Buying F-35 Joint Strike Fighters is no longer a purely academic question for potential foreign buyers. The UK and the Netherlands signed orders earlier this year for flight test aircraft, and Italy is expected to follow soon.
As the foreign customers start lining up, a whole new clarity is being brought to the issue of the F-35's price tag.
The US government established an international partnership with a business case partly based on the F-35's supposed affordability, advertising a price tag of roughly $60 million per aircraft, depending on the model.
Now, facing both industrial and competitive pressures, Lockheed Martin is seeking a novel approach to fix the F-35 price for international customers that sign multi-year deals at a level below the current market rate.
The $60 million figure is an average price calculated over the life of the programme's estimated 3,000-aircraft production run. The cost to buy a single aircraft this year could be significantly higher.
For example, the US Navy has asked for more than $1.7 billion to acquire eight low-rate initial production aircraft in fiscal year 2009. That figure equates to slightly more than $215 million per aircraft, a potentially unacceptable figure for most foreign partners to buy in quantity.
The price tag is expect to fall dramatically as annual production rises from as many as 19 aircraft in FY2009 to more than 200 a year by FY2016. The pace of the price drop may still prove too slow for potential customers, so Lockheed is seeking approval for a radically different pricing scheme.
Lockheed Martin chief executive Bob Stevens told the Sanford Bernstein investor conference in May: "It is not too early in the programme to start talking about solidifying the production buys because as we do that, I think we all know that when you aggregate demand and you phase that demand in an optimal way, you can get the best opportunity to get the supply chain executing in a fashion that is low cost and high quality.
"And you will offer affordability in these jets that will be the very best buy as a value-for-money spend, when we can get the demand phased properly, and that's the phase of the programme we're entering now."
Lockheed's proposal involves setting the aircraft unit cost at an average rate across a multi-year procurement deal, saving customers perhaps tens of millions of dollars on the higher-priced aircraft bought in the first years of the deal.
Lockheed is still trying to steer the deal pass two obstacles: securing legal authority to sign such a multi-year deal and financing the upfront costs.
If the proposal fails in Congress or in the Pentagon, the Lockheed-led programme faces the challenge of persuading customers to buy early, even at higher prices. Failing to secure enough international orders in the early phases of the programme could be damaging.
The longer it takes to achieve full rate production, the slower prices will decline, creating a circular effect with customers delaying purchases to wait for better deals later.
The critical period for completing deals in the early years of production is from 2012 to 2016.
Hundreds of aircraft could be sold to both the international partners and non-affiliated governments, such as Japan, as long as the pricing meets expectations and the programme avoids critical problems in flight test or production ramp-up.
Meanwhile, the JSF partners continue to refine their long-term plans, with the number of F-35s wanted rising in some countries and falling in others. Canada, for example, wants to cut 15 aircraft from its planned purchase, but Italy is likely to consider adding more.
The JSF international programme is quickly spreading beyond the original eight-nation partnership. Israel, one of two security co-operation participants, has issued a letter of request one year in advance of posting a formal request for proposals for up to 75 F-35s.
Japan is actively considering the F-35 for its F-X fighter programme, sending an assessment to Lockheed's factory at Fort Worth, Texas.
JSF foreign sales have also become an urgent issue because competitors have stepped up the pressure, suspecting that the affordability issue or another production delay will force Lockheed's first stealth fighter export out of some markets.
© Lockheed Martin
The F-35's advertised $60 million price tag is an average price calculated over the life of the programme's estimated 3,000-aircraft production run
Saab is on the attack with the JAS39 Gripen in Norway, forcing Lockheed to unveil an unusual price guarantee for the F-35 in 2016. Boeing continues to push the F/A-18E/F Super Hornet, not only as an alternative to the carrier-based F-35C for the US Navy, but also as an F-35 replacement in foreign markets that require an immediate replacement.
Australia's future regarding the JSF became less than clear when a new Labor government was elected late last year. The new government inherited numerous defence purchases and plans, many of which it has since re-examined and in some cases cancelled.
In February the government launched a review of Australia's future air combat capability requirements to 2045, which included an order for 24 Boeing F/A-18F Super Hornets and plans to acquire up to 100 JSFs for delivery from 2013. A decision on the latter is expected late this year.
The first part of the review focused on requirements through to 2015 and included the feasibility of retaining Australia's ageing General Dynamics F-111s rather than acquiring the Super Hornets that were ordered by the previous government to replace the F-111s and as a stopgap before the first JSFs are delivered.
In March the government decided to retain the Super Hornet order.
The second part of the review, which focused on requirements through to 2045, including a possible JSF purchase and assessing alternatives such as the Lockheed Martin F-22 Raptor, was completed and presented to the government in late April, but it has yet to be made public.
