoot- tion programs and, according to SDI analyst Moutushi Saha: “Tur- ing down of a Russian military jet by one of the Turkish military’s key is in the process of increasing its existing armory through the F-16 fighter jets. On top of this, Turkey has re-engaged- incon acquisition of up to date and advanced weaponry including attack flict with the Kurdish separatist movement (PKK) in the country’s helicopters, multi-role fighters, anti-missile ships, guided bombs, southeastern region. As peace negotiations have deteriorated and and self-propelled guns.” there is no end in sight to either of the conflicts, military equipment There have, however, been instances of controversy, as Turkey has and expenditure will increase as Turkey tries to secure both its do- pursued equipment and technological transfers with non-NATO mestic and regional security. Overall, the Turkish defense industry members including China and Russia. finds itself in a favorable time given that there will be continued The Turkish Armed Forces is also in the process of updating Tur- and steady growth, as Turkey seeks to develop its domestic market key’s aerial dominance in the region with a proposed program to and promote itself as a burgeoning defense and arms powerhouse. modernize Turkey’s F-16 fleet, the planned building of the 200TF- The current ruling Justice and Development Party (AKP) has X aircraft manufactured by the Turkish Aerospace Industries (TAI), placed a strong emphasis on updating its military hardware and and increased purchasing of Black Hawk multi-mission helicop- promoting domestic production and self-reliance. While the Turk- ters. Turkey has also sought cooperation with European consortia ish domestic market may start to compete with European and U.S. to develop its aerospace industry. Analysts at Global Security have companies in individual weapon and equipment sectors, it will still stated: “In December 2010, officials of Italy's defense industry gi- have to rely on foreign armaments and equipment to reinforce its ant Finmeccanica, a partner in MBDA, offered Turkey to build Eu- national defense systems. As Turkey tries to secure and legitimize rofighter jets jointly, as Turkey's F-4 fleet is too old and it would its regional stance, there will be more cooperation with NATO take at least ten years for the first F-35 fighter jet delivery. They partners and companies to provide the necessary equipment and said new generation Eurofighters could be manufactured jointly by military modernization of the Turkish Armed forces. The defense the EU and Turkey.” sector will experience steady growth, particularly as the United These new aircraft would work alongside the F-35 fleet and rein- States, NATO, and Turkey become further involved in the Syrian force Turkish Air supremacy. So far this project has continued with Crisis and as Ankara continues its domestic conflict with the PKK a new memorandum of understanding (MOU) signed in 2014 for in the country’s southeast. •

Industry Explorations - 17 - TURKEY AEROSPACE & DEFENSE 2016 Image: Istanbul Shipyard GBR • Industry Explorations • TURKEY AEROSPACE & DEFENSE 2016 COMMANDING FROM THE FRONT: GOVERNMENT, CLUSTERS, AND ASSOCIATIONS

“OSSA Defense & Aviation Cluster serves as a point of contact between its members, the government, and major industrial companies in Turkey such as ASELSAN, Turkish Aerospace Industries, Inc. (TAI), and Roketsan. We also play an important role as an interface between large international companies and our members. As an association we are working to develop our members’ businesses abroad as well as their level of competitiveness by providing them with education and consultancy services.”

- Hilal Ünal Türkan, Cluster Coordinator and Project Manager, OSSA Defense and Aviation Cluster 24˚ 26˚ 28˚ 30˚ 32˚ 34˚ 36˚ 38˚ 40˚ 42˚ 44˚ 46˚ 48˚

EDITORIAL Global Business Reports 42˚ 42˚

CENTER OF İstanbul 1. SAHA Istanbul Defense and Aerospace Cluster Association 104 members, many located in Teknopark Istanbul (2.7 million sq. m.) 40˚ GRAVITY 40˚ Kazan Clusters and Associations in 1. Eskisehir Aviation Cluster (ESAC) Eskişehir 23 members, most located in the Eskişehir Organized Ankara Turkey’s Aerospace and Industrial Zone (32 million sq. m., largest OIZ in Turkey) Defense Industry

38˚ 38˚ İzmir

1. Aerospace Clustering Association (ACA) 60 members, located located across Aegen Free Zone, Izmir Ataturk Organized Industrial Zone, Kemalpasa Organized Industrial Zone; 32 million sq. m.

36˚ 36˚

AEROSPACE & DEFENSE CLUSTERS IN TURKEY Source: GBR research

Turkey’s efforts to strengthen its indigenous military capabilities as their level of competitiveness by providing them with educa- 34˚ 34˚ are supported by defense-focused clusters and special investment tion and consultancy services,” said cluster coordinator and project zones in Ankara, Eskisehir, Izmir, and Istanbul. Like many other manager26˚ Hilal Ünal 28˚Türkan. 30˚ 32˚ 34˚ 36˚ 38˚ 40˚ 42˚ 44˚ 46˚ successful economies, the Mediterranean nation has turned to the While OSSA Defense & Aviation Cluster represents Turkey’s cluster model to promote growth and competitiveness of select in- A&D manufacturing arm, other newer clusters such as TSSK tar- dustries, including aerospace and defense (A&D). In line with this get Turkey’s research and development (R&D) capabilities. The policy, five major A&D-focused clusters have established them- bulk of TSSK’s 93 members are situated within the prestigious selves as centers of excellence across the country over the last eight Middle East Technical University Park or ODTÜ Teknokent, a years. These include: OSSA Defense & Aviation Cluster, Tekno- TDZ where many of Ankara’s budding A&D startups are gaining kent Defense Industry Cluster (TSSK), Es- traction. TDZs are designed to foster R&D kisehir Aviation Cluster (ESAC), Aerospace through collaboration between universities, Clustering Association (ACA), and SAHA The ultimate goals are to fulfill the companies, public institutions and other Istanbul Defense and Aerospace Cluster. requirements of the Turkish Armed relevant organizations. TSSK’s innovative Member companies are situated within vari- Forces and to position the Turkish member companies are working hard along- ous technology development zones (TDZs) defense industry as a significant side the university to build critical technolo- or technoparks, organized industrial zones player in the world market through gies and help Turkey become progressively (OIZs), and free zones across the country. high-technology solutions, products more import independent. The bulk of Turkey’s A&D industry is and services presented to the “The ultimate goals are to fulfill the require- concentrated in the capital city of Ankara ments of the Turkish Armed Forces and international market. alongside policymakers and government to position the Turkish defense industry institutions. OSSA was the first A&D- as a significant player in the world market focused cluster founded in Turkey, and is through high-technology solutions, products situated in Ankara. Since establishment in - Fatih Unal, and services presented to the international 2008, the cluster has grown its member base Chairman of the Board, market,” said chairman of the board Fatih to 158 small- and medium-sized enterprises Teknokent Defense Industry Cluster Unal. (SMEs) that are focused on manufactur- (TSSK) Additional initiatives are being taken by the ing and scattered primarily across the city’s government to promote technological de- OSTIM Industrial Zone. “OSSA Defense & velopment, including the establishment of Aviation Cluster serves as a point of contact between its members, Turkey’s first specialized aerospace industrial zone in the Kazan the government, and major industrial companies in Turkey such as District outside of Ankara. To accommodate the growing defense ASELSAN, Turkish Aerospace Industries, Inc. (TAI) and Roket- industry, the upcoming OIZ will host 120 companies within 7,230 san. We also play an important role as an interface between large million square meters. A total of 50 million TL was spent to build international companies and our members. As an association we the zone, in line with Turkey’s 2023 goals to expand its defense are working to develop our members’ businesses abroad as well sector.

TURKEY AEROSPACE & DEFENSE 2016 - 20 - Industry Explorations 24˚ 26˚ 28˚ 30˚ 32˚ 34˚ 36˚ 38˚ 40˚ 42˚ 44˚ 46˚ 48˚

Global Business Reports 42˚ EDITORIAL 42˚

TURKISH AEROSPACE & DEFENSE ANNUAL R&D INVESTMENT İstanbul Source: SSM $ MILLION 1,000

900 40˚ 40˚ 800

Kazan Turkey's First Aerospace Industrial Zone 700 Eskişehir 600

Ankara 500

400

300

200

100 38˚ 38˚ İzmir 1. OSSA Defense and Aviation Cluster 2007 2008 2009 2010 2011 2012 2013 2014 164 members, most located inside the OSTIM Industrial Zone; 7,500 employees SSM-CONTRACTED PROJECTS ($ BILLION) Source: SSM

2. Teknokent Defense Industry Cluster (TSSK) $ BILLION 93 members, most located inside ODTÜ Teknokent 28,000

27,000 36˚ 36˚ 26,000

25,000

24,000

23,000

22,000

21,000 Further outside the capital city, A&D hubs have flourished in a 34˚ 34˚ 20,000 number of localities around Turkey. Just 200 kilometers west of 19,000 26˚ 28˚ 30˚ 32˚ 34˚ 36˚ Ankara, the northwestern38˚ city of Eskisehir40˚ hosts the 42˚strategic aero- 44˚ 46˚ nautical cluster, ESAC. Key international players such as General 18,000 Electric and Sikorsky Aircraft have established their presence there 17,000 through joint ventures with local companies, making way for en- 16,000 gine giant Tusaş Engine Industries, Inc. (TEI) and key parts sup- 15,000

plier ALP Aviation, respectively. On its own, Eskisehir is respon- 14,000

sible for 100% of national aircraft engine production. The local 13,000

cluster ESAC comprises 23 companies and represents the interests 12,000 of both its international members as well as its strong local base, 11,000 as it strives to promote itself on a global scale. The majority of 10,000 ESAC’s members are located within the Eskisehir OIZ, the largest and cheapest OIZ in Turkey, with a capacity of 32 million square 9,000 meters priced at approximately 15 Euros per square meter. 8,000 Yet another hub for Turkey’s fragmented A&D sector is located 7,000

in the coastal city of Izmir. Home to sandy beaches, ACA, and the 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ESBAS Aegean Free Zone, Izmir has attracted some of the indus- try’s biggest international names to Turkey including PFW, Fokker The founding of SAHA Istanbul Defense and Aerospace Cluster Elmo, Pratt and Whitney, and Saab. The zone grants select fiscal exemplifies this trend, as the group continues to add more A&D advantages to companies situated within its borders, including companies to its member base. The new cluster is working in part- exemption from customs duties, corporate income tax, and VAT. nership with Teknopark Istanbul, a local TDZ that will host many ACA first established its presence in Izmir, and has since expanded of the cluster’s members. Of Teknopark Istanbul’s members, 30% its member base to 49 companies throughout Turkey. are producing defense technologies, and include names such as Finally, as a growing international hub, prime travel destination Yaltes, Siemens, and General Electric (GE). and Turkey’s financial capital, Istanbul too is playing a growing Overall, Turkey’s A&D industry is scattered throughout the coun- role in Turkey’s A&D sector. Marked by the establishment of the try, and comprised largely of SMEs. While the clustering initiative industry’s newest cluster in 2015, SAHA Istanbul Defense and has helped some of these firms gain recognition, the policy tool can Aerospace Cluster, Istanbul is slowly but surely realizing its A&D be further utilized to promote collaboration, strengthen the links potential. “Companies are coming to Istanbul either by establish- between academic institutions and the industry, and bolster the vis- ing branch offices or relocating from Ankara to be closer to in- ibility of Turkish SMEs abroad. Moving forward it will be crucial ternational names, airports, and strategic destinations,” explained for Turkey to build its own knowledge base in order to strengthen international relations coordinator at Teknopark Istanbul, Sercan local content and market itself on a global scale, and clusters can Altinbas. play a seminal role in furthering these objectives. •

Industry Explorations - 21 - TURKEY AEROSPACE & DEFENSE 2016

Global Business Reports INTERVIEW

SaSaD provides an excellent overview of being applied. The current effort will need recent statistics and trends for defense to be improved, but it is on the right track. manufacturing until 2010. What are the trends and statistics for industry growth There are several large aerospace proj- over the last five years? ects being developed, as well as ambi- The current outlook for the defense sector tious goals to grow the industry by 2023. is strong with year on year trends such as Where do you see the industry heading in increasing exports that reached $1.85 bil- the next three to five years? lion in 2014 as compared to $835 million My view is that there should be more gov- in 2010. There is a slight discrepancy in ernment controls in the industry. The aero- export numbers compared to government space and defense sector is not a place for data because they do not count services. In liberalism. There have been some discus- regards to defense and aerospace industry sions over the past few years as to how turnover, the industry moved from $4.1 bil- many players that should be around at the lion in 2010 to $5.1 billion while during the system level, but the more players the more same period equity-backed research and de- trouble for Turkey. The current strategy velopment (R&D) more than doubled from should be followed strictly; there is a good $143 million to $350 million in 2014. Of enough environment for smaller industries. K. Nail course, the largest part of R&D spending What is missing is critical technologies that was undertaken by the government, which have been invested in but are not quite there Kurt has fluctuated year to year but remained a yet. In those critical technology areas, there steady element within the industry. In terms must be tier-one suppliers as systems pro- of key sectoral elements behind this trend viders to original equipment manufacturers aeronautics and space and electronics have (OEMs) and this is probably the weakest been the key growth drivers with $1.2 bil- part of Turkish OEMs compared to Western Chairman of the Board lion and $1.4 billion of total industry turn- OEMs. We realize that it will take time and DEFENSE AND AEROSPACE over for 2014, respectively. Looking for- will not be easy but if the industry clever- INDUSTRY MANUFACTURERS ward, the expectation for the next 10-year ly identifies those areas and invest in them ASSOCIATION (SASAD) compounded annual growth rate is 4% to carefully, the capabilities and strength of 5%, whereas for the last five years it was defense and aerospace industry will be el- 5.5%. evated to the next level. Turkey needs to continue improving and Defense and aerospace products often investing in new products, whether they have many technical requirements that are required by the armed forces or not. have to be met, requiring technically You need to be considering ten-fifteen The Defense and Aerospace Industry competent people for manufacturing. years ahead of time and have your quality Manufacturers Association (SaSaD) is How able are aerospace companies to people work on those future requirements the premier organization for defense hire high quality personnel? to come up with creative solutions. Not all manufacturing companies in Turkey. The most critical and important issue for of them will end up with serial production, Could you provide a brief introduction the aerospace industry is the acquisition of but you have to be supporting high quality to the history of SaSaD and its current skilled personnel. In the last 15 years the researchers with developing programs. This role in the industry? industry has invested heavily to develop has been happening in the United States and SaSaD was established in 1990 by a Min- quality personnel with particular focus on Europe, where they are seeing the results. istry of National Defense directive with design skills. Currently there New products including naval platforms, full support to represent the Turkish De- are special programs supported by the Un- the HÜRKUŞ Training Aircraft, the ATAK fense Industry. In 2012, SaSaD integrated dersecretariat for Defense Industries (SSM) Helicopter, Main Battle Tank, Air Defense Turkish manufacturers in civil aviation and to encourage university education related Systems, and regional aircraft should start space industry to make SaSaD the main to the defense industry and orientation for seeing exports in the near future. • association to represent the defense, aero- new employees in the sector. After univer- space, space, and security sectors in Turkey sities observed resource shortages the gov- with 157 member companies. The mission ernment started to apply education policies for SaSaD is to represent and support the to meet ındustry's requirements. So while industry by facilitating partnerships with important progress has been made, the the government, lobbying for beneficial problem in human resources has not been regulations, identifying market opportuni- completely solved. No one was considering ties, gathering performance statistics for the what to do to educate people in the defense industry, and organizing and attending pro- industry 10 years ago, but now that there is motional events for the industry. a high demand and there are more resources

Industry Explorations - 23 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

Although defense companies are com- laboration and information sharing. What prised of a large number of products and are some of yours successes and challenges systems, in many countries aerospace takes in these areas? up the largest portion of their exports and The cluster concept is growing popular both costs. What is the importance of aerospace in Turkey and throughout the world. The con- to TSSK-associated companies? cept highlights an industrial synergy model Currently, TSSK has 93 companies oper- that emphasizes SMEs and the contribu- ating in defense, aerospace and security, tion of specialized and efficient structuring spread to four technology parks in Ankara, to economy. This is also in line with SSM’s namely ODTU TEKNOKENT, BİLKENT strategy to widen the industrial base and in- Cyberpark, Hacettepe Teknokent, and Gazi crease the vertical expertise. Teknopark. Ankara’s major industrial base is TSSK aims to achieve the following targets focused on aerospace and defense and accord- by providing synergy among its members ingly TSSK members are working in defense aimed to develop and produce sustainable and aerospace area. Some members provide products via industry-industry cooperation subsystems to aerospace programs in Turkey, and industry-university cooperation that will such as airborne digital data recorders, air- provide important contribution to our coun- borne missile control systems, airborne digi- try to have indigenous defense and aerospace Fatih tal moving map computer and flight control platforms and systems and also to have them computer, etc. whereas some members devel- as competitive as possible in the export mar- Ünal op tactical unmanned aerial vehicles (UAVs), ket. In order to achieve these targets, TSSK aerostats and similar platforms or some pro- will do: (1) develop new products and tech- vides engineering and training simulators for nologies through effective and complemen- these air platforms. tary interactions between players assuming Only 8 of the 93 members in TSSK are cate- different roles within the techno-park setting Chairman of the Board gorised as players in the aerospace sub sector – such as industries, universities and research TEKNOKENT DEFENSE of the defense and aerospace, but other TSSK organizations; and (2) ensure the develop- INDUSTRY CLUSTER (TSSK) members are dealing with electronics units, ment, expansion and sustainability of new software development, and simulation prod- R&D and product ideas within this ecosystem ucts are also providing products and services that, in line with the commercialization ob- to aerospace. Obviously, there are ongoing jectives, lead to an increase in market share. aerospace programs like Turkish attack heli- copter, ANKA MALE UAV, Hurkus training What are TSSK’s plans for the next five The TSSK is a newer cluster. Could you aircraft, Karayel Tactical UAV, F-16 mod- years? provide a brief introduction to the devel- ernization, Turkish general purpose helicop- TSSK will conduct extensive activities to en- opment of the TSSK cluster and its role? ter programs in which various members of sure that its members can take on an effective Teknokent Defense Industry Cluster (TSSK) TSSK take part including the major players role in new and large-scale programs, such as was established in 2010 among the defense, like partial operation of TUSAŞ, ASELSAN regional aircraft, the Turkish fighter devel- aerospace, and security companies at the and HAVELSAN within ODTU TEKNO- opment (TF-X), indigenous helicopter, and Middle East Technical University Technol- KENT. Moreover, there are new programs cyber security. In this context, TSSK plans ogy Park (ODTU TEKNOKENT) in the be- like the indigenous light helicopter program to hold various training sessions in the first ginning. It then became a common platform and others to be launched very soon, such quarter of 2016 to increase the competitive- for all the defense, aerospace and security as the implementation phase of the national ness and technical competencies of its mem- companies that operate in technology parks fighter aircraft program and a new program in bers in the relevant areas, while also assist- in Ankara, not just ODTU TEKNOKENT. civilian aviation, regional jet program. TSSK ing its members in gaining access to various TSSK hosts 93 defense, aerospace, and secu- members are working to take roles in these public support programs. To diversify the rity companies doing research and develop- programs with the products and capabilities areas of activity and the customer portfolio ment (R&D) and product development. The that they have. This is crucial for our sector of TSSK companies, we will continue to pro- cluster provides added value to generate more because the only way that we can make in- mote their activities in civil areas through synergy and cooperation among its members, digenous airborne platform programs that can emphasis on dual-use technologies. with universities for applied research in de- compete in the export market is to localize the In January 2016, we held Project Market fense sector, and with major contractors in subsystems by utilizing small and medium- Day at the ODTU Cultural and Conven- the market. The ultimate goals are to fulfill sized enterprises having vertical expertise, tion Center, under SSM’s participation and the requirements of Turkish Armed Forces universities, and R&D organizations in the TUBİTAK’s support as well as the participa- and position the Turkish defense industry as a right combination. tion of large-scale players in our sector such significant player in the world market through as ASELSAN, TAI, ROKETSAN, HAVEL- high technology solutions, products, and ser- Part of TSSK’s mission is to promote its SAN, FNSS and . • vices presented to international market. members internationally and facilitate col-

