F-35 deal clears path to full production

The Pentagon’s new $US11.5 billion ($16bn) contract for 141 F-35 fighter jets has cleared the way to full production.

One of Australia’s first F-35 fighter jets during a test flight in the US. Picture: Lockheed Martin

The Pentagon’s announcement of an $US11.5 billion ($16bn) contract for 141 F-35 fighter jets from Lockheed Martin Corp, the biggest batch yet, has cleared the way towards a future multi-year deal.

The latest contract lowered the price for the most common version of the stealthy jet by 5.4 per cent to $US89.2 million.

This follows an 11th round of contract negotiations between Lockheed Martin and F-35 customers including Australia, the US, Denmark, Israel, Italy, Japan, the Netherlands, Norway, Turkey, South Korea and Britain.

Greg Ulmer, head of the F-35 program at Lockheed, said the Maryland-based company expected to cut the cost of the F-35A further to $US80m by 2020.

Negotiations were ongoing for a multi-year deal that was said to be worth more than $US37bn, and encompass a record 440 F-35 fighter jets.

Negotiations for this 11th batch of jets were extended because the Pentagon leadership appointed by the Trump administration have drilled deep into the program to understand its costs, prolonging negotiations for the multi-year “block buy”, people familiar with the talks have said.

Further reducing the cost of the world’s most expensive defence program remains crucial to securing orders in the US and more from abroad, Reuters reports. Lockheed is the No 1 US defence contractor.

The Australian carried a report by The Wall Street Journal on Wednesday quoting the military head of the F-35 program as saying Lockheed Martin was being encouraged to cut costs and could face penalties unless it improved delivery times.

“We see potential for a less-than-$US80m jet in LRIP 14 [the 14th round],” Vice Admiral Mat Winter, the Pentagon’s F-35 program executive officer, said.

The Pentagon buys the jets in batches, known as low-rate initial production lots or LRIPs, with the 14th round, two years from now, expected to be the first to reach maximum annual production of almost 170 jets.

A preliminary deal was struck in July, as reported by Reuters, clearing the way for a larger multi-year purchase that aims to bring the cost per jet down to $US80m by 2020. Most of the jets are for the US military, and others are for allied countries.

“Driving down cost is critical to the success of this program,” Vice Admiral Winter said.

Reuters says the latest agreement removed a roadblock from negotiations for a multi-year deal for the fighters that is expected to consist of three tranches over the US financial years 2018-2020.

President Donald Trump and other US officials have criticised the F-35 program for delays and cost overruns, but the price per jet has declined as production has increased. The price of the last batch of F-35As in 2017 cost 7 per cent less than the previous jet order.

The F-35 comes in three variants: the F-35A conventional take-off and landing model, which Australia is buying, the F-35B, a short take-off/vertical landing version for the US Marine Corps, and the F-35C, for aircraft carriers. Last week a B version was completely destroyed during training in the first known crash of an F-35. The pilot safely ejected.

This latest deal has 91 jets for the US including 53 of the A variant, 24 of the B variant and 14 of the C variant. In addition, there are 28 F-35s for international partners such as Australia and 22 for “foreign military sales’’ customers in this batch.

The F-35 program is aiming to expand the fleet to more than 3000 jets and bring the unit price of the F-35A closer to $US80m in 2020 through efficiencies gained by ordering in larger quantifies.

Lockheed is the prime contractor for the jet. Its partners including Northrop Grumman Corp, United Technologies Corp’s Pratt & Whitney and BAE Systems.

The Wall Street Journal reported that the Pentagon was looking to open up more work to maintain and upgrade the planes to companies other than Lockheed Martin and Pratt & Whitney.

Lockheed has so far delivered 59 of 91 jets due to be handed over this year, but had to temporarily halt production earlier this year because of parts issues.

Agencies