Going Once, Going Twice…

In a move that bodes poorly for the U.S. and world economies, the Department of Defense is reportedly nearing an agreement with Lockheed Martin for the production and delivery of approximately 375 F-35A fighter jets over the next three years. The purported deal lends substance to murmurings of a coming price increase for the most common F-35 variant in the wake of sluggish orders and worsening inflation.

When it came off the production line in 2007, the first F-35A cost $221-million. In the years since, increased production volume and refined building methods attributable to a growing number of buyers drove the per-unit price of the stealthy, fifth-generation fighter as low as $79-million.

Inside sources report a pending handshake agreement between Lockheed and the DOD could determine a price range and quantity for the acquisition of the new jets; though finalized pricing—which is estimated to be in the range of $30-billion—would not be locked-in for a period of time measurable in months. The alleged handshake agreement, if made, would coincide with the Farnborough Airshow, at which the aviation industry will imminently gather with the aim of staging a post-COVID show of confidence in its own future.

In the midst of the pandemic, Lockheed began to intimate that the per-unit price of the F-35 could rise as economies of scale diminished and supply chains stumbled. A pre-pandemic forecast of the three year buy currently being discussed by Lockheed and the DOD predicted movement of 485 jets. The 375 F-35As now being haggled over represent a 22% volume decrease from Lockheed’s pre-pandemic projection. Such a decrease would almost certainly impact future pricing of the F-35A—the version flown by the United States Air Force and America’s NATO allies.

Lockheed builds three variants of the F-35: the A-model, designed for use on conventional runways: the F-35 B-model, which features a ducted fan system that enables it to perform short takeoffs and vertical landings; and the F-35C, the landing gear assemblies and wings of which are respectively engineered to facilitate landings and storage aboard aircraft carriers.  

The F-35 has had several recent successes in jet fighter competitions, including Finland, Switzerland and Germany. Potential customers include Greece and the Czech Republic.

Lockheed executives maintain that any country operating the F-16 or variants thereof is a potential F-35 customer—a cheery prospect for Lockheed Martin shareholders insomuch as the F-35 program represents about 27% of the company’s revenue.

FMI: www.lockheedmartin.com