it’s a crock of shit, but you have to buy it because if you don’t, they promise they’ll bomb you with it

Lockheed nears $37b+ deal to sell F-35 jets to 11 countries
Mike Stone, Reuters, Jun 18 2017

Lockheed Martin Corp is in the final stages of negotiating a deal worth more than $37b to sell a record 440 F-35s to a group of 11 nations including Pindostan, two people familiar with the talks said. This would be the biggest deal yet for the F-35, set to make its Paris Airshow debut this week. The sale represents a major shift in sales practices, from annual purchases to more economic multi-year deals that lower the cost of each jet. The pricing of the jets was still not final, although the average price of the 440 jets was expected to be $85m. The multi-year deal for the fighters will consist of three tranches, spread over FY2018 to FY2020. A Lockheed rep said any deal involving a “block buy” would be announced by the government. Last week, representatives from 11 F-35 customer nations met in Baltimore to discuss terms. They toured a Northrop Grumman Corp facility in Maryland that provides equipment for the jet. Those nations included Australia, Denmark, Israel, Italy, Japan, the Netherlands, Norway, Turkey, South Korea, Britain and Pindostan. The MoU being negotiated between Lockheed and the customers aims to procure 135 or more jets in FY2018 for delivery in 2020 for about $88m each. In FY2019 and FY2020, procurement would ramp up to 150 or more jets per year. The average price in 2019 could be $85m for the F-35 “A” variant and could drop below $80m in 2020. That would mark the lowest price ever paid for an F-35, making this deal an important step in reducing the overall cost of each jet.

The F-35 has been widely criticized for being too expensive, including by Pres Trump and other Pindo boxtops who have criticized the Pentagon’s most expensive program for delays and cost overruns. Recently, a quarter of the operating F-35 fleet was grounded until further notice because of problems with the pilots’ oxygen supplies. The MoU will guarantee contracts will take place in each successive future year. This allows the manufacturing group led by Lockheed to take advantage of greater economies of scale, reducing the cost of each jet. They have been working to reduce the cost of the jets through streamlining the supply chain and purchasing materials in bulk. Recently revised estimates indicate the Pentagon expects to spend $379b, down from $391b, to develop and buy 2,443 of the supersonic warplanes through 2039. Robert Stallard, an analyst at Vertical Research, said:

This is part of an ongoing process. If it gets done, it would be a plus for Lockheed, allowing for better long-term production management

The F-35 comes in three configurations, the A-model for the USAF and vassals; the B-model, which can handle short take-offs and vertical landings for the Marines and the Brits; and the carrier-variant F-35C jets. In February, the Pentagon agreed to a deal for the tenth batch of the fighter aircraft and agreed to pay below $95m each for the first time, compared with $102m in the previous purchase, which was the lowest price up until that point. Around that time, the Pentagon said the price of a jet could fall 16% to around $80m in future purchases. The F-35 accounts for about 37% of Lockheed’s total revenue. During the first quarter, Lockheed’s revenue from its aeronautics business increased 8% to $4.1b, led by higher sales of the F-35. Lockheed executives have estimated that a multi-year deal will save about $2b for the nations that choose to participate in the multi-year purchase. Lockheed and its partners including Northrop Grumman Corp, United Technologies Corp’s Pratt & Whitney and BAE Systems Plc, have been working on building a more cost-effective supply chain to fuel the production line in Fort Worth.

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