TURKEY AEROSPACE & DEFENSE 2016 - 24 - Industry Explorations Global Business Reports INTERVIEW

with education and consultancy services. For ture, and manufacturing skills, meaning that example, we conduct trainings for AS9100 European companies can work well with us. certification and SEO optimization, inform Furthermore, TAI and TUSAŞ Engine Indus- our members of foreign trade protocols, and tries, Inc. (TEI) are very good prime contrac- provide them with specialized country infor- tors and Turkey is a large customer for Boe- mation. ing and Airbus, as Turkish Airlines continues to purchase many aircrafts each year. Hence Aerospace is a specialized industry requir- Turkey will be a good solution in the long ing custom components and high quality. term, especially for Airbus. What specific programs within univer- sities and schools are available to train Increasing the share of domestic produc- aerospace professionals? How does OSSA tion is OSSA’s major goal. What is the facilitate collaboration in this regard? cluster doing to reach this goal? OSSA maintains good relationships with We as OSSA are an association that works to a number of Turkish universities that offer assist our member companies with their de- relevant faculties. In Ankara there are many velopment. Other companies abroad can uti- technical schools including the University of lize our database, knowledge, and experience Turkish Aeronautical Association as well as at no cost. OSSA knows each company, as Hilal Ünal Middle East Technical University, which has well as their strengths and capabilities, and an aerospace engineering department. In Es- we want to be the first point of contact for Türkan kisehir, Anatolian University boasts a repu- any international contracts. table civil aviation department from which students often come to find jobs in Ankara Do you have a final message for our inter- due to the concentration of industry here. national readers? OSSA is working to attract more students to Every two years OSSA organizes an event in Cluster Coordinator and Project Manager the cluster. partnership with business-to-business (B2B) OSSA DEFENSE AND event organizer BCI Aerospace in Ankara AVIATION CLUSTER Among OSSA members, what is the ratio known as International Cooperation Days in of civil aviation projects to defense avia- Defense and Aerospace (ICDDA). Our last tion projects? two events effectively helped attendees to While we are unable to make a definite dis- source appropriate contacts, offered work- tinction, it is clear that civil aviation is grow- shops and facilitated B2B meetings. In 2014, ing. Roughly half of companies’ business 34 countries were represented with more than To begin please provide a brief history and volume stems from civil aviation while the 250 companies, and 4,800 B2B meetings oc- introduction to the services that OSSA other half comes from defense. Four years curred within two days. Large international provides. ago a majority of projects were defense- companies including Boeing, Airbus, and OSSA was established in 2007 as a result of a related—approximately 70%—whereas at Sikorsky have asked us to organize the event competitiveness analysis that was conducted present many defense projects have already every year and most have already registered. in the OSTIM Industrial Zone, an organized been completed. It is easy for defense com- Representatives from the Middle East, Turk- industrial area comprised of 5,000 companies panies to shift their focus in the direction of ish republics, Europe, United States, and and approximately 50,000 workers across 17 civil aviation, and they are choosing to do so. other Asian countries such as Malaysia and sectors. The analysis identified strategic sec- Indonesia will attend ICDDA, making it an tors, which included aerospace and defense, In terms of business models how does the attractive forum for the industry at large. • compelling the management to establish mix of civil and defense affect companies a cluster. Over the years we have built our with regards to their ability to grow? member base to include over 160 member Previously there were more active defense companies, most of which are manufacturing projects that spurred growth, but the number sub suppliers located in Ankara. of projects has dwindled. In contrast to short- OSSA serves as a point of contact between er defense contracts, civil aviation requires at its members, the government, and major in- least a five-year plan. These longer produc- dustrial companies in Turkey such as ASEL- tion cycles help small- and medium-sized SAN, Turkish Aerospace Industries, Inc. enterprises grow, and hence we are trying to (TAI), and Roketsan. We also play an impor- develop civil aviation companies. tant role as an interface between large inter- Turkey can serve as an optimal solution for national companies and our members. As an civil aircraft manufacturing systems, due to association we are working to develop our the fact that it is not in the euro zone, and has members’ business abroad as well as their good experience as a result of its work in the level of competitiveness by providing them defense sector. We have the capability, cul-

Industry Explorations - 25 - TURKEY AEROSPACE & DEFENSE 2016 Image: Turkish Aerospace Industries, Inc. (TAI) GBR • Industry Explorations • TURKEY AEROSPACE & DEFENSE 2016 DOMESTIC DRIVE: TURKEY'S AEROSPACE & DEFENSE OEMS

“A prime example of our work in developing Turkey’s next generation of indigenous aircraft is the HÜRKUŞ program, which started in 2006 to develop a state-of-the-art trainer aircraft. The HÜRKUŞ aircraft allows different mission configurations, features a next generation glass cockpit, unique high tandem seating configuration, best-in-class pilot view, on- board oxygen generating system and a high-power engine.”

- Muharrem Dörtkaşlı, President & CEO, Turkish Aerospace Industries, Inc. (TAI) EDITORIAL Global Business Reports

LEVELING UP Turkey’s Major Platforms and Systems

Militaries need quality platforms to leverage force in the most will be able to fill the gap especially in export markets. Global effective manner. While the most powerful weapon in any mili- demand for MALE UAVs is expected to reach $13.5 billion in the tary is people, platforms can provide a force multiplier effect for next ten years and demand from Middle Eastern countries, where any military unit. They can also help adapt to the new dilemmas border security is a priority, is expected to be particularly robust. in national security, such as information warfare and intra-state Land systems are another major area where Turkey is making sig- conflicts. Cognizant of these new challenges, Turkey has commis- nificant investment, most notably with its Tank project. The sioned a number of high-profile defense platform projects includ- Altay is a third generation battle tank under development by Oto- ing aerospace platforms, unmanned aerial vehicles (UAVs), land kar with technical support from Hyundai Rotem. The new tank platforms, naval vessels, and air defense missile systems, all of will incorporate several new technologies such as ASELSAN’s which will help grow its domestic defense industry and strength- AKKOR active protection system, ROKETSAN’s designed mod- en its indigenous capabilities. ular armor, and a 120-millimeter turret designed by the Turkish Turkey has launched a large number of new indigenous aerospace Mechanical and Chemical Industry Corp. (MKE). Bids for the platform projects, which are some of the country’s most expen- contract for the tanks’ serial production will be accepted in the sive, technologically intensive, and highest-grossing projects. near future, and other land-platform companies like FNSS and The largest aerospace company in Turkey, Turkish Aerospace In- BMC are likely to bid on the contract. BMC is also the producer dustries, Inc. (TAI), has begun working on several new projects. of Turkey’s first indigenous mine-resistant ambush-protected ve- “During the last decade, TAI has changed itself from a subcon- hicle, the Kirpi. Yet, much like many other indigenous platforms, tractor company into an original equipment manufacturing with the Altay project has faced delays and problems related to engine the development of products like the ANKA medium-altitude development. It was only in March 2015, eight years after the long-endurance (MALE) class UAV, the HÜRKUŞ primary and start of the project, that Turkish engine developer TUMOSAN basic trainer aircraft, and the T129 ATAK multirole combat heli- signed a contract to build an indigenous engine for the tank proj- copter,” said president and CEO Muharrem Dörtkaşlı. ect. TUMOSAN will receive technical assistance from AVL List, TAI is also developing a light-utility helicopter, which will be an Austrian firm. The Altay project will see significant production the first indigenous rotary wing project for Turkey, as well as a for Turkish military use and has strong export potential like Tur- new fighter jet in partnership with BAE Systems within the TF-X key’s other land systems, including FNSS’ Pars armored combat program. The TF-X will be a fifth-generation fighter, similar to an vehicle, of which 267 were ordered by Malaysia. F-22, and will provide an air dominance role to complement the In the realm of naval projects, Turkey is developing and pro- F-35. Currently the HÜRKUŞ is the furthest along in its develop- ducing two major indigenous systems: the MILGEM patrol and ment lifecycle and should be operational in 2018. anti-submarine warfare corvette, and the air-defense frigate or Turkey is also progressing in the UAV market, where there is TF2000 program. The corvettes are multi-purpose vessels made significant room for global growth and differentiation.- Accord for surveillance, anti-submarine warfare, and other purposes. The ing to Otonom Teknoloji’s general manager A. Nezir Erturk, the MILGEM class corvette program is already underway, having main factors that will differentiate Turkish UAV platforms in the launched two ships with two more under construction. Construc- market are, “the attributes they can provide, especially in sur- tion by private shipyards is ongoing and the remaining ships will veillance, where the end users are sensitive to the payload that be built and launched as upgraded versions of the original design. these platforms can provide. Other attributes include the range, The TF2000 frigate is still in the development phase, but will be response time, altitude, cost, and endurance.” used in air defense. All-weather aerial surveillance is particularly needed, and indige- Recently, there have been additional announcements about includ- nous platforms like Otonom Teknoloji’s aerostat Tepegöz UAV or ing a laser-weapon system on the frigate, which is under develop- Baykar’s Bayraktar Mini UAS are able to provide such capability. ment by the scientific research council of Turkey TÜBITAK, mil- For larger payload and altitude requirements, however, MALE itary electronics and radar manufacturer ASELSAN, and Bilkent UAVs such as TAI’s ANKA and Baykar’s Bayraktar Tactical UAS University. Development of these capabilities will bring Turkey’s

TURKEY AEROSPACE & DEFENSE 2016 - 28 - Industry Explorations Global Business Reports EDITORIAL

Image: HÜRKUŞ Primary and Basic Trainer Aircraft. Turkish Aerospace Industries, Inc. (TAI). navy in line with that of the United States, whose laser-weapon easier for technology sharing to speed up the process. Regardless, system was tested this year on the USS Ponce. The development the long-range air defense system will require a large budget, for- of an indigenous laser system could drastically reduce ammuni- eign technical assistance, and patience to realize. tion costs for the navy. These new vessels and systems coming into development are benefitting private shipyards that have ex- perienced lagging growth due to a downturn in global trade fol- Challenges Ahead lowing the 2008 financial crisis. “To rekindle the entrepreneurial vigor from before the crisis, the The question surrounding all defense programs is the ability to Turkish government strategically invested in the naval sector for ensure on-time delivery. Although many industry leaders agree the domestic production of naval vessels for the Turkish Navy,” that Turkey will be able to manufacture its indigenous platforms, said Atilla Çiftçigüzeli CEO of Istanbul Shipyard. there are disagreements over timelines and the levels of foreign This has allowed the naval industry to propel itself forward and technology that will be required. Fully indigenous platforms are upgrade the industry’s technical capabilities. not impossible to design and produce, but it is also unrealistic Two of the most important and high-profile indigenous missile to confect such platforms—engines in particular—without incor- systems under development are the HISAR-A and HISAR-O porating some level of foreign technology. Lastly, none of these low- and medium-range air defense systems. The HISAR series programs, moreover, will realize significant levels of export with- air defense systems are designed for short-to-medium-range use out operational use by the Turkish Armed Forces, and delays will and developed by ROKETSAN, a major rocket producer, and only serve to increase the likelihood that the military will procure ASELSAN. The project is successfully moving into its test phase foreign platforms to meet pressing operational needs. The large and the system is nearing completion for use in 2017. The devel- number of prototypes for these projects means that critical tests opment of short- and medium-range air defense systems is one of their viability will materialize during production and marketing thing, but longer-range systems are much more complex and re- phases. Despite these problems, large and technologically inten- quire another level of research and technology. sive projects will further refine the capabilities of Turkey’s A&D Turkey has been considering the acquisition of a long-range air players. defense system for more than twenty years and, having compared In addition to indigenous projects, Turkey’s A&D sector is en- Russian, Chinese, and Western contractors, has undergone a num- gaged in modernization, weapons development, and platform ber of vacillations. In the latest twist of the procurement saga, building in a number of exciting areas. Yet even this abbreviated the Chinese bid was rejected and it was announced that Turkish list represents a large commitment by the Turkish government to companies, likely ASESLSAN and ROKETSAN, would develop create a world-class defense industry. The complexity of technol- the system. This complex system requires radar, command and ogy and delays in some projects demonstrate that it will take ten control, fire control, and advanced missiles, and developing such years or longer for Turkey to fully realize their benefits. The de- technology will be a challenge. Furthermore, given Turkey’s large fense industry is characterized by long project horizons with long geography the system will have to be deployed over great dis- development phases and often even longer production, servicing, tances, increasing both the cost and time needed for the project. and modernization cycles. Only once these platforms and systems The Turkish government is a committed supporter of the defense reach their full maturity can Turkey become one of the world’s industry, and Turkey’s status as a NATO member will make it top ten defense manufacturing countries. •

Industry Explorations - 29 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

combat helicopter. TAI also participates in in- various narrow- and large-body passenger air- ternational programs as a design, industrial, craft including A320, A330, A350XWB and and/or risk-sharing partner. Our portfolio in- B737, B787. For Airbus, TAI is in charge of cludes: the Airbus A350 wide-body aircraft, the A320 section 18 and section 19, the A330 Airbus A400M next generation transport air- rudder components and is a risk-sharing part- craft, and F-35 Joint Strike Fighter Aircraft, ner for A350XWB aileron. For Boeing, TAI to name a few. TAI has evolved to become a is responsible for the B787 Dreamliner eleva- strategic partner and single source supplier to tor, cargo barrier, and body seal, and is a sole leading OEMs such as Airbus, Boeing, Bom- source manufacturer of B737, B747, B767, bardier, AgustaWestland, Sikorsky, Northrop and B777 components. We have also estab- Grumman and Lockheed Martin. lished relations on the military side (A400M, F-35, S-70, and similar) for fixed- and rotary- Turkey has set major goals for 2023 with wing platforms. the development of an indigenous aircraft One of the most visible international projects at the top of the list. What are some of the that TAI is involved with includes the F-35 major aircraft platforms that TAI is cur- program. TAI is responsible for the manufac- rently working on? turing of the center fuselage, air-to-ground A prime example of our work in developing alternate mission pylon, and composite inlet Muharrem Turkey’s next generation of indigenous air- ducts on the F-35. We have invested in ad- craft is the HÜRKUŞ program, which started vanced composite technologies due to pro- Dörtkaşlı in 2006 to develop a state-of-the-art trainer gram requirements, enhancing our capabili- aircraft. The HÜRKUŞ aircraft allows dif- ties for future projects. ferent mission configurations, features a next The other international project that TAI is en- generation glass cockpit, unique high tandem gaged with is the A400M Program, initiated seating configuration, best-in-class pilot view, in 2003 with Spain, Germany, France, the President and CEO on-board oxygen generating system and a UK, Belgium and Luxembourg in order to de- TURKISH AEROSPACE high-power engine. velop a transport aircraft to replace the aging INDUSTRIES, INC. (TAI) Another milestone in Turkish aviation is the C-130 and C-160 transport aircraft. The Turk- development of a twin-engine, five- to six- ish government bought ten A400M aircraft, ton, light utility helicopter. The program start- allowing TAI to work as an industrial partner ed in 2013 and was Turkey’s first rotary wing responsible for the design and production of Turkish Aerospace Industries Inc. (TAI) is design program. At the moment, the design various parts of the aircraft. Serial manufac- one of the largest original equipment man- process for the program is ongoing with the turing and deliveries are ongoing, and the ufacturers (OEMs) in Turkey, boasting a first flight planned for 2018. Turkish Air Force already has three A400M portfolio of cutting edge products. Please A third prominent TAI program is the T129 aircraft in its inventory. provide a brief introduction to TAI and its ATAK helicopter developed under a special current services and products. collaboration scheme with AgustaWestland. The Turkish defense industry has grown Turkish Aerospace Industries Inc. (TAI) was The T129 ATAK inherits features from the significantly over the last ten years through established in 1984 as a Turkish-American combat-proven AgustaWestland A129CBT the help of targeted government policies. joint venture company to co-produce the F-16 and incorporates a completely new system What will be the most significant devel- fighter aircraft for the Turkish Air Force. Un- with new engines, the LHTEC CTS 800-4A, opments for the industry in the next five til 2005, TAI collaborated with several Eu- new avionics and weapon systems, as well as years? ropean and American companies as a manu- a modified airframe and tail rotor. Ten heli- The Turkish government’s Vision 2023 tar- facturing partner for fixed and rotary wing copters have been delivered to the Turkish gets include major aviation milestone pro- platforms like the CN-235 light transport air- Land Forces, who are using these helicopters grams: a future jet trainer and fighter aircraft. craft and AS-532 Cougar utility helicopters. in active operations. The conceptual design phase of the Turkish In recent years TAI has developed extensive Fighter Aircraft has been completed, and capabilities for the design, development, Boeing and Airbus dominate the global TAI’s engineering team is working together modernization, manufacturing, integration aerospace market, making collaboration with SSM and the Turkish Air Force for the and life cycle support for integrated aero- with international companies on major follow-up phases of the program. space programs that span from fixed and rota- projects and technologies a must. What is In the last 10 years, the yearly revenue of ry wing platforms to unmanned aerial vehicle TAI’s experience in working with interna- Turkey's defense and aerospace industry has and space systems. TAI has evolved from a tional platform producers? increased fourfold, while exports have in- subcontractor into an OEM with the devel- TAI maintains strong partnerships with creased by five times. Research and develop- opment of products like the ANKA medium- worldwide aerospace and defense companies ment expenditure has also been steadily in- altitude long-endurance class, unmanned aer- and is a sole source supplier for both Airbus creasing, totaling $887 million by the end of ial vehicle; the HÜRKUŞ primary and basic and Boeing commercial aircraft programs. 2014. Exports in 2014 were valued at $1.35 trainer aircraft; and the T129 ATAK multirole On the commercial side TAI is involved with billion and total revenue at $5.1 billion. These

