Lockheed executives hope to reel in a large number of foreign orders
this year to offset budget-driven delays in U.S. purchases, but
sales have proven elusive.
"It's steady progress, but slower than hoped. The international
orders are not coming in as fast as we hoped," Steve O'Bryan,
Lockheed vice president and the company's main international F-35
salesman, told Reuters.
Current plans call for the U.S. military and other countries to
order 57 F-35 fighters in a ninth production batch of the new jets,
short of the roughly 72 orders once expected. The Pentagon estimates
it will spend $392 billion to develop the jet and buy 2,443 planes
over the coming decades.
News that South Korea expects to spend 7.34 trillion won ($6.79
billion) for 40 F-35s is a plus for Lockheed, said Richard Aboulafia,
aerospace analyst with the Virginia-based Teal Group, but the
company needs more orders to help drive down the unit cost of the
"The risk is that it stays too expensive to order in large
quantities, and the lack of large quantities means that it stays too
expensive," he said.
Lockheed is developing three models of the radar-evading jet for the
U.S. military and eight countries that help fund its design:
Britain, Australia, the Netherlands, Norway, Turkey, Italy, Denmark
From the start, the program was aimed at quickly ramping up
production to 200 jets a year. But budget pressures have not been
confined to the United States, and technical challenges have slowed
that momentum as well.
Pentagon officials are preparing new estimates, expected in
mid-April, for the projected cost of the jet over the life of the
program, factoring in costs to operate and maintain the planes.
Current plans call for U.S. orders to ramp up to around 96 jets in
fiscal 2019, when Lockheed will be building a 13th batch of jets,
according the F-35 program office.
Most of the initial partners on the development have already ordered
jets, but Canada and Denmark have wavered.
Canada is expected to decide this year on whether to proceed with
plans to buy 65 F-35s, or launch a fresh competition. Denmark has
already launched a competition, but is not expected to announce a
decision this year.
That gives Lockheed rivals Boeing Co <BA.N>, with its F/A-18 Super
Hornet, Airbus Group <AIR.PA> and BAE Systems <BAES.L>, with their
Eurofighter Typhoon, and Sweden's SAAB <SAABb.ST> with its Gripen,
another shot at more orders.
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Italy, which has built a large assembly plant for F-35s, last week
said it may halve its plan to buy 90 jets. Italy already cut its
orders by 30 percent two years ago to trim state spending during the
euro zone debt crisis.
Further big cuts could jeopardize the share that Italian firms
have in building parts of the F-35m, since industrial participation
is tied to the size of a country's orders.
Britain is expected to announce an order for 14 more F-35s during a
visit by its defense minister to Washington this week. But it is
unlikely to add orders at this point, according to sources familiar
with the program.
South Korea will be the third country, after Israel and Japan, to
buy the jets outside the original partnership. Israel is also due to
finalize plans for a second batch of F-35 jets this year.
Sources familiar with South Korea's plans said Seoul hoped to sign a
letter of agreement for its F-35 purchases by August, with the first
jets to be delivered in 2018, when Korean pilots will start training
at Luke Air Force Base in Arizona.
Singapore has also expressed interest in the F-35s. The country's
defense minister said in December that Singapore was in no rush to
replace its F-16s, but the number of meetings on the issue has
increased in recent weeks, said a second source familiar with the
Matthew Bates, spokesman for Pratt & Whitney, the United
Technologies Corp <UTX.N> unit that builds the F-35's engine,
welcomed South Korea's selection and said it demonstrated the
program's growing stability.
He said the orders would also help lower costs. "As production
increases, costs will come down," he said.
(Additional reporting by Joyce Lee in Seoul and Steven Scherer in
Rome; editing by Ros Krasny and Dan Grebler)
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