Wednesday, May 21, 2008

Why has our new fighter requirement been reduced to 65?

We had been planning on 80:
...
Canada's participation in the F-35 program has been based on the planned procurement of 80 aircraft [F-35 the likely, but not certain, choice], the number of upgraded Boeing CF-18s the Canadian Forces will operate until they replaced by new fighters in 2017-20. Harper said fewer aircraft are required because the new fighter will have significantly greater capability than the CF-18s...
In 2007 $3.8 billion--flyaway cost only--was allocated for the Hornets' replacements.

Now Lockheed Martin is apparently offering a flyaway price of $63 million (the author, Bill Sweetman, is Editor in Chief of Defense Technology International, Aviation Week Group):
A potentially important report from Australian Aviation magazine: Lockheed Martin will indeed offer a fixed price for international JSF partners. According to the magazine, Lockheed Martin business development VP George Standridge told Australian journalists touring Fort Worth that the price - to be set later this year and offered with US approval - would be around $63 million in 2008 dollars. This is a basic flyaway price, typically a fraction of the total acquisition cost.

A fixed price has also been offered in Norway, according to Standridge, where the Gripen team has been pushing hard on the pricing issue. (There's enough of the existing Gripen in the NG, together with an off-the-shelf engine, to permit them to offer a firm price.)

The price is higher than the estimated average F-35A price across the program - $51 to $57 million in 2008 dollars - but lower than the likely cost of low-rate initial production aircraft. The offer's intended to give customers an incentive not to slide their purchases to the right, into later and cheaper production years. Give us a firm order now, Lockheed Martin is saying, and we'll share the benefits with you.

One open question: since the cost of a JSF in 2015 or later is not known, who eats the difference if it's much higher than today's estimate - as history suggests that it will be, whatever the program bosses say? It's a big gamble for Lockheed Martin, but if it's underwritten by the Pentagon it's a subsidy - and observers of the tanker deal, and the Boeing-versus-Airbus war generally, will note that the US hates subsidies.
At an F-35 flyaway price above of $63 million, 65 would cost us $4.1 billion. Our allocation has been $3.8 billion Has the number been reduced to meet the new price (roughly)?

But, in any event, that price sure looks low--and how capable will export F-35s be?

Update: More on rising military aircraft costs generally.

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