TURKEY AEROSPACE & DEFENSE 2016 - 30 - Industry Explorations Global Business Reports INTERVIEW

figures indicate that Turkey is successfully and their derivatives. To realize these goals tinuously putting forth more aggressive re- continuing to become a global supplier for TEI provides services, products and support quirements for future gas turbine engines. aerospace and defense products. to customers around the world as a globally These requirements mainly include reduced recognized, competitive, and high quality fuel consumption, weight, emissions, and in- TAI is positioned as one of Turkey’s top manufacturing, sales and engineering center. creased performance. Achieving such targets aerospace and defense companies. What TEI’s main areas of activity include parts and requires increased engine operating tempera- are the company’s plans to improve its po- module production, engine assembly and test, tures and higher overall pressure ratios. sition in the global market? maintenance, repair and overhaul, engine de- Engine design requires a combination of TAI will grow in two main areas: products and sign and product development. Recognized high-end knowledge and expertise on many portfolio. This includes development projects as a center of excellence for manufacturing engineering disciplines such as materials, such as FX Fighter Aircraft, Light Utility He- parts, TEI is also the sole source for most of aerodynamics, thermal systems, combustion, licopter, HÜRKUŞ Primary & Basic Trainer the parts it manufactures. TEI has expanded cooling, structural and product engineering, Aircraft and ANKA Unmanned Aerial Vehi- its product range throughout the years, and testing, as well as controls and electrical sys- cle variants, as well as new communication today manufactures parts for 39 different tems. In order to be successful in designing and observation satellites. Through this two- engine programs in both military and com- these complex systems, you need to have top- pronged strategy and by enhancing our rela- mercial aviation. TEI participates in both na- level engineering knowledge in every techni- tions with leading OEMs, TAI will become tional and international projects including the cal discipline, and prove your technical capa- even more competitive. “Defense News” cur- A400M TP400 engine project—as a risk and bilities with real applications. rently ranks TAI 78 of the top 100 players in revenue partner, the Turkish medium-altitude the aerospace and defense sector in the world long-endurance (MALE) class unmanned aer- Given that engine design requires engi- in 2014, and we expect to move further up ial vehicle (UAV) (ANKA), T129 ATAK mul- neers with a combination of expertise in a on the first 100 players list. The growth trend tirole combat helicopter and utility helicopter number of systems, how would you charac- will endure and TAI will continue to make engine projects. TEI also services the Turk- terize TEI’s labor environment? groundbreaking achievements for years to ish Air Forces military aircraft and helicopter While TEI utilizes modern equipment and come. • engines with experienced on-site professional technologies, it is our human workforce that technical representatives. truly makes a difference in terms of quality and reliability. TEI tries to attract and employ Engine development is a highly techni- the most competent people in the labor mar- cal field and critical technology will allow ket. In order to do this, there are extensive hir- Turkey to become more independent from ing programs for both blue- and white-collar foreign companies. What is the role of re- personnel. Candidates are put through person- search and development (R&D) in reduc- ality tests, as well as technical written and ap- Chairman, Board of Directors ing dependency on foreign technologies? plied exams to be evaluated thoroughly. In the TUSAŞ ENGINE INDUSTRIES, Defense and aerospace is one of the critical end due to our high demands, only the best INC. (TEI) sectors for which minimum foreign depen- are hired. To illustrate this, today over 300 dency is desired. For this reason, significant GE and TEI engineers are working for GE nationalization projects are being conducted Aviation Engine Development Programs at under the leadership of the Undersecretariat the Türkiye Technology Center (TTC), which for Defense Industries (SSM). In order to was jointly established in Gebze by GE and ensure the sustainability of these projects, TEI in 2007. In partnership with GE, TUSAŞ Engine many R&D centers have been established in Industries Inc. (TEI) is Turkey’s premier Turkey. TEI established its own R&D cen- What are the most promising growth areas engine manufacturer. Please introduce us ter in 2008, and has been performing R&D for TEI’s products and services? to TEI and its main products. in its Eskişehir, Gebze, İstanbul, and Ankara Military and civil uses of UAVs are quickly TUSAŞ Engine Industries Inc. (TEI) is a Engineering Offices. Our R&D center was expanding. One of the most important sub- joint-venture company established in 1985, awarded as the best in aviation industry by the systems in UAVs is their engines, and TEI through a partnership agreement between Ministry of Science, Industry and Technology is looking to provide piston engines and jet Turkish shareholders, TUSAŞ Aerospace in 2014 and 2015 because of its successful engines for the UAV market. As part of the Industries, Inc. (TAI), the Turkish Armed research studies. To contribute towards Tur- operative UAV engine development project Forces Foundation, Turkish Aeronautical As- key’s 2023 vision, TEI has to prioritize R&D. signed with SSM, TEI is developing a die- sociation, and General Electric (GE). The first sel piston engine for Turkish Aerospace In- four parties own 53.78% of the firm while Aerospace and defense products are tech- dustries Inc. (TAI)’s advanced MALE class GE maintains a 46.22% minority stake in the nically challenging to manufacture and UAV, ‘ANKA’. In addition, TEI is developing company. often come with many requirements from a mini turbojet engine for TAI’s high-speed TEI’s mission is to be the leading engine end users. What technical challenges re- target drone system, 'Şimşek'. After TEI com- manufacturer through the design, production lated to engine design is the industry cur- pletes these programs for the domestic mar- and service of globally competitive, sustain- rently facing? ket, they will be presented to international able and indigenous aviation power systems Airline agencies and governments are con- markets. •

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Consequently, over the past 40 years ASEL- nesia. Another technology transfer has been SAN has become Turkey’s leading defense executed between ASELSAN and King company. Today ASELSAN carries out its Abdullah City for Science and Technology activities in five different sectors: commu- (KACST) Institute in Saudi Arabia for local nications and information technology, mi- development of national radio waveforms to croelectronics, guidance and electro-optics, be used in ASELSAN Software Defined Ra- radar and electronic warfare, C4ISR and dios (SDR). Moreover ASELSAN is already defense system technologies and transporta- executing a contract with Military Industries tion, security, energy, automation and medi- Corporation, for the local manufacturing of cal systems. We export our products to ap- ASELSAN SDRs, in a jointly established proximately 50 countries around the world production facility in Saudi Arabia. and rank 62nd among Defense News World’s top 100 defense companies. The long-range anti-air missile system tender, T-Loramids, has recently been ASELSAN has a number of affiliate com- cancelled and the government may soon panies and subsidiaries. How do these commission ASELSAN and ROKETSAN companies complement ASELSAN? What to build this new and very complex sys- is their role in the future development of tem. In what areas would the T-Loramids Faik ASELSAN? project need international cooperation It is no coincidence that ASELSAN has been and technology? What critical technolo- Eken progressing steadily among the top 100 de- gies and strengths would ASELSAN be fense companies worldwide. We owe this able to provide? success partially to our affiliates and subsid- The Turkish defense industry has been com- iaries, which act as our region-specific local missioned to design a very important system entities in the global domain. Our subsidiar- for the air defense of our country, and we are Ph.D., President and CEO ies and affiliates are essentially vessels of ready to take on this major role for our na- ASELSAN A.Ş. ASELSAN technology, and generate local tional defense. These are very complex sys- value. These entities are involved in a broad tems, or ‘system of systems’ since they are range of activities including design and pro- formed of different high-technology subsys- duction to qualification and integration. tems such as radar, missiles, command-and- In line with a vision to become one of the control and fire control systems. best players in the global defense industry, In recent years, national development has ASELSAN started in 1976 with its core ASELSAN has pursued opportunities for become a priority especially in the air de- business of communications but has since development and growth both at home and fense field. ASELSAN has been selected as branched out into a number of fields like abroad. ASELSAN not only engages in di- a major prime contractor for projects such electro-optics, unmanned systems, and rect sales to many countries but also seeks as HİSAR, KORKUT and ÇAFRAD and C4ISR systems. Could you provide an in- joint production with local institutions and have already started to get promising results troduction as to how these new businesses organizations overseas through technology within these projects. We are also expecting evolved and developed as ASELSAN transfer. to secure the long-range surveillance radar grew? As part of its growth strategy based on in- development contract soon, one of the major ASELSAN was established in 1975 in or- digenous products, ASELSAN has evolved components of a long-range air and missile der to fulfill the communication require- from being a company growing within itself defense system. Along with these programs, ments of the Turkish Armed Forces (TAF). to a global company buying, establishing and our 30 years of air defense experience and The company was also founded to contribute partnering with other companies at home and accumulated technological know-how have to the formation of a local defense industry abroad. In line with this strategy we have es- elevated us to a center of excellence in the by enhancing technological capability and tablished factories in the United Arab Emir- air defense field. The background we have creating a workforce endowed with the lat- ates, Jordan, and Kazakhstan, holding 49% reached with these national developments est technological knowhow. Since establish- of the shares, to manufacture and sell ASEL- may lead us to be able to directly feed an in- ment, ASELSAN’s in-house research and de- SAN products in these and nearby countries. digenous long-range air and missile defense velopment (R&D) activities have advanced In accordance with our target to benefit from system development program. these goals. Accumulated technological foreign expertise, we founded an electro- Not only would we be able to take a major knowhow through in-house R&D, comple- optics design company in South . Fur- role in system-level design, engineering, mented with international collaborations and thermore, we own a company named ASEL- testing and qualification but we will also be manufacturing experience gained through li- SAN BAKÜ that administers our marketing supplying major components such as the ra- censed and co-production activities in early activities in Azerbaijan. dars, command-control system, fire-control years, have helped ASELSAN design and ASELSAN has also realized technology systems and the seeker of the missile, all produce devices and systems for all types of transfer programs for our radios to be pro- within the existing major competencies of land, air, sea and space vehicles. duced under license in Pakistan and Indo- ASELSAN. •

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portfolio, the company also aims to extend its HAVELSAN will be responsible for provid- customer base. HAVELSAN has four main ing: overall combat and electronic systems business lines: C4ISR, training and simula- integration; evolved combat management tion technologies, management information system with network centric warfare capa- systems, and cyber and security solutions. bility; integration and building a joint com- bat management system by integration of C4ISR projects consist of roughly half of air, land and amphibious C2IS of national Havelsan’s total work volume. Given the and NATO systems; building Link 11, Link recent announcement of construction of a 16, Link 22; JREAP and VMF data link net- cyber security center and a contract with works with various participants; support for Turkish Airlines for the production of maritime operations other than war; real- simulators, does Havelsan plan to increase time distribution of platform data to sensors; work volume of its additional business weapons and C2 systems; building informa- lines? tion management systems for NATO and na- Software-intensive systems, such as train- tional headquarters, integrated CCTV sys- ing and simulation systems, as well as new tem. emerging technology areas such as cyber- security, will have great importance to our Havelsan’s domestic sales have increased Ahmet Hamdi customers, and we would like to increase our in the last several years while foreign sales market share in these areas. Globally, cyber have slumped. What is Havelsan’s export Atalay security can be considered a very promising and domestic sales strategy? sector. We are making significant investments Our company, which I have already men- and conducting several research and devel- tioned in the beginning, is a Turkish Armed opment (R&D) projects in this area and have Forces Foundation institution. Our first aim developed and launched several products. In is to develop and meet the needs of Turkish CEO the near future, cyber security will be a very Armed Forces. Foreign sales issue is a mat- HAVELSAN INC. important business line for HAVELSAN. In ter of international relations. No matter how regard to training and simulation market, much technologically advanced products you HAVELSAN is considered a regional leader develop, how cheap and fast you produce, and competent supplier. We have developed defense companies are depended on diplo- many critical competencies and capabilities matic relations. In this context, all around the that we can also use within civilian markets. world defense and aviation sectors are sup- The contract with Star Alliance Member ported by the government policies. Turkey, Turkish Airlines is a big opportunity to ex- as a comparatively new and powerful play- HAVELSAN Inc. began its operations pand our business lines to civil aviation mar- er is on a pathway leading to more business three years after its founding in 1982, ket. By this initiative, we do not only reach deals in the international arena. My vision for and has since developed many successful global customers, but we also enrich our cus- HAVELSAN is that there will be three main international and domestic product lines. tomer portfolio by adding non- military cli- sources of revenue: the foreign market sales, Please provide a brief history. ents for our high-tech simulation products. the civilian market sales, and the defense and HAVELSAN Inc. was founded in 1982 and security sales, including information and cy- commenced its operations in Ankara as a Havelsan and Aselsan recently won a con- bersecurity systems. 100% Turkish company opening domestic tract to work on the Landing Platform and overseas offices in line with its new re- Dock project. Could you tell us more about Havelsan has ambitious goals to become a quirements. In 2004, the HAVELSAN-USA this project and Havelsan’s role in it? global brand and regional leader in the in- Inc. was founded in Seattle, Washington. HAVELSAN has started to work on combat dustry. Where would you like to see Havel- Also in the first half of 2015, HAVELSAN management systems with the GENESIS san in five years? purchased an U.S.-based company named Project that was developed with Turkish Na- The year 2023 is a very special year for our Quantum 3D, which is located in the Sili- val Research Center Command (TNRCC). country, because Turkey has been established con Valley and specializes in developing and Our company became TNRCC’s industry in 1923. And our aim is to become one of the manufacturing real-time visual simulation partner and integrated the Combat Manage- top 100 defense companies of the world by systems. With this purchase, HAVELSAN ment System to 8 Oliver Hazard class frig- 2023. We would like to increase our global has started to be regarded as a U.S. compa- ates. GENESIS Project and the following presence and indeed to increase the percent- ny, which may help it tap into new markets. projects such as MİLGEM, OPV Combat age of exports within our total sales as well HAVELSAN develops technologically ad- Systems, LST were milestones in HAVEL- as boost our civilian sales both at home and vanced mission critical systems and critical SAN’s business line variety. Landing Plat- overseas. Moreover we expect significant security systems for its domestic and over- form Dock -with its new name Landing He- technological changes, and we would like to seas public and private sector customers. Par- licopter Dock- Project has been the zenith of be a technological leader. Accordingly we are allel to developing its product and capability this process. making important R&D investments. •

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in the Boeing 787 program in 2008, re- and is a major global source for Sikorsky ceived government approval as a research Machine & Transmission Centers. These and development (R&D) center, and ex- projects demonstrate the significance of in- panded into aftermarket operations in ternational markets for Alp and our success 2013. Alp currently invests 3.8% of its rev- in sustaining long-term relationships with enue into R&D. Finally, Alp partook in the large OEMs. Achieving Competitive Excellence (ACE) Operating System in which we will reach With new models like the Chinese stealth enterprise site gold level in 2016, the high- Z-20 and Turkey’s General Utility Heli- est level showing operational perfection. copter, what trends do you see in new he- Since its founding, Alp had a clear plan to licopter technologies and models? build a world-class company that could en- As a key instrument for militaries glob- ter niche areas such as the manufacturing ally, the standard design for helicopters and assembly of flight-safety components has not changed significantly over the last and engine-rotating parts for the signifi- five decades. The basic flight technologies cant military and civilian program such as have remained the same while electronics Black Hawk, the F-35 Joint Strike Fighter, and power systems have improved. This is and the Boeing 787. The company made slowly changing, with a new generation of Mustafa Kemal strategic investments in engineering, tool- radically designed helicopters. New gen- ing, special process applications, testing, eration helicopters such Sikorsky’s X2 can Erçelik laboratory infrastructure and cutting tool fly higher and/or faster than ever before, development, making Alp a vertically inte- with or without a pilot. grated organization. Today, Alp is a key supplier of flight-safety What role will Alp Aviation play in the components, complex rotating parts and future of the Turkish aerospace and de- Member, Board of Directors assemblies, and a world-class center of ex- fense industry? ALP AVIATION cellence for titanium and nickel machining Alp Aviation aims to participate as a design and processing, in addition to aluminum and manufacture partner in indigenous air- and steel, with magnesium lines to be op- craft programs in both military and civilian erational in the near future. sectors in Turkey. Alp is prepared to play an important role particularly for landing Alp cooperates with major industry gears and transmission systems. The com- players such as Pratt & Whitney (P&W) pany is also investing in niche technologies and Boeing for certain projects. What is and best selling military and commercial the importance of international markets programs, including newer aircraft pro- Alp Aviation plays a key role in the de- to Alp Aviation? grams such as the F-35, Boeing 787, Air- velopment of the helicopter industry, in- International markets are key for Alp given 380 and P&W NGPF. This helps us cluding production of critical gear, spin- that over 90% of our sales come from ex- maintain a high rate of sales growth, which dle, and swash plate assemblies for the ports, not only to Sikorsky, as our sales to we expect to be 20-30% annually over the Turkish Utility Helicopter Program and Sikorsky account now for less than 35% next five to seven years. While 64% of our Black Hawk platforms. Please provide a of our turnover. Alp’s aim is to partner projects are currently in defense and the brief introduction to Alp Aviation and its with key original equipment manufactur- remaining 36% commercial, commercial role in aerospace and defense projects. ers (OEMs) in high-volume and promis- programs are primed for growth. Signifi- Alp Aviation’s roots originate from the ing programs with our strategic goods and cant orders from the Turkish Aviation In- Turkish Alpata Group, which already had services, a target we have achieved so far. dustry, particularly THY, leading to an in- a considerable footprint in various sectors Alp’s international activity includes, but is creased interest towards Turkish industry in Eskisehir, an important center of mili- not limited to, the significant work share from leading OEMs, Alp is expected to en- tary aerospace in Turkey. Hence the aero- in U.S. Blackhawk programs, involvement hance its key flight safety products supplier space sector had been on our radar even as the only non-U.S. partner of Goodrich role further as a result of the Turkish Utility before Alp Aviation (Alp) was established LG (now UTAS Landing Gear) on the F-22 Helicopter Program (TUHP) and will also in 1998. The turning point in Alp’s history program, partnering on R&D with P&W on become a spare parts source for the Turk- came after the group’s partnership with the the F-135 Nickel integrally bladed rotors, ish Armed Forces and Turkish National Po- Sikorsky Aircraft Corp. in a joint venture, supply to Pratt & Whitney, of key rotating lice’s Sikorsky fleet. Turkey is one of the which took effect in 2000. Soon after this, components for the new generation gear world’s fastest growing countries, whose Alp became an approved flight-safety part turbofan engine. Alp has also evolved to progress in aerospace and defense makes it source for Sikorsky, joined the F-35 pro- become one of the top two subcontractors not only a market, but a reliable partner for gram, and invested in the engine-rotating for UTAS Landing Gear in the JSF pro- sales, profits, additional capacity, competi- parts business. ALP also became a partner gram in dollar terms over the last decade, tive costs and dependable resources. •

