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​Lockheed remains optimistic on F-35 buys

Despite a recent report predicting reduced acquisitions and rising costs for the F-35, prime contractor Lockheed Martin believes there are still opportunities to grow the orderbook for theJoint Strike Fighter (JSF).

During an 18 July earnings call, Lockheed chief executive Marillyn Hewson and chief financial officer Bruce Tanner indicated that cost and procurement details in a recently released Selected Acquisition Report (SAR) summary were not yet set in stone.

Company officials have not yet seen the SAR, submitted to Congress last week, which showed overall inflation-adjusted costs could rise from $379 billion to $406.5 billion as a result of lower F-35 procurement. The biggest customer for the JSF is the US Air Force, which could lower its acquisition rate from 80 A-model aircraft per year to 60, according to the SAR.

“I know that in my discussions with the air force, there's a desire to buy as many as they can, as quickly as they can,” Hewson says. “So, I haven't got an official position from them that they’ve reduced their procurement profile. That just happens to be what's in that selected acquisition report.”

There’s opportunity to change the order quantities as budget deliberations continue on Capitol Hill and the services request additional F-35s from lawmakers, Hewson adds: “We think it's still in – we’ll still see potentially some upside on it.”

At the same time, Lockheed is continuing discussions with the F-35 Joint Programme Office on a potential block buy, says Tanner. Lockheed could deliver around 450 aircraft over a three-year low-rate initial production (LRIP) period, or about 150 aircraft per year across LRIP lots 12, 13 and 14. The USAF would account for about 48 of those 150 jets each fiscal year, Tanner adds.

Earlier this year, Tanner warned that Lockheed could not reach its $85 million-per-unit price target without a block buy. The manufacturer is not allowed to use a multi-year procurement authority since the programme will remain in the LRIP phase through FY19, so the company must receive approval for a block buy to find discounts.

The Department of Defense recently awarded Lockheed an undefinitised contract action for LRIP 11 while final contract negotiations continue.

“As Marillyn said, [there are] a lot of opportunities to change quantities between now and then,” Tanner says. “And it will be interesting, once we do see the full SAR, how much of that was budgetarily driven, with the potential to change that budget that far out, versus, I’ll say, a quantity difference.”

Lockheed plans to deliver 66 F-35s by the end of the year, with 61 from its main production facility in Fort Worth, Texas, and the remainder from final assembly and check-out facilities in Cameri, Italy, and Nagoya, Japan. The five international jets have not yet been delivered but have rolled out, Tanner says.

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