Lockheed F-35 jet price falls to below $90 mln: Sources

FARNBOROUGH - Reuters

The United States has struck a preliminary deal to buy F-35 jets from Lockheed Martin worth about $13 billion, clearing the way for a larger multi-year purchase that aims to bring the cost per jet down to $80 million by 2020, sources said.

The deal for 141 F-35s lowers the price of the F-35A, the most common version of the stealthy fighter jet, to about $89 million, down around 6 percent from $94.3 million in the last deal struck in February 2017, the sources familiar with the talks said.

Bringing down the cost of the world’s most expensive defense program is crucial to securing more orders, both in the United States and abroad.

President Donald Trump and other U.S. officials have criticized the F-35 program for delays and cost overruns, but the price per jet has steadily declined in recent years as production increased.

The current “handshake” deal will be solidified along with pricing and other terms in a contract that will be announced in the coming weeks, the sources said, on condition of anonymity because the talks were private.

The agreement with the U.S. Department of Defense removes a crucial road block from the ongoing negotiations for a multi-year deal for the fighters that is expected to consist of three tranches over fiscal years 2018-2020.

The Pentagon and Lockheed Martin “have made progress and are in the final stages of negotiation,” the Pentagon’s head of acquisitions Ellen Lord said in a statement, adding the two sides had reached “a handshake agreement which symbolizes the Department of Defense’s commitment to equip” U.S and allied forces, while giving “great value” to the U.S. taxpayer.

Last summer, Reuters reported that F-35 customers including Australia, Denmark, Israel, Italy, Japan, the Netherlands, Norway, Turkey, South Korea, Britain and the United States had aimed to procure 135 or more jets in fiscal year 2018 for delivery in 2020 for about $88 million per jet.

In addition, negotiations were ongoing for the multi-year U.S. deal that was said to be worth more than $37 billion, and encompassing a record 440 F-35 fighter jets.

But negotiations for this 11th batch of jets extended because new Pentagon leaders drilled deep into the program to understand it and its costs, prolonging negotiations for the multi-year “block buy,” the sources said.

On July 15, a Lockheed Martin representative said the handshake agreement on the production contract for the 11th lot of F-35 aircraft was in place, but the total value and cost per variant would be released when the contract was finalized.

The F-35 comes in 3 variants: the F-35A conventional take-off and landing model; the F-35B, a short take-off/vertical landing version; and the F-35C, used aboard aircraft carriers.