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industry began in 2002, and we delivered is out of the hanger, it can travel to the the first UAV product—Bayraktar Mini runway by itself. The plane can also land, UAS—to the Turkish military five years brake, and park completely autonomously. later in 2007. Furthermore, the UAV’s surveillance view Since 2007, Baykar has delivered more is of a very high quality both during the than 200 miniature planes to the mar- day and at night. ket. We design the platform, electronics, Turkey is currently focusing on building ground control and components of the new aviation technologies and hence the UAS. Our team is comprised of young government is heavily supporting the de- talent, whose dynamic engineers are mo- velopment of UAV systems. Accordingly, tivated by work and accomplishments in they have put forth a criterion to determine new and emerging areas. About 75 of our what percentage of a given system is in- employees are engineers and 45 are techni- digenous. 93% of Baykar’s tactical UAV cians with multidisciplinary backgrounds. project is indigenous, which is significant- We also have a research center that em- ly high. We are able to achieve this per- ploys 70 people. Baykar’s products are centage due to the fact that all critical elec- very successful in Turkey and have been tronic subsystems and software used in our used by the country’s military and police. products are developed in-house. Haluk In fact ours is the first UAV in Turkey to be accepted by the military and operated What is Baykar’s vision and goals for Bayraktar actively. In 2012, we also started exporting the next few years? the Bayraktar Mini UAS to Qatar’s Armed With regards to the current global UAV Forces. The plane is built for short-range market, 85% is comprised of military forc- reconnaissance and surveillance applica- es and only 15% of sales go towards civil tions. Compared to similar products on the use. The reason for this is that the military General Manager global market, Baykar’s product has a very is not bound by regulatory limitations in BAYKAR unique system along with advanced tech- terms of UAV use. We have to aim to de- nological features. velop new innovations as opposed to fol- lowing others’ footsteps. Within the UAV What are some of the Mini UAS’ differ- industry, Turkey is able to compete at a entiating features? global level. While our main focus today is The Bayraktar Mini UAS is fully autono- the Turkish government, Baykar has goals mous from takeoff to landing. The plane to operate outside of the country. Our tac- continuously calculates its store of energy tical UAV is still very new on the market Baykar began work in the automo- and if its energy is not sufficient to return and we would like to focus all our atten- tive manufacturing business, and has to the point of takeoff, the plane will au- tion on delivering the best possible prod- evolved to now manufacture unmanned tomatically return without any user inter- ucts to our own country. The government aerial vehicles (UAVs). Can you please vention. The plane can fly for up to one is committed to growing Turkey’s UAV provide us with a brief history of hour, and survive many adverse weather industry, and since 2004 has been follow- Baykar and elaborate on the evolution conditions. If affected by conditions such ing a new indigenous development model. of the company? as spinning from high winds, the plane is UAVs are one of the main development ar- Baykar was established in 1984 as an en- able to recover automatically. The Bayrak- eas included in the model. gineering company and sub-contractor to tar Mini UAS has completed is product Over the next few years we will focus on major automotive companies in Turkey. life cycle including design and delivery, establishing our tactical UAV unit in the In 2000 the company became interested in to training and logistics. The Bayraktar market and increasing sales. There are a guidance and control systems for the avia- Mini UAS is the first system of its size that significant number of opportunities for tion industry. UAVs were a relatively new the Turkish Military Force is using, and us within our reconnaissance and surveil- concept in Turkey, and we had to conduct Baykar continues to offer logistics support lance business that we would like to em- a significant amount of research given the to the product’s end users. brace. Baykar will also continue conduct- number of complex electronics involved. Subsequently, we developed Bayraktar ing research and development in order to Discontinuing operations within the auto- Tactical UAS that can fly at 30,000 feet for develop bigger and better products. • motive industry, Baykar went to the draw- up to 30 hours, breaking Turkish national ing board and concentrated on fully auto- aerospace altitude and endurance records. matic UAV guidance and control systems. We delivered the product in 2014 and The company mainly started with minia- 2015, and it is currently operational. Our ture-sized systems and then shifted to big- plane utilizes a triple redundant computer ger systems over the years. Our shift from system, which is the first in its class world- the to the aviation wide. The advantages are that if the plane

TURKEY AEROSPACE & DEFENSE 2016 - 36 - Industry Explorations Global Business Reports INTERVIEW

cal UAV KARAYEL, and training aircraft working mainly in command and control BORA. In order to develop different UAV and avionics. The company was estab- systems such as armed or rotary, in-house lished 25 years ago in 1990, making it one technology is required. Our advantage both of the oldest private defense companies in as a company and country is that the do- Turkey. We are pioneers in avionics soft- mestic UAV field has matured significantly ware, and continue to maintain our position enough to design and develop almost ev- as market leaders in this field. AYESAS is erything indigenously. While we purchase the only company in Turkey to develop select components from foreign markets, more than 18 to 20 software systems that the complete design, software and devel- are already FAA-approved. We are also the opment is performed internally. primary avionics supplier for Turkish plat- As per the needs of the user, we have al- form makers such as TAI and ASELSAN, ready started to make the necessary modi- but work mainly for American civilian fications for the armed UAV and, although aerospace companies. the details are not shared with the public Apart from avionics AYESAS is an elec- at this stage, an armed version of KARAY- tronics manufacturer, and the first compa- EL is almost ready. Currently, KARAYEL ny in the world to secure a software share UAV’s are actively used by the Turkish outside the United States within the F35 Aziz Armed Forces for surveillance purposes program. We are still the only company across Turkey. in Turkey to have a software, electronic Sipahi Vestel Defence is currently leading other manufacturing, and design share in the pro- confidential indigenous development UAV gram. We also provide two main systems programs for different purposes. We are for the F35: a missile remote interface unit working with Turkish sub-system manu- (MRIU) and panoramic cockpit display facturers and trying to make use of locally electronic modules. AYESAS is manufac- VESTEL DEFENSE AND available UAV systems on UAV’s as much turing electronic cards and modules for AYESAS as possible. both sub systems for F35 aircrafts as a sole UAV technology is relatively new, hence source. We also work with Boeing, Lock- UAV regulations, including those concern- heed Martin, Sikorsky and Airbus. ing UAV flight within civil air zones, are In the field of command and control, being developed now in Turkey, Europe, AYESAS gained its expertise through a and the United States. However Vestel De- large Turkish air defense mobile radar fence has an important advantage: NATO complexes program in 1990s, for which we standards. The NATO 4671 ‘airworthiness’ were the main contractor. Today we per- standard has to be met in order for UAVs form command and control software and Can you please introduce us to Vestel to fly over civilian zones, and our Karayel hardware design, manufacturing and inte- Defense and AYESAS? UAV is one of very few UAVs that are de- gration. Vestel Defence and AYESAS are sister signed according to this standard. companies, both belonging to the Zorlu What goals would you like both Vestel Group. Vestel Defence is wholly owned by What other challenges prevent the suc- Defence and AYESAS to realize in the the Turkish Zorlu Group, while AYESAS cessful development and sale of UAVs? next three to five years? is a joint venture with the American com- There is one primary issue: payloads. Our goal is for Vestel Defence to become pany L-3 Communications, owning 40% of Only select payloads, which are critical for one of the leading UAV suppliers in the re- the company. Vestel Defence is a platforms UAVs, are manufactured in Turkey. And as gion. The interest that we continue to re- manufacturer, focused on the production of per U.S. specifications, Turkey is obliged ceive from Middle Eastern, Eastern Euro- UAVs, and AYESAS is a systems supplier to import. Otherwise, most systems are pean and African companies is incredibly of avionics and electronics. Aziz Sipahi ours, or can be purchased from other coun- high. We are engaged in negotiations with heads both organizations from their head- tries. In the meantime, Turkish company some of those countries, and can achieve quarters in Ankara, Turkey. ASELSAN is developing payload technol- this goal within the next three to five years. ogy, and we hope that they succeed. For AYESAS, we would like to firstly Turkey has demands for armed as well maintain our competitive position in the as all weather surveillance UAVs. Is Ves- On the other end of the spectrum, AYES- market with respect to the main global tel Defence working on any new projects AS is a systems supplier of avionics. players, and to improve our business vol- to meet these needs? Please introduce us to the company and ume with those companies. Secondly, as Vestel Defence has developed indigenous its presence in the Turkish market. per our long-term strategic plan, we plan to UAV systems in three categories since the AYESAS does not manufacture any kind leverage our expertise and enter the health- company’s establishment 11 years ago. of land, air or sea platform, but rather sup- care market, where quality and technology These include the mini UAV EFE, a tacti- plies electronic systems for such platforms, expectations are similar. •

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the team formed a forward-looking pri- vehicles in its class. Can you discuss vate Turkish company. Their vision lay some of these features? the foundation that FNSS is now building FNSS has chosen to offer products that upon, inspiring a competitive Turkish land meet the demands of the battlefield, -in system company on the path towards be- stead of following traditional designs. coming one of the leading companies in PARS, for example, is amphibious. This the world. feature gives the vehicle the advantage FNSS’ CEO and top management have of crossing inland waters without a need always utilized modern management prin- for a transporting medium. A very impor- ciples and relied on top-tier young person- tant difference is also the cockpit design, nel. FNSS’ CEO is not only a leader of the which provides the driver and the soldier company, but also a leader of the Turkish sitting by him with the comforts of a mod- defense industry, whose positioning lends ern truck, such as a greater visibility ad- a great deal of strength to the company. vantage over the operation area while still FNSS’ personnel are selected from top- under protection. The PARS FoV driver notch university graduates, and are proud cockpit has twice the volume that its com- to be part of such a fast-growing company. petitor vehicles offer. With regards to product offering, FNSS Unlike its competitors, the PARS driver K. Nail evolved from a licensed product manufac- does not have to drive at an open-hatch po- turing company to designing and develop- sition under any climatic conditions. This Kurt ing its own combat vehicles and weapon immediately impacts the driver positively systems. FNSS entered the wheeled-ve- as he is not affected by the existing threats hicle market with its own products, a de- outside the vehicle. Thanks to its all-wheel cision that proved to be very successful. steering mechanism, the vehicle does have Currently, FNSS’ vast portfolio of indig- a very short turn radius. In fact PARS FoV General Manager, CEO enous products ranges from a family of has the shortest turning radius relative to FNSS DEFENSE SYSTEMS tracked vehicles called Kaplan and WAV its competitors. This is quite advantageous FoVs called PARS, to weapon systems, in urban fighting, where sharp turns in nar- special engineering vehicles, and ILS. row streets are necessary. If selected by the customer, the ride-height system gives What are some specific technological the driver the ability to adjust the height advantages that make FNSS’ products and inclination of the vehicle according to attractive in the global marketplace? the geology and threats of the operational Given that the average rate of indige- area. Furthermore, if required by the cus- FNSS Defense Systems was established nous production for the Turkish Armed tomer, a hydropneumatic suspension sys- in 1988 as a result of a large and sym- Forces inventory is 50%, what percent- tem provides different ride characteristics bolic SSM contract for the production age of your technologies have been pro- that some customers might find advanta- of 1,698 armed combat vehicles (ACV- duced indigenously? geous in their operations. 15) for the Turkish Armed Forces. Since Since 1993, FNSS’ products have em- then, FNSS has evolved to become one ployed local Turkish systems that com- What does Turkey require to improve of Turkey’s most established and repu- prise about 60% to 70% of its vehicles. its positioning in the global defense mar- table defense companies. How has the FNSS’ marketing philosophy is to adapt ket and achieve its 2023 targets? How is company grown to secure its current to the technologies that our customers are FNSS playing a role in this strategic na- market position? asking for. This flexibility in our offering tional plan, and where do you envision There are numerous reasons for FNSS’ provides comfort to the procurement au- the company in the next three to five growth. Firstly, the firm’s partners have thorities, allowing them to select sub sys- years? not looked at this joint venture as a one- tems from a variety of sources. Turkey will continuously improve its po- time opportunity. Both partners have fore- The power pack for example has been an sition in the global defense market by in- seen the successes of such a young, dy- issue in Turkey since FNSS began indig- creasing its offering of indigenous prod- namic company and supported it entirely enous production in the country. The pro- ucts. Turks are progressively learning how since its formation. The initial hybrid man- curement authorities, however, are now to improve their exports. In this respect, agement team was very professional and planning to establish such capabilities in FNSS is already a champion in the export laid down a corporate foundation that was Turkey, which will immediately enhance market and such performance will contin- strong, professional and resilient. FNSS’s position to offer products with ue, as FNSS is expecting to capture major The Turkish team that took over manage- Turkish power packs. upcoming local land platform contracts. ment from the American team in the mid By 2018, the company plans to earn $500 1990s was visionary, modest and confi- FNSS PARS vehicle family has select million income annually. • dent. Together with the company staff, features that do not exist in competing

TURKEY AEROSPACE & DEFENSE 2016 - 38 - Industry Explorations

INTERVIEW Global Business Reports

certificates for national and NATO- stan standards applied that include factory test- dards with the capacity to build both com- ing, harbor testing, a two-to-seven month mercial and naval vessels. The shipyard period of sea acceptance testing, as well as area has a capacity of processing 25,500 system installation and integration. These tons of metal per year, as well as six slip- high standards and tests mean that roughly ways for the new building projects. It is ca- 8% of Turkey’s shipyards are eligible for pable of providing repair and maintenance projects like these. services for up to 14 vessels simultaneous- The naval sector also presents a global op- ly, and has two floating docks, three piers, portunity for the company to build patrol and an extensive wharf area. craft for safeguarding offshore oil and gas platforms from security threats. Accord- SNR Holdings has several companies ing to recent research, roughly 2,000 patrol including Seft Ship Design, ABS Steel, boats are required to safeguard offshore ABS PV, Şener Petrol Shipping and SNR facilities globally. For example, Istanbul Shipyard. How does Istanbul Shipyard Shipyard entered the Romanian market collaborate and work within this group with the SNR class patrol boat and has of companies? renovated Turkish Coast Guard search and SNR Holding’s subsidiary companies pro- rescue vessels. Building warships for Tur- Atilla vide a complementary system where ves- key does not yield substantial profits due to sels constructed by Istanbul Shipyard will the very high requirements of the navy but Çiftçigüzeli be chartered by Şener Petrol Shipping, and it does give the company a reputation for the feedback from their experience will go naval work, which introduces new opportu- into building new and better tankers. An- nities to do naval work for other countries. other subsidiary, Seft Ship Design, with 45 engineers provides the brainpower for de- Both the ALEMDAR and the ISIN & CEO signing new vessels. Istanbul Shipyard’s AKIN ships, the MoShip and RAT Ships, ISTANBUL SHIPYARD spin-off, research and development compa- had significant offsets applied to their ny, MILPER propeller technology, invests contracts. What strengths and expertise in propulsion technology development. does Turkey have in the shipbuilding in- There is a high level of design and manu- dustry? facturing that go into MILPER’s propellers Turkey’s shipbuilding sector developed which can transfer 95% to 98% of the en- considerably between 2004 and 2008, but gine’s power to thrust resulting in a better the global financial crisis affected world speed to fuel consumption ratio. MILPER trade and the shipbuilding sector. To re- Istanbul Shipyard has a 35-year history, also uses a seven-axis system for grinding kindle the entrepreneurial vigor, the Turk- though within the last 12 years has up- its propellers leading to a high quality prod- ish government strategically invested in graded its infrastructure after being ac- uct that can be used in all segments of the the naval sector for the domestic produc- quired by SNR Holdings. Please provide maritime industry from small boats to large tion of vessels for the Turkish navy. During a brief introduction to Istanbul Ship- naval vessels. Though the management of this period high budget projects such as the yard’s history. these companies is independent, the com- MoShip, the Rat ships, landing ships, tank The shipyard was founded in the 1980s bined abilities of SNR Holding’s subsidiary landing craft, landing platform docks, tank- but after being acquired by SNR Holding companies provides many opportunities for ers with replenishment at sea capabilities in 2003, it was renamed Istanbul Shipyard. synergy in the servicing the full lifecycle of and Coast Guard boats have all been com- Following the acquisition Istanbul Shipyard our vessels providing long term benefits. missioned by the government with more began a massive reconstruction process to projects forthcoming. upgrade our facilities and capabilities. The Istanbul Shipyard began its work in the work on naval projects started in 2007 with defense sector in 2007 with the SAR-35 Where do you see Istanbul Shipyard in our modernization of four SAR 35 Turkish modernization project for the Turkish the next three to five years? Coast Guard Boats. After that, the shipyard coast guard. What prompted Istanbul Building on the experience and reputation completed five Romanian Border Police Shipyard to work in the defense sector? gained from the construction of naval ships, River Station Boats and then was awarded Istanbul Shipyard targeted naval projects Istanbul Shipyard plans to increase exports a contract by the Undersecretariat for De- because of their high visibility and techni- and international visibility. The vessels that fense Industries for the submarine rescue cal difficulty. Through this effort Istanbul Istanbul Shipyard has built represent some mother ship (MoShip), rescue and towing Shipyard has improved its technological ca- of the most cutting-edge technology that ships (RAT ships), and seismic research pability, helping us to produce higher qual- the industry has to offer. Building off of this vessel projects. Today Istanbul Shipyard ity advanced vessels. For example, two of experience Istanbul Shipyard aims to be a has all the necessary certificates including the major naval projects, the MoShip and leading actor in Turkey’s shipbuilding sec- facility and personnel security clearance RAT ships, have had American and British tor. •

TURKEY AEROSPACE & DEFENSE 2016 - 40 - Industry Explorations Global Business Reports INTERVIEW

factories that are mainly delegated for mili- of the global defense market. It will be able tary purposes, and has completed over 200 to support MKE in R&D, and we will both research and development (R&D) projects. cooperate on the basis of our aspirations to Currently, 117 R&D projects are being - penetrate international markets. The main ried out with a budget of nearly 260 million benefit will likely be the transfer of Rhein- Turkish lira. MKE is proud to be the leading metall’s R&D into MKE’s production ca- company in the Turkish defense industry. pacity, while Rheinmetall will profit from MKE’s large production capabilities. In 2013, MKE’s exports totaled $38 mil- lion. How has the company’s export Turkey has experienced phenomenal strategy evolved since this time? growth, and is working to position itself As a huge institution with about 5,500 em- as a key player in the global defense mar- ployees across 10 factories, we cannot only ket. What advantages does Turkey have supply our own country’s military, making to help reach its ambitious 2023 goals? exports necessary. MKE has to be global in Turkey’s main advantage is that the country scale to make the institution more economic has high motivations compared to Western and able to compete in the global market. countries. Our industries are eager to grow MKE aims to be competitive in terms of ca- and there is a huge drive for success. Tur- Izzet pacity, quality and price. key has invested heavily in its human capi- MKE’s exports have grown significantly. tal and a significant amount of resources Artunç At the end of 2015, our exports will total have been allocated to education. Turkey approximately $96 million, up from $4 mil- currently has about 180 universities and lion in 2000. By the year 2023 we hope to has provided many incentives to attract its achieve a much higher level of exports for younger generation to educate themselves. which we will need to make substantial In recent years, government investments Chairman & Director General investments and focus on training our em- in R&D have also been increased signifi- MECHANICAL AND CHEMICAL ployees to cultivate a global mentality. cantly. INDUSTRY CORP. (MKE) MKE operates within four main areas in- What is the perception of Turkey's inter- cluding ammunitions, rockets, weapons national brand in the defense market? and explosives. Which of these divisions MKE is a well-known brand in the interna- is most important to your business? tional marketplace for its ammunition and All four divisions are equally important to cannons. ASELSAN ranks among the top MKE as the areas are interconnected and 100 companies in the global market, and support each other. Hence we are commit- Roketsan is also becoming well known. MKE has an impressively long history ted to developing each product group equal- Turkey’s eagerness to promote its industry beginning with Sultan Mehmet II after ly. This strategy helps us maintain and in- as well as the advantages of cultural rela- the conquest of Istanbul. Please provide crease the number of customers with whom tions we have with the markets that we seek a brief history of the firm in the modern we work, as we can provide them with to penetrate, result in a significant amount era, starting from the early 2000s. complete solutions. Depending on global of potential. The Turkish Armed Forces are MKE has a very rich history that dates back political circumstances, as well as political also our most useful promotion instrument to the in the 15th century. conditions of the companies to which we given that they use all the products we ex- When the empire dissolved, the company’s export, some business areas might become port. machinery and manpower were transferred more significant at certain times. Recently, to Ankara, which served as the cradle of our small ammunition and small arms produc- Where would you like to see MKE in the institutions during the independence war. tion has become important as global de- next three to five years? After the war, MKE became the pioneer fense expenditures are leveled. Exports of MKE has a rich history. We have evolved for the industrialization of the Republic of small arms and ammunition have also be- into one of the biggest brands in the global Turkey, as the organization was responsible come more substantial, as conflict-ridden market, especially within the ammunition for many of the first industrial institutions areas have undeveloped markets and lack and weapons industry. At MKE, we en- of the republic. Most factories that are cur- the capacity to procure. deavor to consistently meet global market rently in operation were established from requirements. We would like to increase the mid 1920s onwards, after which time MKE recently announced a joint venture exports significantly, and incorporate R&D Turkey has been led by private industrial- with Rheinmetall. Please elaborate on and design into our production philosophy, ization. MKE was initially involved with the project and how MKE and Rhein- include smart ammunition into our pro- many economic activities but currently fo- metall will complement each other. duction line, and change our production cuses all its attention on military produc- Rheinmetall is a well-known company in capabilities to be more environmentally tion. The company operates 10 different the Western market, and sits at the forefront friendly. •

Industry Explorations - 41 - TURKEY AEROSPACE & DEFENSE 2016 Image: Fokker Elmo Turkey GBR • Industry Explorations • TURKEY AEROSPACE & DEFENSE 2016 MAKING A DIFFERENCE: MULTINATIONALS IN TURKEY

“GE has a total of eight innovation centers in the world, of which Turkey’s is the newest. The innovation center is a place where GE can collaborate with customers in different industries and derive solutions to our clients’ challenges. The center is also part of GE’s announced $900 million investment commitment to Turkey.”

