July 30, 2013
Credit: Lockheed Martin
Lockheed Martin Corp and the Pentagon have reached agreement on orders for the next two batches of F-35 fighter jets, a deal worth over $7 billion, a person briefed on the discussions told Reuters on Monday.
The deal covers 71 of the radar-evading planes, with 36 jets to be purchased in the sixth production lot, and 35 in the seventh. The total includes 60 F-35s for the U.S. military, and 11 for Australia, Italy, Turkey and Britain.
The agreement is good news for Lockheed, which generates about 15 percent of its revenues from the F-35 program, and its key suppliers: Northrop Grumman Corp and Britain’s BAE Systems Plc. At a projected procurement and development cost of $392 billion, it is the Pentagon’s biggest arms program.
The agreement was negotiated without factoring across-the-board budget cuts imposed on the Pentagon in March, said the source, who was not authorized to speak publicly.
Lockheed officials last week said the Pentagon was trying to minimize the impact of the budget cuts on the output quantities in the seventh batch of low-rate production jets, which is funded under the fiscal 2013 budget.
A second source familiar with the negotiations said Pentagon acquisition chief Frank Kendall had approved the broad outlines of the deal, which includes further reductions in the cost of the planes from the previous contract.
Neither source had details on the cost per plane.
The government negotiates separately with Pratt & Whitney, a unit of United Technologies Corp, for the plane’s engines. Those talks are also expected to wrap up soon.
Lockheed is building three models of the F-35 for the U.S. military and eight international partner countries: Britain, Australia, Canada, Norway, Turkey, Italy, Denmark and the Netherlands. Israel and Japan have also ordered the jet.