Pentagon announces $34bn F-35 fighter jet deal with Lockheed
Pricing details show lower costs, which may encourage more countries to buy the jet
Washington — The Pentagon announced pricing details on Tuesday for its agreement with Lockheed Martin that lowers the cost of the F-35 jets it plans to purchase up to and including 2022 by 12.7%, which may encourage other nations to buy fighter jets.
The agreement will be worth $34bn for 478 F-35 fighter jets over three years.
Lockheed stock has advanced 42% in 2019, double the gain of the S&P 500.
Lockheed executives have said that any country with an F-16 jet, the predecessor to the F-35, is a potential customer.
The F-35A, the most common version of the aircraft, will cost $82.4m in 2020, $79.17m in 2021, and $77.9m a jet in 2022, the US defence ministry told reporters at the Pentagon on Tuesday.
In June, the US defence department said the price for the F-35A fell by 8.8% to $81.35m in fiscal 2020, but the cost of the engine, made by Pratt & Whitney, is responsible for the $1m cost difference. It did not contain final pricing for the Pentagon’s purchase options for the jets in 2021 and 2022.
The options exist because official purchases cannot be made until the US Congress approves an annual budget for those years.
Lockheed Martin’s goal is to deliver 131 aircraft in 2019 with production growing to more than 149 aircraft deliveries in 2020, and 160 and 169 jets a year thereafter.
Bloomberg reported on Monday that the F-35 has faced years of delays and cost overruns. The cost of operating and supporting the fleet for more than six decades has increased to $1.196-trillion, according to the Pentagon’s latest cost assessment of major projects.
The F-35 comprises about 25% of Lockheed’s annual revenue. The F-35 programme aims to grow the fleet to more than 3,000 jets and bring the unit price of the F-35A below $80m through efficiencies gained by ordering larger quantities.
About 10 countries are eyeing the purchase of the F-35, US Air Force Lt-Gen Eric Fick, head of F-35 lightning II joint programme office, said. Included are Finland, Switzerland and the United Arab Emirates.
The F-35 comes in three configurations, the A-model for the US Air Force and US allies; an F-35 B-model, which can handle short take-offs and vertical landings; and carrier-variant F-35C jets for the US Navy.
The plane is manufactured in Fort Worth, Texas,