- Ismail Sami Özdemir, Regional General Manager, Sales Etihad Group/Turkey/Azerbaijan, GE Aviation EDITORIAL Global Business Reports

FOREIGN WINDS International Players in Turkey

The presence of multinational companies is crucial in bolster- over the years built its network of local suppliers and partners up ing developing economies’ technological know-how all over the to 2,500 people, generating a business volume of more than 1.2 world. In its efforts to build indigenous capabilities, Turkey too billion USD. has subscribed to coproduction and technology transfer policies. Another strong multinational partnership with Turkey’s A&D sec- Such directives are especially necessary in the highly specialized tor dates back to 1985, when GE made a strategic investment in and technical aerospace and defense (A&D) industry, and have the country. The world’s renowned engine manufacturer entered been fuelled by the government’s strategic offset requirements the Turkish market through a joint venture with local contrac- and investment incentive schemes. tor Turkish Aerospace Industries, Inc. (TAI), the Turkish Armed “During the process of the establishment of the domestic defense Forces Foundation and the Turkish Aeronautical Association in industry infrastructure, for the production of military weapons, Eskisehir. The resulting company is known today as Tusaş Engine vehicles, and ammunition, Turkey preferred to cooperate and Industries Inc. (TEI). co-produce with countries and companies that were seen as the “GE Aviation made its first investment in the 1980s in establish- leaders in this sector. This enabled many defense projects like ing TEI and continued with TTC in 2000. Today TEI is a world MILGEM (the Turkish warship program), the ALTAY main battle class aviation company manufacturing over 700 high-tech, com- tank, attack helicopter program, ATAK, and several unmanned plex parts for 39 military and commercial engine programs and aerial vehicle (UAV) projects to be successfully executed by our also provides MRO and AIT services for certain military engines national defense industry,” said Investment Support and Promo- regionally. TTC is focused on promoting aviation-related re- tion Agency of Turkey (ISPAT) president Arda Ermut. search & development and innovation for our aircraft, marine and Major players including Boeing, Airbus, industrial engines throughout their lifecycle BAE Systems, General Electric (GE), To the extent we are able to, we aim with over 350 highly skilled Turkish engi- Sikorsky Aircraft, Fokker Elmo, PFW Pratt neers,” said GE Aviation’s regional general for a designed-in-Turkey, built-in- and Whitney, Rolls-Royce, Honeywell and manager Ismail Sami Özdemir. Turkey approach, focusing on high- Bodycote have all penetrated the Turkish GE has announced a $900-million commit- localization content and as much of market, resulting in a dynamic local indus- ment to Turkey, $500 million of which has try. Many of these international players ben- knowledge transfer as is possible. already been invested. The engine giant has efit from Turkey’s export-oriented -incen also established its eighth Innovation Center tives such as VAT exemption, custom-duty in Turkey, as well as an aviation engineer- exemption, and corporate-tax reduction, as - Patrick Regis, ing technology center. Most recently, GE well as social security-premium and interest President, worked together with its local partner TEI rate support. Turkey & Central Asia, Rolls-Royce on the development of its new LEAP en- Turkey’s most notable international part- gine, helping to grow Turkey’s local knowl- ners include both the world’s largest origi- edge base. nal equipment manufacturers (OEMs), Airbus and Boeing, whose Engine rival Rolls-Royce has also made significant strides in Tur- presence has a tremendous impact on the local supply chain. key, today holding close to 10% of the total local defense market “Turkey is a huge market for both Airbus and Boeing, who are share. The British power systems manufacturer supplies aero en- both selling a large number of aircrafts to the local industry. As gines to the Turkish Armed Forces, power plants for the A400M Airbus and Boeing cannot simply sell aircraft and have to provide and ATAK helicopters, and soon the engine for Turkey’s Light work to the local industry through offsets, local companies will Utility Helicopter program. But aside from their commercial en- strengthen their positions as aircraft sales increase,” said manag- deavors, the firm is investing heavily in Turkey’s research and de- ing director of PFW Aerospace Werner Kuntze. velopment capabilities. Late last year, Rolls-Royce signed a mem- Both OEMs have developed longstanding relationships with Tur- orandum of understanding with the scientific and technological key, resulting in greater business volumes for local and interna- research council of Turkey, TÜBİTAK, to establish an Advanced tional companies in the country. German company and subsidiary Manufacturing Technology Center (AMTC). The initiative is part of Airbus, PFW Aerospace, for example, has grown its presence of its broader strategy for Turkey that includes building relation- in Turkey by threefold in the last three years due in part to the ships through involvement in Turkey’s indigenous programs as extensive work it does with Airbus. Boeing too has maintained well as developing strong local technological capabilities. an important relationship with Turkey since the mid-1940s, and “To the extent we are able to, we aim for a designed-in-Turkey,

TURKEY AEROSPACE & DEFENSE 2016 - 44 - Industry Explorations Global Business Reports EDITORIAL

built-in-Turkey approach, focusing on helicopters. On the commercial side, the high-localization content and as much of firm is beginning work on the Bombardier knowledge transfer as possible,” said pres- During the process of the Cseries and Airbus A330neo. ident of Rolls-Royce Turkey and Central establishment of the domestic As Turkey continues to invest in the devel- Asia, Patrick Regis. defense industry infrastructure, for opment of its defense industry in line with In a similar manner, international aero- the production of military weapons, its 2023 vision, international A&D players space pillar Fokker Elmo has contributed vehicles, and ammunition, Turkey will continue to play a crucial role in its its unique electrical wiring expertise to strategy. Having recognized the opportuni- preferred to cooperate and co- the Turkish market. The Dutch firm has ties the country offers, many multination- produce with countries and companies established itself firmly within the Turkish als have already been drawn to its borders. A&D ecosystem, boasting a quarter cen- that were seen as the leaders in “We are by far the largest economy in tury old relationship with the country. this sector. This enabled many the region with a huge domestic market, “We are continuously adding more capa- defense projects like MILGEM (the a highly qualified labor pool and -an ad bilities to our Turkish facility and by doing Turkish warship program), the ALTAY vanced infrastructure. With these traits, so introducing responsibilities and pro- main battle tank, attack helicopter Turkey is an excellent location as a manu- grams that otherwise would not have the program, ATAK, and several unmanned facturing hub as well as a regional head- ‘made-in-Turkey’ sign on it, and will fur- aerial vehicle (UAV) projects to be quarters for international investors looking ther evolve to be able to serve customers successfully executed by our national for new growth markets to tap into or man- directly without assistance of our parent defense industry. age their current regional operations,” said company,” said general manager Mischa Ermut. Baert. Moreover, Turkey’s offset policies and Fokker Elmo performs specialized devel- status as a NATO member serve as further - Arda Ermut, opment and production of electrical wiring incentives for foreign firms to consider integration systems for various defense President, entering the market. These factors can projects including the Airbus A400M, Investment Support and Promotion promote a favorable mutual exchange for Boeing P-8A, Lockheed Martin F35 and Agency of Turkey (ISPAT) investors and Turks, and help the republic AgustaWestland AW 159 and AW 101 realize its ambitious 2023 vision. •

To rekindle the entrepreneurial vigor from before the crisis, the Turkish government strategically invested in the naval sector for the domestic production of naval vessels for the Turkish Navy.

- Atilla Çiftçigüzeli, CEO, Istanbul Shipyard

Industry Explorations - 45 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

parallel with government policies. of our armed forces and plays an effective Lately ISPAT has assumed an even more role in the highly competitive international influential role in attracting foreign direct defense market by developing indigenous investment, as part of a new deputy prime products. Turkey’s increasing industrial ca- ministry that is directly responsible for im- pabilities and competence have pushed the proving Turkey’s business and investment country forward in recent years with home- environment and coordinating the reform grown projects such as ANKA (a UAV agenda. produced by Turkish Aerospace Industries, As per the reform program, ISPAT will con- TAI), HÜRKUŞ (a tandem two-seat, low- tribute to the strategy and policy making wing, single-engine turboprop developed processes of the government, and help tune by TAI), GÖKTÜRK (a high resolution the investment incentives to better fit our electro-optical satellite), the T70 Turkish country’s needs and become one of the top Light Utility Helicopter, and the TFX Turk- 10 economies of the world by 2023. ish Jet Fighter Aircraft. Some important sub- The promotion of Turkey’s business oppor- systems and technology development proj- tunities also remains one of ISPAT’s core ects have also been initiated to support such tasks, as a network of country advisors work programs. In this regard, we can say that around the globe to bring the best of our the Turkish defense industry has reached a Arda country to the attention of international busi- maturity level in terms of capabilities, qual- ness circles. ity, and proficiency. Turkey’s domestic and Ermut overseas market share will increase along- Part of Invest in Turkey’s mission is to side the completion of the other important provide industry overviews and sector re- national defense projects. ports. Could you provide an overview of Turkey’s investment incentive schemes are the aerospace and defense sector in Tur- mainly based on a regional approach. Ac- ISPAT & WAIPA President key? Also, what kind of incentives does cording to the incentives legislation, Turkey INVESTMENT SUPPORT AND ISPAT provide to this sector in Turkey? is divided into six different regions where PROMOTION AGENCY OF Turkey has achieved great success in recent the most developed cities, defined as first TURKEY (ISPAT) years in the field of aerospace and defense, region, benefit from the least amount of in- and today is among the countries with the centives, while the least developed cities, fastest developing aerospace and defense defined as the sixth region, benefit from the sectors. Owing to their experience and em- highest amount of incentives. phasis on quality, Turkish companies in this The sectors to be supported in each region sector are developing one project after an- are determined in accordance with regional other, creating products that are competing potential and the scale of the local economy, The Investment Support and Promotion worldwide, and assuming important roles while the intensity of support varies de- Agency of Turkey (ISPAT), also known as in international projects. With their quali- pending on the level of development in the Invest in Turkey, is the official organiza- fied human resources and high technology region. However, some areas that are con- tion for promoting Turkey’s investment infrastructure, our companies bring global sidered under the priority investment areas opportunities. Please provide a brief in- solutions to satisfy many countries’ require- (listed in the legislation) can benefit from troduction to the history of ISPAT and its ments. Turkish companies conduct activities fifth region incentives regardless of the re- role in the Turkish economy. in many critical areas of the aerospace and gion where the investment is made. Among The Investment Support and Promotion defense sector such as original design and these investments areas are: Investments Agency of Turkey (ISPAT), established un- development, domestic production, modern- in the defense industry to be made with re- der the Prime Ministry in 2006, unified all ization and modification, R&D and interna- spect to the project approval received from the foreign investment-related services into tional projects. the Undersecretariat for Defense Industries one institution. Catering to the needs of for- During the process of the establishment of (SSM), and Investments for the production eign investors looking to do business in Tur- the domestic defense industry infrastructure, of items in the high-tech industry segment key, ISPAT operates with a one-stop-shop Turkey preferred to cooperate and co-pro- stipulated in the OECD’s definition for tech- formula. From first contact to after-care ser- duce with countries and companies that were nology intensity (production of aviation and vices, it is present at every stage of an invest- seen as the leaders in this sector. This en- space vehicles are also included). Therefore, ment project by an international company in abled many defense projects like MILGEM most production-based investments in the Turkey. (the Turkish warship program), the ALTAY defense, aviation, and aerospace sectors are To date, the agency has realized many in- main battle tank, attack helicopter program, considered as priority investment areas and vestment projects that created employment, ATAK, and several unmanned aerial vehicle can benefit from fifth region incentives. transferred technology, know-how, and (UAV) projects to be successfully executed These incentives include VAT exemption, raised our exports, all of which contribute by our national defense industry. Nowadays, custom duty exemption, corporate tax reduc- to the overall development of our country in the Turkish defense industry meets the needs tion, social security premium support (em-

TURKEY AEROSPACE & DEFENSE 2016 - 46 - Industry Explorations Global Business Reports INTERVIEW

ployer’s share), and interest rate support. deterrent, and modern. Our national defense As the Turkish economy has been growing In addition, if the total fixed investment industry needs to further develop so that our significantly over the last decade the aero- amount of production of aircraft and space- armed forces can maximize their military space and defense sector followed suit, ex- craft and/or related parts exceeds 50 million capabilities. panding from $3 billion to over $5 billion Turkish lira it can also benefit from the large- In that sense, we are working on a new ex- over the last five years. scale investment incentives scheme. port and international cooperation strategies According to SSM’s strategic view, the fol- in order to accelerate growth in this area. lowing issues are primarily important for Increasing exports and reducing imports Turkey’s 2023 general export target of $500 the defense industry within the context of is a key part of the 2023 aerospace and de- billion expects the defense sector to have a the plan: achieving maturity in program fense export goals. What export markets share of $25 billion (5% of overall exports). management, sustainability of the defense does the sector currently export to? Which Furthermore, increased localization will also industry, and developing technological com- countries does it import from? What is the be a focus for the defense industry. Of Tur- petence. SSM will focus on endeavors to projected trajectory for export growth in key’s defense needs, 60% were sourced lo- ensure the sophistication of the defense sec- the aerospace and defense sector? cally in 2015, up from 25% in 2003. tor. It will also guide the small and medium- Over the last decade, different types of ex- sized enterprises and suppliers present in the port and international cooperation opportu- Turkey has seen positive GDP growth for defense industry to develop their capabilities nities have emerged for our companies, in the last five years. What will be the future related to program management and technol- parallel with the development of the Turkish growth of the aerospace and defense sec- ogy levels. aerospace and defense sector. Defense and tor, as well as Turkey's GDP? Nonetheless, endeavors related to design aviation exports amounted to $1.85 billion The Turkish economy has been growing at projects that enable growth of technological in 2014, and main export areas included the an average annual real GDP growth rate of competence, and studies regarding improve- United States. The main export areas were 4.7% over the past 12 years, standing out ment of R&D activities, will become more the United States with $581 million (a 15% as one of the fastest growing economies in important in strengthening the sector. Ob- decrease compared to 2013), Europe with the world. Turkey will continue to grow, al- taining a number of critical technologies as $418 million (a 24% increase compared to beit at a moderate rate. The deceleration is a result of these design and R&D activities 2013), and Asia & Africa with a combined mainly caused by the economic slowdown will increase the number of indigenous prod- $856 million (a 55% increase compared to in the global economy, as a result of the re- ucts and hence the capability of the indus- 2013). When we look to the export trend in cent global financial crisis and the ensuing try’s competitiveness in the world market. the previous years, there has been an average sovereign debt crisis. Against this backdrop, Within the context of the aforementioned annual 15% increase in the last seven years. the IMF expects the Turkish economy to ex- strategic plan, the turnover target for the Assuming that this rate of growth continues pand by 3.1% in 2015 and 3.6% in 2016 and defense industry will be $8 billion for 2016 in the following years, the projected export 2017. The robust economic growth over the with an export target of $2 billion. Those level is around 6 billion dollars [by 2023]. past decade has almost doubled the Turkish figures may be easily doubled in 2020 upon Turkey has set specific targets to achieve by economy: GDP, at purchasing power parity, the condition that the performance of the 2023, the centennial of the Republic. One of increased to $1.5 trillion in 2014, up from activities envisaged under the strategic plan the requirements of our vision to become a $800 million in 2004. Similarly in the mean- are efficiently followed and that maximum 210x98.pdfregional 1 leader 3.02.2016 and global 12:11 player is to make time, per capita GDP reached $19,610, up effort is put towards the stimulation of the our military defense systems more efficient, from $12,163. defense sector. •

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Industry Explorations - 47 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

research and development (R&D) and in- tional’s engines are currently in service novation. Within TTC, we support our and are some of the most widely used en- aircraft, marine and industrial engines gines in the aviation sector, for example throughout their lifecycle with over 350 on the Boeing 737 and Airbus 320 aircraft. highly skilled Turkish engineers. We de- Together with CFM International, GE has velop technologies that go into our new or developed the next generation in engine upgraded engine parts, or into our manu- technology, the LEAP engine. The engine facturing/repair shops as a new processes. has composite fan blades that are signifi- Teams solve problems on current fleet ev- cantly lighter than metal fan blades and ery day. The center built on an impressive bring additional reliability, saving custom- 3X growth in the last five years and more ers fuel. There are a number of other tech- than 2.5 million engineering hours are gen- nologies that GE also integrated into the erated, which is a solid achievement for engine such as lean combustion, a debris Turkey’s aviation sector know-how. rejection system, and a fan mounted ac- GE also has large install base on military cessory gear box, which makes the engine and commercial engines operated by Turk- easier to service, lowers maintenance, and ish Armed Forces and also powers more reduces operating temperature. than 60% of commercial airlines in Turkey. Thus far GE has received approximately Ismail Sami 9,500 engine orders on three platforms: GE recently established an innovation Boeing MAX, Airbus NEO, and COMAC. Özdemir center in Turkey. How will this impact In Turkey, the LEAP engine has already GE Aviation’s overall R&D capabilities been selected and ordered by Turkish Air- in the country? lines, Sun Express, and Pegasus for vari- GE has a total of eight innovation centers ous platforms. in the world, of which Turkey’s is the new- We have suppliers all over the world, are Regional General Manager, est. The innovation center is a place where looking at our production rate, and orga- Sales Etihad Group/Turkey/Azerbaijan GE AVIATION GE can collaborate with customers in dif- nizing our suppliers to make sure we re- ferent industries and derive solutions to spond to demand accordingly. Given that our clients’ challenges. The center is also LEAP is a fast-selling engine, we are also part of GE’s announced $900 million in- expanding our supplier network to make vestment commitment to Turkey. sure that we deliver on time to airframers and customers. Recently TEI in Eskisehir What have been the greatest advantages became designated as a manufacturing offered by Turkey to GE Aviation? facility for LEAP engine blisks, our lat- General Electric (GE) has built a strong GE is a global company operating in 175 est compressor technology that reduces relationship with Turkey over many countries with more than 300,000 em- weight and improves fuel efficiency. This years across a number of sectors. To be- ployees inventing the next industrial era to example itself shows expansion of our sup- gin please introduce us to GE Aviation’s build, move, power and cure the world. We ply chain. operations in Turkey’s aerospace and have great talent from all over the world, defense market. including the Middle East, who are well What is GE’s strategic growth plan for GE made its first aviation investment in educated and knowledgeable about the its aviation business in Turkey? Turkey in 1985 through a joint venture culture of the region, our customers and In 1948, GE became one of the first foreign with Tusaş Engine Industries (TEI) in their needs. Turkey is a dynamic country industrial investors in Turkey, when we Eskisehir. Today, TEI is a world-class with highly skilled and well-educated peo- joined hands with Koc Group and Isbank manufacturing shop delivering over 700 ple. The Turkish economy is also growing to establish a light bulb factory. During high-tech and complex parts to the com- quickly, which impacts the aviation indus- the past 65 years, we have been an integral mercial and military aerospace sector, and try positively. partner in Turkey’s social and economic performing military engine maintenance, transformation, and remain committed to overhaul, assembly, and testing. Today GE Aviation has pioneered the develop- supporting the country’s economic growth TEI has more than 1600 employees. This ment of the best-selling LEAP engine, and infrastructure development targets partnership has strengthened Turkey’s ca- securing interest from large carriers in- through strong partnerships, localization, pability to export aviation parts globally, cluding . How widely is and innovation. as export volume has reached $250 million the new engine being used today? How GE Aviation made its first investment in by the end of 2014. will greater use of the engine affect the the 1980s with TEI and with TTC in 2000. GE Aviation also established Turkish Tech- aerospace supply chain? We will continue to invest in both entities nology Center (TTC) in 2000, one of only CFM International—a 50-50 joint venture in terms of technology, engineering, inno- nine engineering centers of GE worldwide, between GE Aviation and Snecma—manu- vation, and talent development to support focused on promoting aviation-related factures the LEAP engine. CFM Interna- growth in Turkey’s aviation industry. •

