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Lockheed finalises deal for 90 F-35s, claims $728M savings

Following a year of tense negotiations, Lockheed Martin secured its low-rate initial production lot 10 contract to deliver 90 F-35 fighter jets this week.

The F-35 Joint Programme Office touted $728 million in savings on lot 10 compared to lot 9, which exceeds by $128 million the cost reduction estimated by president Donald Trump earlier this week.

According to the JPO’s math, the F-35A’s price decreased by 7.3% to $94.6 million, including the Pratt & Whitney F135 engine. The B variant came down to $122.8 million, a 6.7% decrease, and the C decreased by 7.9% to $121.8 million. The contract for 90 aircraft includes 55 jets for the US services and 35 for international partners and foreign military sales customers. Lockheed will build 44 F-35As for the US Air Force, nine F-35Bs for the US Marine Corps and two F-35Cs for the US Navy.

Adding up the price per unit of all three variants amounts to a total value of $8.9 billion for 90 airframes and engines purchased under Lot 10.

But the JPO did not reveal the total price of the contract in a 3 February news release, and the numbers available conflicts with the per-unit prices.

The office estimates the total contract value for just the air vehicles at $8.2 billion. Pratt & Whitney previously received a $1.5 billion contract in July for F135 engine procurement for lot 10 and a $157 million contract the previous year for long-lead components. That adds up to $9.8 billion for airframes and engines in Lot 10, or about $950 million more than the $8.9 billion value available in the JPO's news release. The JPO could not immediately explain the discrepancy.

“Lot 10 reflects a $728 million reduction in the total price when compared to Lot 9 and marks the first time the price for an F-35A is below $100 million,” the JPO states. “The bottom line is unit prices, including jet, engine and fee for all three variants went down.”

White House press spokesman Sean Spicer cited a $455 million savings, which the JPO attributed to the US aircraft. The remaining $273 million savings comes from sales to international partners and foreign military sales customers, a JPO spokesman says. Earlier this week, Trump claimed his pressure on Lockheed would lower the price for lot 10 aircraft by $600 million.

Between larger order quantities and initiatives such as the Blueprint for Affordability, Lockheed was already targeting an $80-85 million price for each F-35A by Fiscal 2019. Lockheed mentioned those efforts in its own 3 February press release, but also showered the president with praise.

“President Trump’s personal involvement in the F-35 program accelerated the negotiations and sharpened our focus on driving down the price,” Lockheed states. “The agreement was reached in a matter of weeks and represents significant savings over previous contracts.”

While Lockheed may be bowing to Trump, the price is tracking with previous JPO estimates. During a December roundtable, F-35 programme executive officer Lt Gen Chris Bogdan estimated the price of all variants in LRIP 10 would decrease by 6-7%.

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