Part two is "currently under consideration", says the Australian government. "The findings and recommendations of the Air Combat Capability Review will feed into and inform the wider-reaching Force Structure Review being conducted as part of the defence white paper process."
The new defence white paper is not due for consideration by the government until December.
Although the new government is so far non-committal on the JSF, Royal Australian Air Force chiefs have long supported the type and many believe the Air Combat Capability Review recommends that the JSF is the best next-generation fighter for the country.
Two major decisions are in store this year for Italy, the number three partner in the JSF programme, which invested $1 billion in the system development and demonstration (SDD) phase.
Italy's first decision - to buy the country's first two F-35s to take part in the flight-test phase - has been on hold for up to a year.
The political crisis that swept the previous government from power has delayed Italy's decision until next year, but Lockheed confirms it is protecting production slots for Italy as the political situation stabilises.
Now, with the extreme left-wing faction marginalised in the Italian parliament, the country's first F-35 order and participation in the test phase is expected to be approved by July 2009.
Italy is to procure two early production models of the F-35A, starting with the first order in the lot 3 low-rate initial production contract. The second aircraft will be ordered from the LRIP lot 4 batch.
Both aircraft are expected to be F-35As, even though Italy intends to eventually have a mix of conventional and short take-off vertical landing (STOVL) aircraft.
© Lockheed Martin
Early achievement of full-rate production is vital for keeping costs down for the F-35
Italy's navy has a requirement for 22 F-35Bs, and the air force wants a mix of F-35Bs and F-35As to replace Panavia Tornados and AMX strike and attack aircraft. The programme's overall restructuring in 2004 prompted Italy to opt for two CTOL aircraft, however.
Italy must also confirm its decision to open the final assembly and checkout line for the Italian and Dutch F-35. If approved, the line would be at the former Cameri air force base.
Share-out of the financing package still has to be decided between Italy's ministries of defence and economic development, and the initial investment by the Italian companies involved in the production and support programme is not frozen.
A dramatic change in previous decisions is unlikely, however.
The programme's industrial and occupational benefits are clear to most of Italy's political forces, as well as the need to safeguard the country's status as a reliable partner in major international programmes, perhaps seeking to offset the harm to Italy's reputation caused by its withdrawal from the Airbus A400M programme.
It also appears likely the number of F-35s ordered by Italy will rise from the current 131, including 109 F-35A/Bs for the air force and 22 F-35Bs for the navy. The scale of such an increase and the final quantities of the two versions are still to be decided.
© Lockheed Martin
Italy intends to eventually have a mix of conventional and STOVL F-35s
Meanwhile, Alenia Aeronautica is stepping up its efforts at the Foggia plants, where it is producing components for LRIP lot 2 aircraft.
In the LRIP lot 3 phase, Alenia's role will expand to add the central wing box, then the external wing panel with LRIP lot 4 and the complete wing with LRIP lot 6. This later production batch will include the first series-production Italian aircraft - up to six of the fully operational Block 3 configuration.
Although it has had only a minor role in the JSF programme to date, Israel is poised to become the first international partner to order the aircraft in significant quantities.
The Israeli air force issued a letter of request in May and is expected to release a request for proposals in the second quarter of 2009.
Israel's official request seeks information on the purchase of at least 25 basic F-35As. Lockheed sources confirmed the letter may also include an option to buy 50 STOVL F-35Bs.
This option would be exercised only after the performance of the F-35B can be compared to the unit price. Deliveries of the first F-35s to the Israeli air force are scheduled in 2013 to 2014.
A special liaison office in Washington is coordinating the efforts of the Israel's air force and defence and aerospace industries to gain more influence on the final configuration of the F-35s that Israel will purchase.
Despite the fact that the Israeli defence industries are not fully integrated into the programme, some of them are already working on dedicated systems for the F-35.
Israel Military Industries is developing internally carried, high-impact bombs for the F-35. The Israeli air force wants to increase the fighter's operational radius by adding specially designed external fuel tanks, and Israel Aerospace Industries and Cyclone Aviation are already designing the tanks. Cyclone offers tanks that will be carried on the wing hardpoints, and IAI is offering specially designed conformal tanks.
According to Israeli sources, the request for proposals that will be issued in 2009 will include a formal request to instal Israeli developed systems in the F-35. "We don't expect any objections to installing Israeli weapon systems on the air force's F-35s," one of the sources said in June. "But we may encounter problems when we express our wish to install electronic warfare systems on the aircraft."
In February 2002, Israel joined the JSF program as a security co-operation programme participant. This relatively low status gave the country's air force limited access to some of the programme's data, but allowed it no influence in the design process. Even Israel's SCP role was suspended for several months in 2005 because of an unrelated dispute between the Israeli and US governments over export control security.
Additional reporting by Emma Kelly, Pino Modola and Arie Egozi contributed to this article