TURKEY AEROSPACE & DEFENSE 2016 - 48 - Industry Explorations Global Business Reports INTERVIEW

ect management and services. Our defense nuclear over time. and commercial customers have recognized We expect both international OEMs and lo- MTU Turkey for the last 25 years. cal Turkish players to become members of We are a major supplier of integrated power this center. The AMTC will be designed to systems solutions to our Turkish customers, satisfy Turkey’s ambition to develop ad- which include: Turkish Airlines, the Under- vanced core industrial capabilities around its secretariat for Defense Industries (SSM), national indigenous programs. This initiative Turkish Aerospace Industries (TAI), the will help shape the regional supply chain ca- Turkish Armed Forces, marine operators and pability for Turkey to meet its future needs of shipyards, and industrial power entities. We the aerospace industry, amongst others in the are also exploring opportunities to develop region. A public-private partnership model supply chain capability as well as research is based on a collaborative cross-industry re- and development capabilities in Turkey. In search working culture that will also include 2014, we signed a Memorandum of Under- well-known Turkish universities. It will fo- standing (MoU) with Aselsan A.S, one of cus on the development of industrial capabil- Turkey’s leading defense companies, to ex- ity across industrial segments in the areas of plore potential collaboration opportunities in advanced manufacturing and research. the area of engine control systems. We will work closely with the Turkish gov- Patrick ernment and industrial partners to establish What role does Rolls-Royce want to play the AMTC, which will be an integral part of Regis in the future development of the Turkish our strategy to build a global network of ad- aerospace and defense industry? vanced manufacturing research centers and One of our key strategic intents is to develop world-class suppliers. Seven of these centers partnerships through indigenous programs, are already operational around the world in especially in defense. This is a collabora- the UK, United States, and Singapore. President, Turkey & Central Asia tive intent through product co-development ROLLS-ROYCE activities. To the extent we are able to, we In June of 2015, Light Helicopter Turbine aim for a designed-in-Turkey, built-in-Tur- Engine Company (LHTEC), a joint ven- key approach, focusing on high-localization ture between Honeywell and Rolls-Royce, content and as much knowledge transfer as signed a MoU with Turkish Aerospace In- possible. We are open to a risk and revenue dustries for use of the CT800 engine for sharing partnership where this makes sense. the light utility helicopter program. What In addition to our engagement in the defense has been the progress on this deal since aerospace indigenous programs, we are June? looking to increase participation in new na- On Dec 10 2015, we signed the contract to With increasing media attention paid to val indigenous programs such as MILGEM. supply CTS800 turboshaft engines for the Rolls-Royce’s future plans for Turkey, the Turkish indigenous light utility helicopter engine manufacturer is poised to grow. Rolls-Royce’s recently signed a MoU with (TLUH). The agreement, which confirms an Please provide a brief introduction to TUBITAK to open an Advanced Manu- MOU signed at this year’s Paris Air Show, your operations in Turkey. facturing Technology Center (AMTC). consists of a five-year development program Turkey represents a strategic market and Could you tell us more about the project? to integrate and certify the CTS800-4AT partner country for Rolls-Royce in the con- How did it start? What type of projects engine model on the TLUH platform. The text of all of our business segments includ- does Rolls-Royce plan to develop at this agreement is expected to result in a produc- ing civil aerospace, defense aerospace, ma- center? tion program that will provide helicopters to rine, power systems and civil nuclear. Our Most recently, we became the founding the local Turkish military and civil market, local corporate office was established in member and lead industrial entity in the as well as globally. With the CTS800, opera- 2012 in Istanbul, from which we provide development of Turkey’s AMTC with our tors will benefit from a proven commercial strategy and oversee our business activities Turkish partner TUBITAK. The project is and military propulsion system that expands in Turkey and Central Asia. We employ 174 led by Turkey’s Ministry of Science, Indus- mission range and payload across both the people, all of whom are Turkish nationals. try & Technology with the endorsements of ATAK and the TLUH platforms, a significant Rolls-Royce also has a marine sales and ser- the Ministries of Defense, Transportation operational advantage given common train- vices office in Tuzla, from which our marine and Energy. The AMTC is a public-private ing and logistics delivery platforms. In ad- services team has completed over 1,000 ser- partnership model, based on a collaborative dition to the development program, LHTEC vice jobs for our marine customers, includ- cross-industry research working culture. It plans to industrialize production and mainte- ing the Turkish Navy. Under our power sys- will focus on advanced manufacturing ca- nance of the engine in Turkey, boosting the tem’s MTU brand, we have a pability development and technology appli- Turkish aerospace market by providing local production facility in Hadimkoy along with cation development in aerospace and will opportunities for manufacturing and depot additional offices focusing on sales, proj- include other industrial sectors such as civil repair. •

Industry Explorations - 49 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

Given the country’s status as a long-term a perfect configuration, which is crucial in NATO member, its sizeable domestic de- the whole lifetime of an aircraft. We utilize fense market and offset policies, as well as this system across our locations in China, a young and highly educated workforce, Turkey, the , and our latest ad- Turkey was the ideal option. Fokker Elmo dition in . founded its greenfield operations in - Tur key in 2007, and grew its staff to 100 by What are some important trends driving 2011. Today, we employ approximately the EWIS market? 300 employees operating out of our new New technologies include flat bed wire and and custom-built facility in ESBAS, the fiber optics, structure, and composite inte- Free Trade Zone in Izmir. While we began grated wiring, to name a few. Given that the in Turkey solely as a production company driver in the aerospace sector is weight, the controlled out of the Netherlands, today industry is developing various solutions to we are surely moving up the responsibility push more data through less cable. Yet the matrix and conducting our own purchasing industry caveat is that all solutions must and manufacturing engineering activities. be proven in reliability and safety, mak- Fokker Elmo Turkey performs complete ing the sector relatively conservative in its production and logistics handling, and has approach. Such a mentality sometimes im- Mischa grown into a mature and more independent pedes quick adoption of new trends. entity. Last year Fokker was acquired by Baert the British multinational GKN, making us Which sector does Fokker Elmo Turkey now part of a 56,000+ employee family primarily work in, defense or commer- with locations in more than 30 countries cial? Which is growing in importance? and more than $11 billion in sales. We are At present, Fokker Elmo Turkey is pre- confident the new company structure will dominantly engaged in defense programs. General Manager boost our presence and performance both We will begin to work on some commer- FOKKER ELMO TURKEY internationally and in Turkey. cial programs in 2016, increasing our share of work in this segment. Some current de- The electrical wiring system is crucial in fense programs that we are involved with an aircraft, and can be compared to the include: AgustaWestland AW 159 and nerve system in a human body. What ap- AW101 helicopters, Airbus A400M, Boe- plications do your products have and in ing P-8A, Lockheed Martin F35 and on what ways does Fokker Elmo innovate? the commercial side we are starting work Inside of an aircraft is a fine, thin maize on the Bombardier Cseries and Airbus Fokker boasts a decade-long relation- of wires, crucial to the well-functioning A330neo. ship with Turkey. To begin please in- of all the complex systems. This network troduce us to Fokker’s presence in the of wires occupies almost every part of the Do you have a final message for our domestic market, and its evolution aircraft, and damage or malfunction in one readers about your future plans for the throughout the years. can be extremely problematic. The contrast Turkish market? Fokker Elmo’s history within the greater of aerospace with the automotive industry We are aiming to grow further, especially Dutch Fokker Aircraft entity dates back is characterized by much fewer quantities, given our recent progress and underutilized 65 years. Initially being part of an origi- the highest production programs being existing capacity. Fokker Elmo is aiming nal equipment manufacturer (OEM), the about 40 aircrafts per month. For defense, to increase its local Turkish team to 400, ELectrical MOunting (Elmo) part was al- this number drops to one or two, and still as well as to grow its responsibilities. We ready operating as a separate entity within often each airplane requiring a unique har- are continuously adding more capabili- the mother company. Currently that ex- ness set. In this respect, production is not ties to our Turkish facility and introducing perience, both the OEM perspective and standardized. In fact, due to the precision responsibilities and programs that other- supporting the electrical interconnection and capabilities required Fokker Elmo con- wise would not have the ‘made in Turkey’ system as a supplier, is beneficial to Fok- ducts its own training of all personnel. stamp, and will further evolve to be able to ker Elmo in its added value towards its With regards to innovation, Fokker Elmo serve customers directly without assistance customers. In the end of the 1990s, Fokker has developed a proprietary IT system from our parent company. Fokker Elmo is Elmo established a low-cost production fa- that helps us build and maintain a strong looking forward to many programs, includ- cility in China, which grew to a now 900+ link between design and manufacturing. ing some potentially exciting Turkish work people operation. Building on this success, Our system links design to manufactur- following our successful synergy with combined with the request from the market ing information, and helps us to digitally GKN. • for a similar approach for defense prod- design wiring harnesses together with our ucts, we decided to explore alternative geo- customers in their environment. During graphical locations for suitable locations. this process our software always maintains

TURKEY AEROSPACE & DEFENSE 2016 - 50 - Industry Explorations Global Business Reports INTERVIEW

Boeing aircrafts. We produce piping of up Turkey is a huge market for both Airbus to 1.5 inches in diameter for water, fuel, and Boeing, who are both selling a large wastewater, and pressurized air. To craft number of aircrafts to the local aviation in- these piping systems, PFW Aerospace dustry. As Airbus and Boeing cannot sim- uses special processes in welding, our met- ply sell aircraft and have to provide work allurgical expertise, and X-rays to exam- to the local industry through offsets, local ine fittings. Most of the company’s aero- companies will strengthen their position structure and assembly component work as aircraft sales increase. At the moment, is conducted in Izmir, and most of the re- Turkey’s aerospace sector is comprised of maining aerostructure work performed at only a select few large companies such as headquarters will be transferred to Turkey Turkish Aerospace Industries Inc. (TAI), in the near future. PFW Aerospace in Tur- Fokker Elmo, Kale Pratt & Whitney, and key currently manufactures flaps, pressure Kale Aerospace. But offsets along with frames, and floor structures. a host of indigenous projects underway will push the domestic aerospace indus- PFW Aerospace has a strong reputation try in Turkey forward, a growth trajectory as a supplier to Airbus and Boeing. In in which PFW Aerospace would certainly which major projects is PFW Aerospace like to play a part. Werner currently participating? PFW Aerospace in Izmir works on all Air- PFW Aerospace’s expertise and exten- Kuntze bus projects including the single aisle se- sive history has primed the company ries A318, A319, A320 and A321 planes, for future success. What is PFW Aero- as well as the A330, A380, A350, and the space’s strategic growth plan for the A400M. PFW Aerospace is owned by Air- next three to five years? bus as the majority shareholder, which PFW Aerospace’s expansion is ongoing, Managing Director enables the company to secure contracts and in the next three years we will grow PFW AEROSPACE TURKEY for many large-scale projects. PFW Aero- the size of our team from now 300 to 500, space also has contracts with other com- as well as increasing the revenue. Due to panies such as Bombardier and Embraer, high supply chain visibility and planning for which related operations take place in for the next five years, we know exactly Germany. how many aircrafts and parts to manufac- ture for Airbus and Boeing. Even beyond What advantages does Turkey provide 2020, PFW Aerospace in Turkey will con- over other countries for PFW Aero- tinue to grow as Airbus and Boeing sell space? more aircrafts. For example, Airbus is in- PFW Aerospace has a long history dat- In the same manner as many other com- creasing its production of the single aisle ing back to 1913, evolving over time panies, PFW Aerospace chose to establish fleet from 44 aircrafts per month to 50 through multiple owners and partner- its facilities in Turkey over countries like aircrafts in 2016. From 2017, they will in- ships. The company’s relations with China due to its strategic location, which crease that number to 63 planes per month Turkey, however, began in the early reduces shipping times. Turkey is proxi- until 2018. Given that these numbers and 2000s. Please provide a brief history mate to Europe, the destination for both future delivery plans are clear, PFW Aero- and overview of PFW Aerospace’s op- sourcing of materials and receipt of final space has been able to invest in its plant erations in Izmir. products. Moreover, all approved material accordingly and is prepared to expand PFW Aerospace established its opera- sources for Airbus and Boeing are located its capacity. PFW Aerospace is ready for tions in Turkey in 2003 with seven team in Europe or the United States; there are no the future, and to serve all our customers’ members. We have been growing steadily sources in Turkey. However, PFW Aero- needs. • since, by the end of 2016 we will have 400 space works to purchase as much material employees and 500 by 2018. Our plant in from Turkey as possible to support its pro- Izmir is part of PFW’s global network of duction. A second advantage is Turkey’s specialized manufacturing plants, which labor cost, which is significantly lower we will continually expand and improve than that of Europe, providing substantial as our revenue grows. In just three years, cost savings. PFW Aerospace has tripled its size here in Turkey and increased revenue by four or Turkey is a growing market in regards fivefold. to the number of both defense and com- PFW Aerospace in Turkey manufactures mercial aviation projects. What is your complex piping systems, aerostructures opinion on the future of the Turkish and assembly components for Airbus and aviation market?

Industry Explorations - 51 - TURKEY AEROSPACE & DEFENSE 2016 Image: Aycan Aviation GBR • Industry Explorations • TURKEY AEROSPACE & DEFENSE 2016 SECURING THE SUPPLY CHAIN: TURKEY'S SMES

“There is a problem in our defense sector. While there are a number of large-scale companies and small-scale companies, there are no mid-sized companies that can assimilate smaller companies’ capabilities and be integrated to large-scale companies.”

- Fatih Unal, Managing Director and Member of the Board, Space and Defense Technologies (SDT) EDITORIAL Global Business Reports

INTO THE FRAY The Importance of Sub-Tier Suppliers in the Supply Chain

The bulk of Turkey’s defense achieve- “During the 1990s there were joint ven- ments are attributed to its largest and most tures in Turkey that engaged in coproduc- prestigious star players, but the bulk of tion, through which people got experience Cogs in the Wheel Turkey’s Aerospace & Defense (A&D) building complex defense systems. Indig- industry is comprised of small- and medi- enous development programs began in the Further down the supply chain, the ma- um-sized enterprises (SMEs) that are often 2000s and many engineers have developed jority of Turkey’s SMEs are engaged in overlooked. Over 2,000 SMEs are operat- products, platforms, and systems. Hence subcontracting or manufacturing of small ing in Turkey’s A&D sector, ranging from there is a certain level of experience, but parts and sub assemblies. While many of OSSA’s manufacturing members in Ankara now we are arriving at the second stage in these players have successfully secured to high technology companies within Tek- which we have to build the very subsys- contracts with large local and international nokent Defense Industry Cluster (TSSK) tems underneath the platforms,” said man- original equipment manufacturers (OEMs) and Teknopark Istanbul to those making aging director and member of the board at and governments, others remain depen- engine parts and aerostructures in Eskise- Space and Defense Technologies (SDT), dent on offsets. hir and Izmir. As the sector is projected to Fatih Unal. As Turkey continues to grow, it will be im- grow by 4% to 5% annually over the next While there is plenty of room for growth, portant for the NATO member to promote five years, it will be crucial for Turkey to companies like ICterra and SDT have the competitiveness of its smaller manu- bolster its lower rung of companies. both succeeded in filling gaps in local facturers. “Offsets are critical for defense and international markets with their soft- and aerospace programs, and while CNK ware development and sensor products Aerospace is not an offset based company, Turkey’s Tech Savants and capabilities. Other firms like BITES they do serve as good leverage. However, and AEROTIM Engineering are break- offsets simply open doors. If companies Like many other developing economies, ing down barriers with their innovations. become dependent on offset driven busi- Turkey has created an IT and software in- Technology firm BITES was recently rec- ness, they will never survive in a legiti- dustry that is internationally competitive. ognized as one of the country’s top 50 tech- mate business environment,” said general With a pool of educated labor comprised nology companies for its impressive work manager of parts manufacturer CNK Aero- of talented engineers, the state has seized with augmented reality (AR), artificial in- space, Melih Han Bilgin. upon its competitive advantage. “Turkey telligence and software solutions. The ap- As a result of the company’s involve- supports its IT sector with many incen- plications of AR technology are growing ment with Airbus and Boeing commercial tives. These include technology develop- in today’s aerospace and defense market, aircraft programs, CNK was able to de- ment zones and project incentives from and BITES is one of a few select Turkish velop the necessary experience to expand institutions like TUBITAK, which are suc- companies that are investing in its devel- its horizons and secure its place within a cessful not only from a price perspective opment. Established as a university spinoff prestigious international defense program. but in developing competitiveness,” said company in ODTÜ Teknokent, AEROTIM “There are only six companies in Turkey CEO of software development company Engineering has been selected as a single- that are eligible to supply detail parts and ICterra, H. Vedat Uslu. source vendor for an FFS Level-D Turk- mechanical units to the JSF Program and Nevertheless, the government needs to ish army helicopter simulator program. It CNK Aerospace is one of them,” said Bil- continuously support the growth of private is the only company in the Turkish market gin. companies, such as MilSOFT. The firm is that is building simulation software for he- Other Turkish SMEs have established a success story that now focuses its efforts licopters and other unconventional flying themselves as direct and indirect suppliers on niche technologies in the areas of C4I objects, providing flight dynamics models, to Boeing, Airbus, AgustaWestland, KAI, and training and simulation, among sev- control systems, and engine models for GE, Sikorksy, Pratt & Whitney, and the eral others, which are unique to Turkey. simulators. U.S. Department of Defense (DoD). Turk-

