Israel Aircraft Industries (IAI) is the favourite to take a contract valued at up to $500 million for the upgrading of the air force's 54 US- manufactured F-4 Phantom fighter aircraft. The defence industry executive committee, the country's highest decision-making body on defence procurement, has recommended IAI, say industry sources.

The committee wants modernisation of the F-4s to be carried out using Turkish facilities to the maximum and transferring technology to Turkey. However, credit financing may still have to be agreed. Israel is also considering the sale of mid-air refuelling aircraft.

A prime location for the F-4 modernisation would be the complex operated by Turkish Aerospace Industries at Murted near Ankara, which is already assembling F-16 jet fighters and other Western aircraft, say observers.

An award to IAI would take co-operation with Israel a stage further following Prime Minister Tansu Ciller's groundbreaking visit to Tel Aviv and Palestinian self-rule areas on 3-5 November (MEED 18:11:94).