The big industry news of late is that the Department of Defense (DoD) and Lockheed Martin Corporation finalized a $34 billion deal for 458 F-35 fighter aircraft (in Lots 12, 13, and 14 ) that, as detailed in the following Lockheed Martin-provided table, reflects an average unit cost for the F-35A model of less than $80 million and less than $78 million in Lot 14.
Cheers rang out in the Air Force and White House — and Lockheed Martin stock inched up modestly on the week — because the Pentagon’s front-line fighter and Lockheed Martin’s signature program cost will decline more than 12% from the previously advertised (Block 11) price by Lot 14 and will finally — and ahead of schedule – reach a unit cost level worthy of boasting.
As noted here, DoD Acquisition head Ellen Lord said that Lockheed Martin and the F-35 Joint Program Office are “laser-focused” on reducing costs for the aircraft, bringing up quality, and achieving timely deliveries. “We will reach a unit recurring flyaway cost-per-aircraft target of $80 million for a U.S. Air Force F-35A price, by Lot 13 — which is one lot earlier than planned, a significant milestone for the department.”
Lord added that there’s a per-unit cost reduction for each variant of the aircraft that averages around 12.7% when comparing Lot 14 purchases to Lot 11 purchases. “These represent some of the largest achieved savings lot-over-lot for the program.”
Air Force Lt. Gen. Eric T. Fick, the F-35 program executive officer, said those lots include 351 of the F-35A aircraft, which is the standard model used by the Air Force. There are also 86 of the F-35B aircraft, which is the vertical-takeoff model used by the Marine Corps, and 41 of the F-35C aircraft, which are for carrier-based operations.
Shedding light on the basis for the unit cost reduction, General Fick said that the most recent contract award slows production of the F-35 from previous awards, giving a break to contractors involved in the aircraft’s manufacture. The lot 12 purchase of 149 aircraft, for instance, is just slightly higher than the 141 aircraft in Lot 11.
Said General Fick: “With this award we see from a production perspective the most dramatic rate increases in the production line are now behind us. This dramatic production rate increase has proven to be challenging for the supply chain, but the comparatively minor quantity changes across lots 12 through 14 should give it some breathing room as we move forward.”
In a statement, Greg Ulmer, Lockheed’s F-35 VP and GM hailed the 5th generation aircraft’s new sticker price as a result of the DoD-Lockheed Martin partnership and put the new prices in the context of 4th generation acquisition (if not operational) cost. Said Ulmer: “With smart acquisition strategies, strong government-industry partnership and a relentless focus on quality and cost reduction, the F-35 enterprise has successfully reduced procurement costs of the 5th generation F-35 to equal or less than 4th generation legacy aircraft.”
Mr. Ulmer’s comparative focus is not lost on F-35 program observers. Indeed, while a skeptic might assume that the F-35’s price drop was influenced by the introduction of competition when President Trump fired up the F-15X production line, DSJ’s sources say otherwise.
When asked of the nexus between the F-15X orders and the new unit cost figures from Lockheed Martin, a former senior official within the F-35 Joint Program Office told DSJ: “There’s no correlation. The cost reduction initiative was in place long before President Trump took office and it has been successful.”
An aerospace industry executive echoed the sentiment: “Surely Lockheed Martin is responding to the Trump mandates but F-35 pricing is its own stalking horse and not about the price of the 4th generation aircraft.”
Added another: “It’s not about being cheaper to drive off the lot than the F-15 or F-16 or F/A-18. LockMart has been under tremendous pressure to reduce price per unit and price for flight hour. They’ve addressed the first issue of procurement cost. We will see what they do about the later, which may be the real challenge.”