Turkish Airlines is set to sign an agreement with Rolls-Royce Holdings plc and Airbus SE for the domestic production of aircraft components valued at as much as US$20 billion , part of its mega plane purchase announced last year.

A deal could be announced at a ceremony in Istanbul later this month, according to Turkish officials familiar with the matter. The Turkish state is the largest shareholder of the airline. 

Türkiye’s flagship carrier firmed up the purchase of 230 aircraft from Airbus in December, with options for more as the airline looks to scale up its Istanbul hub and take on regional rivals such as Emirates and Qatar Airways. As part of the order, Türkiye pushed for local production of airplane parts, the people said.

The agreement for domestic production of airplane parts is a key component in Türkiye’s goal to develop its civilian and military aviation industry, and is part of the 2023 Airbus order that’s valued at about US$70 billion. Turkish companies including state-run TUSAS Engine Industries Inc, or TEI, will likely be part of the manufacturing programme, said the officials, who asked not to be identified as the discussions were confidential.

A spokesman for Turkish Airlines confirmed the date for a signing ceremony, without elaborating. An Airbus spokesman declined to comment. Rolls-Royce couldn’t immediately be reached for comment.

Shares in Airbus climbed as much as 1.6%, and Rolls-Royce 2.8%, after the news. As of 12.53pm in London on Wednesday, Airbus was still 1.2% higher, and Rolls-Royce 2.1% better.

Türkiye has long been engaged in talks with foreign companies including Rolls-Royce to acquire engine technology for its domestic tank and warplane projects. 

The jet-engine maker, whose chief executive holds Turkish and British citizenships, already has a joint venture with industrial conglomerate Kale Group in Türkiye.

The government in Ankara has been pushing to make domestic production a part of its foreign purchases, including in defence equipment and passenger airplanes. 

  - Bloomberg