Pentagon, Lockheed reach agreement on F-35 contract for 90 jets

WASHINGTON – The Pentagon and Lockheed Martin have come to an agreement on the tenth lot of F-35 joint strike fighters, with the per-plane cost on the most common F-35A model dropping below $100 million for the first time.

The announcement was made by White House Press Secretary Sean Spicer, breaking the tradition of announcing Pentagon contracts after the market has closed. Lockheed’s stock received a modest bump on the news, up $1.91 from the opening bell as of publication.

Since his election, President Trump has focused an unusual amount of attention on the F-35, which included calling for a competition between the jet and the F/A-18 Super Hornet via Twitter. Secretary of Defense Jim Mattis followed through on that idea Jan. 27, ordering a review of the F-35C model, which will be used by the Navy, versus the Super Hornet.
Trump on Monday claimed that he had gotten the price of the F-35 down by $600 million, a drop analysts were quick to point out was in the works before his election. But in what may be a savvy political move, Lockheed has not been shy about embracing Trump’s claim, noting in a statement that “President Trump’s personal involvement in the F-35 program accelerated the negotiations and sharpened our focus on driving down the price.”

Despite the widespread agreement from the aerospace sector that the costs were coming down regardless of Trump's intervention, Spicer directly gave credit to Trump for the deal, saying, "Through the president's intervention, a total of 90 planes -- for a lot of 90 planes, 55 were purchased for the U.S. military that added up to a total of $455 million savings for U.S. taxpayers from the previous lot with an average cost reduction of 7.5 percent. Another big win that the president has delivered on for U.S. taxpayers."

The contract, known as Low Rate-Initial Production lot 10 (LRIP 10), covers production for 90 of the stealth fighters. The Pentagon says the cost per plane represents more than a 60 percent price decrease for the conventional-takeoff-and-landing F-35A variant since the first LRIP contract.

For LRIP 10, the per-plane price of an F-35A model sits at $94.6 million (7.3% reduction from LRIP 9), an F-35B jump-jet model used by the U.S. Marine Corps sits at $122.8 million (6.7% reduction from LRIP 9), and an F-35C carrier version is at $121.8 million (7.9% reduction from LRIP 9).

As befits the largest overall customer for the stealth fighter, the U.S. Air Force makes up the majority of the procurement in this lot, but it also features an increasing number of international customers. Deliveries from this lot will begin in early 2018. Overall, the lot is made up of:

•44 F-35A for the U.S. Air Force
•9 F-35B for the U.S. Marine Corps
•2 F-35C for the U.S. Navy
•3 F-35B for UK
•6 F-35A for Norway
•8 F-35A for Australia
•2 F-35A for Turkey
•4 F-35A for Japan
•6 F-35A for Israel
•6 F-35A for South Korea
In total, the Lot 10 contract represents a $728 million reduction when compared to Lot 9. If Trump’s influence can be felt anywhere, it may be in the speed of the contract negotiation – Lockheed fought hard against the Pentagon’s cost goals in LRIP 9, to the point that the Pentagon unilaterally forced a contract on the company.
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