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Oil price, weak currency challenge Norwegian F-35 buy

The low price of oil and a weak currency have led to speculation Norway is questioning its purchase of the costly Lockheed Martin F-35 Joint Strike Fighter, the first example of which was handed over to Oslo in September 2015.

A 52-aircraft requirement for the type, to replace the Royal Norwegian Air Force’s 56 Lockheed F-16A/Bs was seemingly a done deal for Norway last October, as defence chief Adm Haakon Bruun-Hanssen revealed a strategic defence review that committed to the full acquisition. This was followed by a proposed 9.8% real-term defence budget increase for 2016, which would see a near doubling of funding for the conventional take-off and landing F-35A, plus an authorisation request for six more.

But local news sources are now claiming the continued low selling price of oil – a significant income for Norway – has laid pressure on spending, and a weak Krone versus the US dollar has made the price of the already expensive aircraft seem even higher.

The current exchange rate is only $0.15 to every NKr1. Lockheed says the cost of the aircraft is being driven down, with an F-35A purchased in 2018 – that today costs $98 million – and delivered in 2020 costing some $85 million (including its Pratt & Whitney F135 engine), which is the equivalent of $75 million today.

P&W gives the value of 48 engines under the Lot 8 production contract – the most recent where figures are available - as $1.05 billion. However, the manufacturer stresses that the unit cost of each Lot 8 F135 is less than $22 million, although for competitive reasons declines to give an exact figure.

Engines produced under the recently agreed Lot 9 and 10 contracts will show a further unit cost reduction, falling by 3.4% between Lots 8 and 10.

The F-35 aircraft acquisition, alongside associated infrastructure – namely the development of its new base at Ørland Main Air Station – was offered an allocation of NKr8.6 billion ($1.05 billion) in the proposed 2016 budget, from the total NKr49 billion (a rise of NKr4.29 billion from 2015 in real terms).

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James Drew/Flightglobal

Bruun-Hanssen was confident in the F-35 programme when he presented the defence review in October, saying that starting operations with the type was a top consideration: "We remain dependent on the timely introduction of new capabilities into our armed forces, such as the F-35,” he said.

“Only by completing the acquisition of 52 combat aircraft with the [Kongsberg] Joint Strike Missile will we be able to provide the full spectrum of capabilities that we need to address our future security challenges.”

Since speculation around the plan began, Bruun-Hanssen has continued to back the 52-aircraft order, reportedly saying cutting numbers is the “last thing” he wants.

The defence review was formulated to help inform a new long-term plan for the Norwegian armed forces that is expected to be released this year. This will offer investment plans for the next 10 years, plus guidelines for the following four.

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