TURKEY AEROSPACE & DEFENSE 2016 - 54 - Industry Explorations Global Business Reports EDITORIAL

ish suppliers' attractiveness has stemmed to larger batteries for aircraft and power in part from the abundance of skilled low units. We are looking to become a one- cost labor. This is evident in Eskisehir, stop-shop for large and small companies where Aycan Aviation has evolved from alike,” said general manager Ferhat Ozsoy. working with one client to becoming the Similarly, Baturalp-Taylan Ltd. is the sole world’s sole supplier for aft shaft parts provider of engine-testing and automation on high-pressure turbines. “Eskisehir is services in Turkey and the single source a strong region for SME growth, allow- local supplier of engine test cells to the ing us the flexibility to offer lower costs Turkish Armed Forces. There is significant without compromising quality. This is demand for this niche service, tempting due to the fact that we have excellent ac- Baturalp-Taylan to look beyond Turkey cess to labour through the Eskisehir Avia- for new business opportunities. tion Cluster (ESAC), a local airbase, and Other firms such as Bodycote have also nearby universities with reputable civil recognized unmet needs in Turkey’s A&D aviation departments. Local and national industry. As a growing market, Turkey governments are also supportive of the does not always meet all international aviation industry and collaboration with quality standards, especially in the world other SMEs is strong,” said chairman of of heat treatment. In fact, many local play- the board at Aycan Aviation, Adnan Can- ers look to service providers outside of seven. Turkey to perform specialized processing. Many SMEs like CNK Aerospace and Ay- As a result Bodycote came to the Turkish can Aviation are looking to capitalize on market through a joint venture with local their strengths and increase their interna- company ISTAS, to bring its expertise as tional business. Yet, in order to accom- a long standing multinational to the re- plish this, Turkish companies will have gion. “Overall, demand within this sector to become more integrated and invest in is growing and Bodycote ISTAS continues automation and supply chain management to receive new enquiries not only from technologies. OEMs like ROKETSAN, ASELSAN and TAI, but also from their suppliers, which are crucial for our business,” said vice Filling in the Gaps president Eastern Europe (south) of Body- cote ISTAS, Baris Telseren. Within complex supply chains, each ser- Turkey’s smaller A&D players will have vice and piece of equipment plays a vital to continue stepping up to the plate as the role in the completion of a given platform republic works towards increasing local or system. In line with the country’s indig- content, promoting import independence enous production goals, Turkey’s A&D and realizing its 2023 vision. The country industry is committed to building its own has recognized the importance of build- niche capabilities and decreasing its de- ing its own subsystems, which requires pendence on foreign imports. Turkey’s increased research and development and a smaller companies have stepped up to the concerted effort on the part of all industry challenge and have successfully managed players. “When smaller companies work to meet some of the local demand for spe- on subsystem parts for a larger platform cialized services and parts. they learn about the platform and the tech- For example, local firm Military Battery nology, and can produce technology faster Industry and Trade Inc. (ASPILSAN) is than big companies. Big companies are one of the world’s five producers of mili- integrators, whereas small companies cre- tary batteries and the only one in Turkey. ate technological value,” explained deputy ASPILSAN has met a good portion of the undersecretary-industry services of the Turkish Armed Forces demand and is striv- Undersecretariat for Defense Industries ing to expand its reach in the global mar- (SSM). ketplace. “As the quality of our products is In the context of heightening regional well above world standards and the levels conflict and a shifting balance of power, required by military contracts, today all air Turkey needs to mobilize all its forces to vehicles in the Turkish Armed Forces are prove its strength to the world. With tar- equipped with our batteries. ASPILSAN geted government support and investment, wants to serve the military’s complete en- Turkish talent may take the world by sur- ergy needs, from small batteries for radios prise. •

Industry Explorations - 55 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

ASPILSAN has so far been involved in protect their survivability, mobility, opera- some defense projects such as F-16, CASA tion sustainability and lethality, batteries CN-234, SF-260, Sikorsky UH-60, Cougar need to be lighter, smaller, and easy to use. AS-532, Marconi HF Manpack Radio for The challenges presented by greater depen- the manufacture of batteries as a subcon- dence on mobile battlefield technologies tractor and has fulfilled all its obligations mean that companies like ASPILSAN need with great success. to innovate in order to reduce the logistical So far we have manufactured batteries and physical burdens for the Armed Forces. solely for military aircraft, and our prod- Another important trend is the demand ucts have been certified by NATO as well for more technologically sophisticated as German BWB and French SOPEMEA batteries with larger energy storage capa- test centers. ASPILSAN exports its prod- bilities for mobile military bases. Turkey ucts to many countries across the five con- is a vast country in terms of surface area tinents. and its military has a dynamic structure and is constantly on the move around the Battery producers often compete on borders; therefore, mobility of energy is of price and quality metrics for the sale great importance. It requires portable and of their products. What is ASPILSAN’s reliable energy storage systems for areas Ferhat competitive advantage? where there is little to no infrastructure. ASPILSAN’s quality is what sets us apart Energy needs are often quite high, totaling Özsoy from our rivals. An independent investiga- anywhere from 200 kilowatt hours to 200 tion of ASPILSAN’s customer satisfaction megawatt hours of energy. ASPILSAN is showed that 100% of our customers were planning to meet new demands by manu- satisfied with our products, an impressive facturing highly mobile batteries that can testament to ASPILSAN’s high quality of- go on the grid for quick charging and off General Manager fering. Although ASPILSAN is affected by it to provide full power to military bases. MILITARY BATTERY INDUSTRY price pressures, the company is still able to AND TRADE INC. (ASPILSAN) position itself roughly within the middle of New market demands represent a the market in terms of price competitive- growth opportunity. Where do you see ness while still delivering best available ASPILAN in the next five years? quality. ASPILSAN wants to serve the military’s complete energy needs, from small batter- Many countries such as the United ies for radios to larger batteries for aircraft States have been investing in new ways and power units. We are looking to be- ASPILSAN was established in 1981 and to improve battery technology. How come a one-stop shop for large and small has since evolved into one of only five important is research and development companies alike. To achieve this goal, AS- companies in the world that produces (R&D) to ASPILSAN? PILSAN has to be ambitious and invest military batteries. Please provide a short ASPILSAN is working with varied re- in research for the development of high introduction to the history of the com- search institutes on two different signifi- capability batteries with high energy den- pany. cant projects to develop a new battery. Due sity levels. We are considering a number of ASPILSAN was founded in 1981 to manu- to security restrictions we cannot discuss R&D projects that are using new and dif- facture cylindrical-type, rechargeable, the full details of the projects, but ASPIL- ferent chemical combinations to produce portable Ni-Cd batteries for the need of SAN is working as a partner with several these effects. ASPILSAN is also improv- Turkish Armed Forces (TAF). By 1984 we universities on this new and exciting re- ing its manufacturing capabilities in line started making four types of batteries with search. with our ambitions for growth in capacity, the license of German Varta Company. especially as we expect to receive the Eu- Afterwards, we began producing battery Facing exorbitant costs, stretched sup- ropean Aviation Safety Agency certifica- packs for radios as well as for other por- ply lines and stealth requirements, mili- tion shortly. This certification will allow us table equipment as per the demand of the taries are working to increase the use of to serve the civil aviation market. Further- army. In the meantime, another produc- batteries. What trends have you seen in more, we are vigorously pursuing contracts tion line was set up for the manufacture the defense battery market? in several different industries such as the of Ni-Cd aircraft batteries in 1989 and our The average foot soldier carries 30 kilo- medical industry, through which we hope technical and manufacturing capabilities grams (kg) of supplies and five kg of bat- to increase exports to Western markets. We have improved gradually since then. As the teries. This is a significant increase from expect to be one of the largest players in the quality of our products is well above world the 1990s when the total weight of batteries battery market within the next five years, standards and the levels required by mili- in a soldier’s pack was half a kg. As new at which point ASPILSAN will be the first tary contracts, today all air vehicles in TAF technologies are deployed, soldiers require partner of choice for high-quality military are equipped with our batteries. increased sources of power to use them. To and civilian batteries. •

TURKEY AEROSPACE & DEFENSE 2016 - 56 - Industry Explorations Global Business Reports INTERVIEW

which is now NATO AQAP 2210. Milsoft be- When Turkey procured Heron unmanned aer- came CMMI level 3 certified in 2002 and ob- ial vehicles (UAVs) from Israel, we provided tained level 5 certification in 2005. This made the transportable image exploitation sys- Milsoft the first defense company to obtain tem (TIES). The information received from level 5 CMMI certification in Europe and to- the UAV was processed and the information day remains the only company in Turkey with made available to operational users by Mil- this certification. Milsoft’s certifications and soft. We not only provided the software, but portfolio of work with foreign companies is all the hardware within the TIES shelter. We proof that we can work according to best in- are also providing image exploitation capa- ternational standards. bilities as well as ground control stations for The company’s second goal was to develop Anka UAVs. its own indigenous technologies in line with future potential software requirements of the What does Milsoft do as an innovator that Turkish Armed Forces and the global market. differentiates the company from its com- The Scientific and Technological Research petitors? Council of Turkey (TÜBITAK) provides Milsoft’s main focus is to be innovative and good incentives for research and development develop technologies that have not been done (R&D) projects that are innovative and have by any competitors. We invest heavily in R&D Ismail commercial potential in the global market, and and try to gauge future requirements of the in- approved all of the R&D projects that Mil- dustry. Differentiating us further are our latest Basyigit soft initiated. To date we have received about IT technologies that we use to implement our $20 million from TÜBITAK as grant money, defense software solutions. We are also using which enabled us to develop technologies and our own IT infrastructure to develop defense demonstrate our capabilities to international systems. Using the same infrastructure to de- customers. Before Milsoft received contracts velop all our capabilities enables us to make Chairman from the Turkish government in 2004, we the system interoperable, which is an impor- MILSOFT SOFTWARE proved ourselves in the international market, tant aspect for defense forces. Milsoft is con- TECHNOLOGIES INC. securing business from the United States, Ger- tinuously following IT technologies trends many and Israel. and defense software requirements and thus continuously transforming its capabilities Can you elaborate on Milsoft’s facilities to develop new systems using the latest ap- and the company’s key capabilities? proaches. Milsoft initially worked as a guest in anoth- er facility, only establishing its own facility How are Milsoft’s interests divided between in 2005 in Ankara. We also have a facility in different international markets? Can you please provide us with a brief in- Teknopark Istanbul, as we work for the Turk- Milsoft provides its capabilities to Turkish troduction to Milsoft and its role as one of ish navy in the shipyards located near the government-affiliated companies or directly Turkey’s leading software companies? facility. Some of our R&D projects are also to international main contractors. More than When the defense industry was established developed at the Teknopark Istanbul facility. 50% of its revenue comes from international in Turkey, software played an important role Lastly, Milsoft saw ample business potential markets. Our biggest international customers in initial policies. The Turkish Armed Forces in the US and established a Milsoft owned are Alenia in Italy, to which we provide link adopted a directive that required gaining soft- company there to help us realize that potential. 16 capabilities, and HTW in Germany who ware capabilities of the defense systems that One of Milsoft’s key capabilities is command utilizes our link 11 and link 22 capabilities. Turkey was acquiring. To contribute to the and control systems. The company developed Milsoft developed and delivered a Navy In- policy, Milsoft was established in 1998 with its own IT infrastructures and command con- formation Exchange System to the Pakistan the aim to develop software in accordance trol systems. We provided the entire command Navy. We have also submitted many proposals with the highest level of international stan- control system software for the Turkish coast for various programs in different continents dards applicable to defense companies. The guard search and rescue ships. For this project, that are under review. goal was also to develop its own indigenous we sub-contracted to ASLESAN who provid- technologies that would enable the company ed all the electronics. Do you have a final message for our inter- to be independent. Milsoft wanted to be com- Another key capability of the company is the national readership? petitive in global markets, which also required development of tactical data links. We devel- Milsoft has established capabilities in differ- an effective management infrastructure within oped link 11 and 16 that are operational in ent critical defense areas, and in the future are the company. Turkish Perry Class Frigates and two opera- aiming to incubate all capabilities in one sys- Milsoft worked towards obtaining certifica- tional naval ships. In these two ships, Milsoft tem. Our goal is always to make our processes tions for international quality standards and also provided command control functionality more effective. The quality of our products earned ISO 9001 certification in 1999. In 2000 that is directly linked to tactical data link pro- and compliance with international standards we received NATO AQAP 150 certification, cesses. are important to the company. •

Industry Explorations - 57 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

Deloitte has recently recognized BITES as growth area in the market today, as it has one of the top 50 technology companies in many promising military and non-military Turkey. What is BITES’s competitive ad- applications. The military is already utilizing vantage? AR technology, and hence we are investing Firstly, BITES is investing heavily in inno- in this area, both to secure a return and to en- vation. While we may not be a large systems hance our simulation and training products. integration company, we play a different role. We discover large innovation areas such as BITES has provided solutions to custom- big data, augmented reality (AR), and artifi- ers in Europe, Asia and the Middle East. cial intelligence, and develop software solu- How committed are you to expanding tions accordingly. We are not hardware pro- more internationally? ducers, but rather provide software solutions Expanding internationally is one of BITES’ using an ecosystem of hardware providers. targets, and we have always cooperated BITES has strategically positioned itself as closely with the Undersecretariat for Defense the software intensive system integration Industries (SSM) and the ministry of defense partner. Secondly, we are a committed team. on the subject of export markets. We utilize When we sign a contract we deliver on time, two approaches to achieving this, the first of and receive a high level of customer satisfac- which is business-to-business. Competition, İhsan Yusuf tion. We bring long-term returns to the cus- quality, cost-efficiency, and a very capable tomer, and our brand has been recognized in task force lie at the core of our company. We Akbuğa line with these expectations. have competitive labor costs relative to the western world allowing us to do business As a company at the forefront of AR tech- with U.S. and European defense markets. nology, could you provide more detail Offsets are also still strong in the Turkish about the applications of such technol- market, and there are many that need to be International Business ogy within aerospace and defense for our completed. Our second approach is to do Development Director readers? business with the Middle East, North Africa, BITES AEROSPACE & AR technology is most easily explained and Turkic Republics where we have very DEFENSE AND TRADE INC. with a practical illustration. For example, strong government-to-government (G2G) BITES worked with armored vehicle manu- relations. Just this year we signed a contract facturer FNSS to find solutions to common with Airbus Defense & Space for the virtual situational awareness problems faced by the visualization content for one of their ground task force in the armored vehicle. The driver, vehicle simulator solutions. However, in the commander, and task force all have very defense market, G2G relations are an impor- low situational awareness when they are tant factor when it comes to obtaining export Please introduce us to BITES and provide inside the vehicle, given that it is a closed approvals. We try to always take part in gov- us with a brief historical perspective of environment without windows. To enhance ernment meetings that address G2G issues, the company. situational awareness, BITES has developed to better understand their priorities and the BITES began as a startup in Istanbul in 2001. an application called ‘Eye of the Tiger’ that markets we can serve. Initially we served civilian markets, specifi- uses smart glass technology and utilizes sen- cally the digital broadcasting industry, but in sors placed outside the vehicle. This allows Where would you like to see BITES in the 2004, our strong software development ca- for a 360-degree “through the armor” view next 3-5 years? pabilities, coupled with increasing demand of surroundings, providing the crew with a BITES has set strategic targets, and specifi- in the defense and aerospace industry, led us clear constructed view from inside the ve- cally two objectives for 2015. We would like to move our headquarters to Ankara. The in- hicle of the battlefield with augmented in- to increase our R&D investments, especially dustry was booming at the time and Turkey’s formation. in AR, and to expand our international busi- government decided to support a number ness. This year our export sales have in- of defense and aerospace projects and pro- Will AR technology have additional ap- creased considerably and we are looking to grams. One of our very first projects was a plications in aerospace and aviation proj- sustain this growth. Additionally, we aim to tank-driving virtual simulation application. ects? be one of the most successful defense com- Subsequently, we developed other military AR technology can certainly be applied in panies in Turkey. In today’s world a rela- IT programs such as training management aerospace. The Turkish Armed Forces and tively unknown technology company has the information systems to operate training fa- the government are investing in indigenous potential to become enormously valuable in cilities. After initial military developments aviation programs that have the potential for the short term, through innovation. We will we also continued penetrating the civilian the use of AR technologies. Furthermore, continue our efforts and investments in re- market, specifically in the field of web based AR technology can also be applied to for- search and development to build our brand training technologies. Today Bites serves ward observers and unmanned vehicle oper- as a strong Turkish defense company. • both sectors. ation systems. AR technology is the biggest

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players, positioning as a software house R&D is crucial for future innovation. for large systems and platform projects. What support mechanisms are available With its partners, ICterra will be able to to software companies working heavily grow its expertise in this area, and abroad, in research and development? where we are looking to market our soft- Turkey is a unique country in that it sup- ware R&D services. Since 2013 we have ports the country’s IT sector with many grown by 70%, which is an excellent incentives. As part of Turkey’s 2023 goals growth rate given the current global mar- for the centenary of the republic, the gov- ket, providing us with the motivation to ernment wants to realize numerous indus- continue excelling. trial breakthroughs. IT has been named as an industry with great potential in Turkey, ICterra offers high-quality, value-added and in order to grow that potential the information technology (IT) solutions government has formulated incentives to and consulting services. Can you com- support it. These include incentives such pare your service offering to those of as technology development zones and other companies in the field? project incentives from institutions like In Turkey, ICterra is able to differentiate TUBITAK, which are successful not only itself due to its extensive experience with from a price perspective but in developing H. Vedat international projects. ICterra has been ac- competitiveness. Such initiatives are fu- tive over the last 25 years with large-scale ture oriented and help build capabilities in Uslu and complex multinational projects in- aerospace, defense, and corporate sectors. volving 100 to 200 people. The company Software companies are cost sensitive and is used to working with different cultures, often cannot finance R&D activities inde- which is especially useful for defense proj- pendently, and such incentives are useful. ects for which we have to collaborate with Yet more government support is needed to CEO companies in many other countries. For promote Turkey’s IT sector internationally. ICTERRA INFORMATION AND example, ICterra works on satellite, com- COMMUNICATION mand and control, helicopter and aero- ICterra has ambitious targets to in- TECHNOLOGIES space projects for large platform integra- crease its 2015 total business volume tors like Aselsan and international defense to twice its current level and to place organizations. Because of this we have de- among the top five domestic compa- veloped a high level of understanding of nies engaged in software exports. What the world, which is greatly appreciated by strategy have you outlined to achieve our customers. these targets? Last year ICterra ranked sixth for software ICterra has an interesting history that What role does ICterra play in the aero- exports in Turkey. While this rank is high, begins with the international giant, Sie- space and defense industry? export volumes are depressed mainly due mens. Please walk us through the com- In the next fifteen years Turkey’s defense to high domestic demand. As the supply pany’s evolution. companies and institutions will engage in of software in Turkey increases, demand ICterra has a unique story, with roots as a very important projects, of which aero- will become more stable allowing us to research and development (R&D) depart- space has become a high priority. ICterra offer more services to the foreign market. ment within Siemens Turkey. After 21 wants to establish its role in these new ICterra would like to enlarge its footprint years as Siemens’ global R&D partner, projects, especially since today’s plat- in the defense sector especially in com- ICterra evolved into a completely Turkish forms are essentially platforms running munications and aerospace related areas. company owned by myself. We convert- software. Platform development contracts Moreover, we want to be a reliable part- ed the company’s team into a standalone will last at least for 10 years, but software ner for platform integrators and establish company that today works domestically will have longer production cycles because ourselves as the go-to software house for and internationally. During the company’s future development and modernization of the defense sector. Our vision is for half early days in 2013, ICterra only worked in these platforms will stem from software. of our business to be international and the the international market, exporting 100% Together with our partners and foreign other half domestic. Domestically we ex- of its products mainly to Germany. At this original equipment manufacturers (OEMs) pect more than half of our business to be time we found that our competencies and such as Sikorsky and Airbus, ICterra will within aerospace and defense. At the mo- experience in the software field were valu- be able to grow its expertise in this area. ment Turkey is in an incubation phase in able to the aerospace and defense sector, In the medium term (10 or 15 years for aerospace but, as the industry grows, IC- and hence we decided to focus on this sec- defense companies) software companies terra will grow with it. • tor domestically as a first step. ICterra has working in aerospace and defense will find since started to establish relationships with good opportunities not only within Turkey, Turkey’s leading aerospace and defense but in foreign markets as well.

