UPDATE 2-Turkey signs $3.5 bln deal for Sikorsky helicopters

Fri Feb 21, 2014 7:25pm EST

By Seda Sezer and Andrea Shalal

Feb 21 (Reuters) - Turkey signed a deal worth $3.5 billion on Friday to buy helicopters from United Technologies Corp's Sikorsky Aircraft unit, finalizing an order originally agreed upon in 2011, the prime minister said.

The agreement includes options that analysts say could result in billions of dollars of additional orders over the next three decades.

The 109 helicopters, a version of Sikorsky's popular Black Hawk, will be assembled in Turkey. The main contractor is Turkish Aerospace Industries with components to be supplied by Sikorsky, Aselsan and other Turkish companies.

Sikorsky said the deal marked the start of an important partnership with Turkish industry.

"Turkey is such an important market in terms of being a large customer, and it is also strategically important in terms of who they are in the world," Sikorsky President Mick Maurer said in a telephone interview.

He said the agreement would allow Turkish industry to develop the capability to produce nearly every part of the helicopter, including a newly designed Turkish cockpit.

Maurer declined to give many details about the new agreement but said it would give his company a second source for many of the helicopter's components.

He said Sikorsky would work with Turkey to market the international version of the Black Hawk in other countries, leveraging Turkey's existing relationships in those areas and generating additional orders for Turkish suppliers.

"We're going out arm in arm, as we bring in other sales outside of Turkey that will be supplied by the new supply chain," Maurer said.

Maurer said the company expected continued demand for the helicopter in Asia, the Middle East and Europe.

Even if the co-marketing efforts do not pan out, the deal still gives Sikorsky access to "one of the biggest export helicopter markets in the world," said aerospace analyst Richard Aboulafia. "Turkey has requirements that go way beyond these numbers," he said.

Virginia-based defense consultant Jim McAleese said the deal would help Sikorsky weather a downturn in U.S. helicopter orders and underscored the "franchise value" of the company just weeks after speculation that United Technologies could spin it off as a low-value asset.

"This could not have come at a better time," McAleese said.

Despite the deal, Sikorsky on Friday announced it would begin laying off 600 workers in coming weeks, citing continued "challenging and unstable economic conditions."

Sam Mehta, president of Sikorsky's Defense Systems and Services division, said the deal marked the start of a 30-year relationship, and included options for a wide range of Turkish government agencies to buy versions of the helicopter.

It also opened opportunities for servicing and repairing the helicopters, he said.