Friday, February 17, 2012

Lockheed: F-35 Partners Won’t Suffer Unduly from Production Slowdown

The ramp-up of F-35 production is being slowed, but Lockheed Martin says that international partners will still be getting lower prices. (Photo: Lockheed Martin)
February 17, 2012, 10:55 AM

The acquisition cost of F-35s for the international partners is bound to be affected by the slowdown in U.S. production, Dave Scott, Lockheed Martin’s director for international F-35 customer engagement, told AIN. “But we’ll still be doing about 30 in each of the next few years for the U.S., and when you add orders that have already been confirmed by the partners plus Israel and Japan, it’s not a bad annual rate,” he continued.

Under F-35 procurement procedures, the partners pay the same unit recurring flyaway cost as the U.S. for the aircraft that they order in each annual or (eventually) multi-year buy. Smaller order quantities should mean higher unit prices, but countering this trend, Scott told AIN, is the fact that “as we refine the supply chain and the production processes, the price will continue to reduce.”

Scott noted that six of the eight partners now have committed to or ordered aircraft. “They’re all in it together, and have been for 10 years now,” he said, referring to the system design and development phase in which all of them made contributions. These ranged from $2 billion from the UK, a Level 1 partner, to $1 billion from Italy and $800 million from the Dutch as Level 2 partners to $125 million to $175 million from the remainder, as Level 3 partners.

The British (three) and the Dutch (two) have already ordered aircraft, Scott noted. Australia (two) and Italy (four) are placing their first orders in Low Rate Initial Production (LRIP) Lot 6, and have already funded long-lead production items. Turkey is following in LRIP 7, and Norway (four) in LRIP 8. Canada and Denmark are the two partners who have yet to commit. The first deliveries to Israel and Japan will be from LRIP 8.

According to Scott, “some countries” are considering an increase in their F-35 orders, though he would not specify who they are. But the UK is certain to reduce its requirement for 132, and two days after AIN spoke with Scott, Italy announced that it is chopping 40 aircraft from its previously planned buy of 131. The Australian defense minister recently stated that his country’s plans to order its next 14 F-35s are on hold.

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