South Korea Order Would Drive F-35 Per-plane Cost Lower

By Andrea Shalal-Esa/Reuters
November 27, 2013
Credit: Lockheed Martin

South Korea’s plan to buy 40 Lockheed Martin Corp (LMT.N) F-35 fighter jets will save the U.S. military about $2 billion by driving down the per-plane price of the new plane, and could create up to 10,000 U.S. jobs, according to sources familiar with the program.

Seoul’s decision will also help to offset any move by the U.S. Air Force and Navy to deal with mandatory budget cuts by postponing orders for up to 54 jets over the next five years, according to analysts. Seoul’s decision must still be approved by a committee chaired by its defense minister.

Loren Thompson, chief operating officer of the Virginia-based Lexington Institute, said the South Korean news would provide a significant boost to the F-35 program.

“The sale of F-35s to Japan and South Korea - America’s two leading industrial allies in northeast Asia means the F-35 is now becoming the gold standard for tactical aircraft across the western Pacific,” he said.

He said Singapore would likely follow suit with its own orders, followed by Malaysia and possibly New Zealand.

Top U.S. military officials have vowed to protect funding for the $392 billion F-35 program, one of their top priorities, but they acknowledge some U.S. orders may have to be postponed if Congress fails to reverse additional defense budget cuts.

In a worst-case scenario, the Air Force says it would postpone orders for 24 F-35s over the next five years, while the Navy has said it could defer as many as 30 jet orders.

Given ongoing uncertainty about the U.S. budget, military officials say no final decisions have been made, but they expect a slight drop in the planned ramp up in F-35 production, which had been slated to more than double to around 70 planes in a ninth production batch from 30 a year now.

The F-35 program, the Pentagon’s biggest arms program, has seen repeated delays and a 70 percent increase in costs over initial estimates. The fact foreign buyers are now placing orders for the new warplane underscores growing confidence in the program, U.S. officials say.


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