International Demand

Lockheed’s F-35 mega-deal largely cushioned from budget impasse

The Pentagon’s costliest program – the $398 billion F-35 Joint Strike Fighter made by Lockheed Martin Corp. – had its share of difficulties: software problems, delays and, more recently, groundings. But it should be largely isolated from a problem that looks set to plague other weapons systems: the lack of a new fiscal year 2023 budget.

The specter of a budget stalemate is rising as the US Congress heads into a rancorous midterm election in November – and coincides with the Pentagon negotiating new contracts for hundreds more F-35 jets.

Spending bills for fiscal year 2023 are expected to be pushed back until after the election or even next year, as lawmakers tussle over defense and domestic spending levels. Instead, lawmakers will resort to continued resolutions, or stopgap measures, to fund the government. Stopgap measures can be tricky for the Department of Defense because it cannot start new programs or ramp up production of existing programs such as the F-35.

Photographer: Justin Tallis/AFP via Getty Images

A Lockheed Martin F-35 fighter jet takes part in a flight display at the Farnborough Airshow in the UK in July 2022.

Despite its problems and high operating and maintenance costs, the success of the weapons program is crucial for the US military services and for allies seeking to replace their older fighter jets with next-generation stealth F-35s. . US Air Force, Navy and Marine Corps forces are all expected to fly the planes.

The Pentagon reached a preliminary agreement on Lockheed Martin Corp’s next mega-contract last month. for several hundred F-35 aircraft, which a defense official says will amount to about $30 billion. That deal covers three production batches, and a Pentagon spokeswoman said only the third batch — the government’s 17th production contract with Lockheed — could be hit by funding delays due to ongoing resolution.

“An FY’23 CR could place constraints on the amount of FY’23 dollars the Joint Program Office receives and limit the ability to contract for new FY’23 requirements, such as the option for Batch 17 aircraft” said Pentagon spokeswoman Jessica Maxwell. , said in an email to Bloomberg News.

Two previous contracts between the Pentagon and Lockheed, the 15th and 16th batches of jets, will benefit from funding already allocated by Congress for fiscal years 2021 and 2022, she said.

“The Joint Program Office also plans to exercise a contract option for Lot 17 after the FY2023 budget is finalized,” Maxwell said.

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Inflation, international orders

Congress has made rolling resolutions routine for the past decade, and the Pentagon has had to adjust its planning to avoid contract delays. But just a few years ago, it covered the hampered production of rockets used to fight militants in Afghanistan, Iraq and Syria, and improvements to the B-1B bomber used to deter North Korea.

Previously: Army Munitions and Air Force Bombers Hampered by Interim Measure

The Pentagon announced last month that it had reached a preliminary agreement with Lockheed Martin on what is now a total of 375 planes planned for the 15th through 17th production contracts. The F-35 program office declined to provide a breakdown of the aircraft per contract.

The total number of fighters procured has been impacted by inflation and Covid-related delays. The Pentagon had originally planned to purchase 485 planes, in February 2019 before negotiations began, which fell to 404 planes in April 2019, according to a decision memo from former acting head of acquisitions Stacy Cummings.

Lockheed Martin spokeswoman Laura Siebert said in an email that “quantities for each contract are determined by our customers to meet their mission planning needs and budgetary requirements.”

But the F-35 continues to see demand from overseas, with Finland, Switzerland, Germany and Greece being the latest customers. South Korea has also indicated that it wants more jets. More than 800 F-35s have been delivered worldwide out of a potential fleet of more than 3,300 for the United States and partner nations.

“The F-35 is better isolated from a CR than most programs,” said Richard Aboulafia, chief executive of AeroDynamic Advisory, an aerospace and defense management consultancy. “It is largely on track to meet its production ramp targets, it benefits from a high level of program security for strategic and economic reasons, and international demand is very strong.”

To contact the reporters on this story: Roxana Tiron in washington at [email protected]; Tony Capaccio in Washington at [email protected]

To contact the editors responsible for this story: Anna Yukhananov at [email protected]y.com; Bennett Roth at [email protected]