Pentagon reduces withholding on F-35 payments, citing Lockheed’s progress on TR-3 development

The Pentagon has reduced a recurring financial penalty against military airframer Lockheed Martin, citing progress on delivering a much-delayed upgrade to the F-35 stealth fighter.

The Joint Program Office (JPO) that oversees F-35 purchases will now withhold approximately $3.8 million per aircraft, a reduction from the earlier penalty of around $5 million per jet.

“Lockheed Martin has satisfied criteria to reduce the original withhold by approximately $1.2 million for each aircraft,” the JPO told FlightGlobal on 28 January.

The withheld funds will eventually be repaid to Lockheed once the manufacturer completes flight certification of the latest configuration of onboard avionics and software, collectively known as Technical Refresh 3 (TR-3).

During a 28 January earnings call, Lockheed chief executive James Taiclet said the company continues progressing toward full certification of the new package that offers increased onboard data storage and 5G-equivalent processing speeds.

“We completed qualification testing on a set of key TR-3 capabilities in 2024,” Taiclet said. “We’re making solid progress on system performance and remaining TR-3 deliverables.”

Lockheed has struggled for two years to certify the new configuration, which provides extra computing power to enable F-35s to carry improved sensors, better long-range precision weapons and more-powerful communications equipment.

Unexpected complications with the airworthiness evaluations were compounded by Lockheed’s decision to start producing TR-3-standard F-35s before achieving flight certification. This led the Pentagon to stop accepting new-build aircraft for one year, with deliveries finally resuming last July.

The JPO manages F-35 acquisitions for all 20 worldwide customers, meaning the hiatus had a massive ripple effect on the USA’s network of allies and military partners. Part of the resumption agreement included the Pentagon withholding a portion of payment for each aircraft until the full TR-3 capability is certificated.

Notably, older TR-2 F-35s are still operating around the world, notching a number of significant milestones in 2024. The carrier-capable F-35C recorded its first-ever combat mission over Yemen, while elsewhere in the Middle East Israel’s F-35Is penetrated Iranian air defences without taking any losses.

F-35As from the US Air Force also logged the first roadway landing by a US-operated fifth-generation fighter in Europe.

Newer TR-3-standard F-35s are currently cleared for what Lockheed and the Pentagon describe as “combat training”, but not yet for full frontline service.

“We expect to release additional capabilities this year, with further upgrades to follow,” Taiclet says, without revealing specifics.

Lockheed delivered 110 F-35s in 2024, far fewer than its annual production capacity of 156 aircraft, but a slight improvement over the 2023 figure of just 98. Of the 110 delivered in 2024, 62 were turned over in the fourth-quarter alone.

The Pentagon resumed acceptance of new F-35s in July, partway into the third quarter. The 2024 deliveries included a mix of newly built jets and parked aircraft that were assembled during the delivery pause. 

Taiclet expects the delivery figure for 2025 will fall between 170 and 190 jets, as Lockheed works through a stockpile accrued during the year-long turnover pause, during which the company continued assembling F-35s at the full-rate.

“We continue to expect deliveries will exceed the production rate over the next few years,” he says.

The company holds a backlog of 408 F-35s, including the latest Lot 18 tranche, terms for which Taiclet says Lockheed and the JPO agreed to in December.

Since the programme’s inception, Lockheed has delivered more than 1,100 F-35s of all three variants to customers globally.