Industry Explorations - 59 - TURKEY AEROSPACE & DEFENSE 2016 INTERVIEW Global Business Reports

The company is also an approved supplier for Airbus and Safran Tech Adnan Space. The company’s capabilities include precision machining, re- verse engineering, fixture, tool and die design, fluorescent penetration Canseven inspection, 3D modeling, and CAD/CAM operation. Aycan Aviation is adding new competencies to better serve our customers and is look- ing to offer our services internationally. We are a customer-focused company, which means not only do we seek success for ourselves but also for our customers and suppliers. We attract the industry’s top cus- Chairman of the Board tomers by providing high quality products on time. Aycan Aviation is AYCAN AVIATION also committed to attracting reputable suppliers and solution partners early in the process, helping them to grow with us and in turn becom- ing their strategic partners in the development of their products and processes.

Aycan Aviation has direct insight into the local environment for small and medium-sized enterprises (SMEs) after years of work- ing in Eskisehir. How would you characterize this environment in Aycan Aviation boasts 18 years of experience in the aerospace sec- Eskisehir? tor and is positioned for further expansion. To begin please pro- In general, the Turkish industry is facing challenges due to exchange vide an introduction to Aycan Aviation and its operations. rate fluctuations. Nevertheless, Eskisehir is a strong region for SME Aycan Aviation was founded in 1997 with a focus on aircraft engine growth, allowing us the flexibility to offer lower costs without compro- components manufacturing. Over the years we have grown to a size of mising quality. This is due to the fact that we have excellent access to 65 employees and introduced over 300 complex tight tolerance parts to labor through the Eskisehir Aviation Cluster (ESAC), a local airbase, the aviation industry. Aycan Aviation began with contracts from Tusas and nearby universities with reputable civil aviation departments. Lo- Engine Industries (TEI) and has since grown its customer base sig- cal and national governments are also supportive of the aviation indus- nificantly to directly supply Bucher, Alp Aviation, Turkish Aerospace try and collaboration with other SMEs is strong. Aycan Aviation for Industries (TAI), and Roketsan. It also indirectly supplies Airbus, example has signed a strategic partnership with four other critical parts Boeing, Agusta-Westland, KAI, GE, Sikorsky, and Pratt & Whitney. manufacturers to complement our production capabilities. •

involved in the industry over the years, investing more in machining Melih Han and developing relationships with Boeing and Airbus, specifically in the context of their single aisle aircrafts: 737 and A320. These pro- Bilgin grams are the most commercially valuable of two giant, world-class customers. By getting involved in both, CNK has developed an ability to further invest and venture into JSF military programs. We have been manufacturing large-scale structural parts, including the fuselage, for JSF for many years under a U.S. government license. There are only General Manager six companies in Turkey (a JSF partner country) that are eligible to CNK AEROSPACE supply detail parts and mechanical units to the JSF program, and CNK Aerospace is one of them. Aerospace manufacturing propelled us to the cutting edge of the manufacturing business and helped us impress defense customers with our superior quality and capabilities. Defense clients came knocking on our door, compelling us to enter the sector. Yet the structures for aerospace and defense manufacturing are distinct, so we have devel- oped two branches in the company. CNK’s major business remains in aerospace, while defense is secondary. Today, our core competency is Please introduce us to CNK Aerospace and your two main lines of complex manufacturing for aerospace and defense. business: CNK Defense and CNK Aerospace. CNK was founded in 2004 as a software development company. We What vision would you like to realize within the next three to five evolved into the aerospace manufacturing business when we began years for CNK Aerospace? manufacturing structural parts for the AB139 Bell Helicopter program. Within five years the company’s total revenue should equal $50 mil- Machines used in aerospace manufacturing require complex software lion per year. CNK Aerospace is growing its aerospace manufacturing applications, a competency that lies at the very foundation of CNK. and assembly capabilities, but we would also like to grow significantly Hence, this was the trigger for our entrance into the business, when in foreign markets. In five years time we hope to generate 80% of our our customers began asking us to produce parts. CNK has gotten more sales from business abroad, and 20% from local sales. •

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water, oil, emission, blow by, fuel, gear shift control units, as well as Alptekin conditioning units for air, fuel and water. Today Baturalp Taylan is proudly the only Turkish producer of dynamometers and engine test Erman systems.

How significant is the aerospace and defense sector for Baturalp Taylan’s business? Defense customers are strategically important for Baturalp Taylan. Our General Coordinator strengths include working with land systems and hence our main client BATURALP TAYLAN LTD. is the Turkish military. We work with reputable references and have already manufactured an engine test cell in Turkey for which we cur- rently are the single source local supplier of the Turkish Armed Forces. We are able to supply them with more test cells upon request, given that Baturalp Taylan plays a crucial role in the Turkish market, as the all systems are ready. Our potential additional customers include those sole provider of engine testing and automation services. Please in- that use diesel, gasoline and electrically powered engines such as uni- troduce us to the company. versities, overhaul factories as Komatsu or main automotive producers Kadircan Baturalp established Baturalp-Taylan Ltd. Şti. in 1978, and as Turk Traktor, Ford and others that already utilize our services for remains co-owner of the company. At the time of its founding, the com- engine and vehicle test cells and sub systems. We are currently per- pany was only engaged in the mechanical production of dynamometers, forming handover and acceptance tests of the T700-, T53-, and T63- while electronic parts were outsourced to Turkish companies. I initially type turbine engines test cells for the Turkish military. We designed established my own company to produce full engine test systems in- and produced all mechanical and test cell automation computer systems cluding dynamometers, control units, software, conditioning units, and in-house, locally in Turkey. other equipment and instruments. Soon after establishing my company I took the opportunity to form a strong partnership with Mr. Baturalp What is your vision for Baturalp Taylan? in order to avoid competition and collaborate. Our partnership resulted We would like to expand the company’s product offering, and become in the production of all parts involved in engine testing and automation more competitive internationally. As the aerospace sector continues to systems including dynamometer production and control units, engine expand, turbine engine use will increase, providing Baturalp Taylan control units, actuators, consumption measurement equipment for air, with many prospects for success. •

What about the Turkish market compelled the company to estab- Barış lish operations here? Not many countries are home to two engine plants (GE and Kale Pratt Telseren & Whitney), a national jet project, and a leading airline. In fact, Turk- ish Airlines has bolstered the aerospace sector, particularly in engine investments and equipment overhaul, given their phenomenal growth over the last ten years. As an emerging economy, Bodycote does not view Turkey as a short-term investment. Vice President Eastern Europe (South) BODYCOTE ISTAŞ The Turkish aerospace and defense market is projected to grow by 4% to 5% over the next five years. How is Bodycote ISTAŞ plan- ning to target this market? Currently aerospace and defense comprises roughly 7% of Bodycote’s total business volume in Turkey. We recently completed construction Bodycote operates in 24 countries with almost 200 hundred plants. of a plant in Gebze, where we can support this sector. Overall, demand Please provide a brief introduction to Bodycote’s presence in the within this sector is growing and Bodycote ISTAŞ continues to receive Turkish market. new enquiries not only from original equipment manufacturers (OEMs) In 2006 Bodycote entered a joint venture with ISTAŞ, the largest heat like Roketsan, Aselsan, and Turkish Aerospace Industries (TAI), but treatment company in Turkey. Over the course of the past seven years also from their suppliers, which are crucial for our business. Key clients Bodycote ISTAŞ has invested in new technologies and people to de- are both OEMs and their suppliers that require heat treatment service liver top-notch services to its customers. To put our business in context, for their parts. Orders from these clients are already on the rise, en- heat treatment is applied to metals, especially those involved in engine couraging us to grow our operations significantly. Bodycote ISTAŞ has parts, to improve the mechanical properties of the component. Body- been preparing itself for growth by obtaining certifications such as the cote in Turkey applies this process to steel components in particular. AS9100 as well as approvals from TAI, Korean Aerospace Industries Over the years we have grown our specialty businesses by utilizing (KAI), Roketsan, Aselsan and Sikorsky. Moreover, the civil aviation the latest equipment, and today serve key clients in the automotive, market is growing, leading to additional inquiries from companies machine, and aerospace and defense sectors. working on major projects for Airbus and Boeing. •

Industry Explorations - 61 - TURKEY AEROSPACE & DEFENSE 2016 Image: GE Aviation GBR • Industry Explorations • TURKEY AEROSPACE & DEFENSE 2016 INTO THE FUTURE: FINAL THOUGHTS

“A relatively young sector, the defense industry is critical for Turkey as well as the world. No matter how young, it is one of the fastest growing sectors. In the past nearly 50 years, our sector achieved great success, especially in the last 10 years, when it became one of Turkey’s strongest. We are increasing this force through our export volume, which are growing every year.”

- Latif Aral Aliş, Chairman, Defense and Aerospace Industry Exporters’ Association of Turkey (SSI) and Turkish Defense Alliance (TDA) Global Business Reports

“Turkey is a good market, and has started to excel in the [aerospace and defense] industry. The country’s potential is continually growing, but still not enough as the sector is not compact. While local companies can manufacture select spare parts, affixing them to the aircraft require additional parts that have to be imported. To achieve further consolidation, effective guidance from both the government and businesses is required, and is only possible through offsets.”

- Safak Herdem, Managing Partner, Herdem Attorneys At Law

“Companies are coming to Istanbul either by establishing branch offices or relocating fromAnkara to be closer to international names, airports, and strategic destinations.”

- Sercan Altinbas, International Relations Coordinator, Teknopark Istanbul

“Otonom Teknoloji’s focus is on unmanned systems, and the company would like to entrench our position in this domain in domestic and neighboring markets. Although the company is developing aerial systems, the company is looking to extend its experience in unmanned systems, especially using MiniSteer for other unmanned platforms such as land or sea.”

- A. Nezir Erturk, General Manager, Otonom Teknoloji

“If we consider that the 2014 export figure for Turkish defense industry is $1,855 million and the growth from 2013 is around 18%, the growth in exports should be sustained for the next 10 years to attain the given target of $5 billion for 2023. It will not be an easy task. If Turkey manages to timely field its weapon platforms in development, and invest as planned for the sub-system/equipment development, the country could become one of the privileged countries that have no or very few restrictions for exporting for their weapon systems by the 2020s.”

- M. Emre Yazıcı, Editor, Strategy & Development, Military Science and Intelligence Turkish Defense Review (MSI)

“Endeavors related to design projects that enable the growth of technological competence, as well as studies regarding the improvement of R&D activities, will become more important in strengthening the sector. Obtaining a number of critical technologies as a result of these design and R&D activities will increase the number of indigenous products and hence the capability of the industry’s competitiveness in the world market. Within the context of the aforementioned strategic plan, the turnover target for the defense industry will be $8 billion for 2016 with an export target of $2 billion.”

- Arda Ermut, ISPAT & WAIPA President, Investment Support and Promotion Agency of Turkey (ISPAT)

TURKEY AEROSPACE & DEFENSE 2016 - 64 - Industry Explorations Global Business Reports FINAL THOUGHTS

“Esen System Integration’s plans involve developing cost effective ISR solutions both for wide area camera systems and light ISR platforms. The company is also looking for opportunities to build low cost satellites for the same purpose. The core strengths of Esen System Integration are in remote sensing, space systems, airborne systems, and aircraft integration. Currently the company has 60 people in ODTÜ Teknokent and its other office in Bilkent Cyberpark.”

- Cem Uğur, General Manager, Esen System Integration

“Alfa-Beta is a small company, but is growing larger each year. We are investing in CNC machines and trying to increase our manufacturing capacity, which is necessary to gain new customers. At present, 70% of our capacity goes towards the aerospace and defense industry.”

- Umut Isleyici, General Manager and Founder, Alfa-Beta Makine

“Invest in Izmir has a regional development plan for 2014 to 2023 that is aligned with the national development plan. In the sectorial phase, the agency is facilitating entrepreneurship, eco-efficiency, research and development, and innovation. The next three years until 2017 investment promotion efforts are focused on renewable energy and ICT but is also on supporting the aerospace and defense sector financially.”

- Murat Yılmazçoban, General Secretary; Sedef Özer, Investment Support Coordinator; - Halit Duran, Investment Support Office; and - Hakkı Gökhan Elüstün, Investment Support Office; Invest in Izmir

“Established as a university spinoff company in ODTÜ Teknokent, Aerotim Engineering has been selected as a single source vendor for developing Flight Dynamics Models for an FFS Level-D Turkish Army helicopter simulator program. The company is the only one building simulation software for helicopters and other unconventional flying objects—providing flight dynamics models, control systems and engine models for simulators—in the Turkish market. The time is ripe for Turkey to develop its own technologies, rather than reworking those already on the market.”

- Dr. Ilkay Yavrucuk, Founding Partner, Aerotim Engineering Ltd.

“The average foot soldier carries 30 kilograms (kg) of supplies and five kg of batteries.This is a significant increase from the 1990s when the total weight of batteries in a soldier’s pack was half a kg. As new technologies are deployed, soldiers require increased sources of power to use them. To protect their survivability, mobility, operation sustainability and lethality, batteries need to be lighter, smaller, and easy to use. The challenges presented by greater dependence on mobile battlefield technologies mean that companies like ASPILSAN need to innovate in order to reduce the logistical and physical burdens for the Armed Forces.”

- Ferhat Özsoy, General Manager, Military Battery Industry and Trade Inc. (ASPILSAN)

Industry Explorations - 65 - COMPANY INDEX Global Business Reports

GOVERNMENT & ASSOCIATIONS PAGES DEFENSE AND AEROSPACE INDUSTRY EXPORTERS’ ASSOCIATION OF TURKEY (SSI) AND TURKISH DEFENSE ALLIANCE (TDA) 15, 63 DEFENSE AND AEROSPACE INDUSTRY MANUFACTURERS ASSOCIATION (SASAD) 11, 12, 16, 23, 66 INVEST IN IZMIR 65 INVESTMENT SUPPORT AND PROMOTION AGENCY OF TURKEY (ISPAT) 45, 46, 47, 64, 66 TURKISH ARMED FORCES FOUNDATION (TAFF) 7, 14, 66 UNDERSECRETARIAT FOR DEFENSE INDUSTRIES, REPUBLIC OF TURKEY (SSM) 3, 10, 11, 12, 13, 15, 16, 23, 24, 30, 31, 38, 46, 49, 55, 58, 66

CLUSTER OSSA DEFENCE AND AVIATION CLUSTER 19, 20, 25, 54 TEKNOKENT DEFENSE INDUSTRY CLUSTER (TSSK) 11, 20, 24, 54, 65

MANUFACTURER ALP AVIATION 10, 12, 21, 35, 60 ASELSAN A.Ş. 7, 12, 14, 17, 19, 21, 24, 28, 29, 32, 34, 37, 41, 49, 55, 59, 61 BAYKAR 10, 28, 36 FNSS DEFENSE SYSTEMS 24, 28, 38, 39, 58 FOKKER ELMO TURKEY 12, 21, 42, 45, 50, 51 GE AVIATION 31, 43, 44, 48, 62 HAVELSAN INC. 7, 12, 14, 24, 34 OTONOM TEKNOLOJI 28, 64 ISTANBUL SHIPYARD 18, 29, 40 MECHANICAL AND CHEMICAL INDUSTRY CORP. (MKE) 26, 28, 41 PFW AEROSPACE TURKEY 21, 44, 51 ROLLS-ROYCE 44, 45, 49 TURKISH AEROSPACE INDUSTRIES, INC. (TAI) 7, 10, 12, 14, 17, 19, 20, 24, 27, 28, 30, 31, 37, 44, 46, 49, 51, 55, 60, 61 TUSAŞ ENGINE INDUSTRIES, INC. (TEI) 12, 21, 25, 31, 44, 48, 60 VESTEL DEFENSE AND AYESAS 6, 10, 37

SUB-TIER SUPPLIERS ALFA-BETA MAKINE 65 ASPILSAN 55, 56, 65 AYCAN AVIATION 52, 55, 60 BATURALP TAYLAN LTD. 55, 61 BITES AEROSPACE & DEFENSE 13, 54, 58 BODYCOTE ISTAŞ 44, 55, 61 CNK AEROSPACE LTD. 54, 55, 60 ESEN SYSTEM INTEGRATION 65 ICTERRA INFORMATION AND COMMUNICATION TECHNOLOGIES 54, 59 MILSOFT SOFTWARE TECHNOLOGIES INC. 54, 57 SPACE AND DEFENSE TECHNOLOGIES (SDT) 53, 54 TEKNOPARK ISTANBUL 12, 21, 54, 57, 64

LEGAL HERDEM ATTORNEYS AT LAW 64

MEDIA MILITARY SCIENCE AND INTELLIGENCE TURKISH DEFENSE REVIEW 64, 66, 67

CONSULTING GLOBAL RISK INSIGHTS 16, 17

This list contains those companies interviewed during the course of research for this publication and as such represents only a limited selection of the companies operating in the aerospace and defense industry of Turkey. It should not be considered a comprehensive guide. For further information on database access packages, please contact [email protected] or call +44 20 7812 4511.

CREDITS EDITORIAL AND THANK YOU MANAGEMENT TEAM We would also like to sincerely thank the following governmental bodies, associations, and media partners that took the time to share with Project Director: Irina Negoita ([email protected]) us their insights into the market. Journalist: Neha Ghanshamdas ([email protected]) Journalist: Edward Barss ([email protected]) UNDERSECRETARIAT FOR DEFENSE INDUSTRIES, REPUBLIC OF TURKEY (SSM) Executive Editor: John Bowlus ([email protected]) ssm.gov.tr Graphic Designer: Gonzalo Da Cunha ([email protected]) INVESTMENT SUPPORT AND PROMOTION AGENCY OF TURKEY (ISPAT) invest.gov.tr

TURKISH ARMED FORCES FOUNDATION (TAFF) For updated industry news from our on-the-ground teams tskgv.org.tr around the world, please visit our website at gbreports.com, subscribe to our newsletter by signing up to our VIP list DEFENSE AND AEROSPACE INDUSTRY MANUFACTURERS through our website, or follow us on Twitter: @GBReports. ASSOCIATION (SASAD) sasad.org.tr

MILITARY SCIENCE AND INTELLIGENCE TURKISH Additional copies of this book can be ordered DEFENSE REVIEW (MSI) through Elif Ozturk ([email protected]). magzter.com

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