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The U.S. Department of Defense has a “handshake” agreement with Lockheed Martin to cut 8.8% from the price of its latest order of F-35A fighter jet, shaving a year from the time frame in which each aircraft will cost less than $80 million, a Pentagon official said on Monday.

The Pentagon said over three years the agreement will be worth $34 billion for 478 F-35 fighter jets. It is preliminary and a final deal is expected to be sealed in August for the 12th batch of jets, one of the most expensive aircraft ever produced.

The preliminary agreement details the first year, and lays out agreed upon options for two additional years. The options are there because official purchases cannot be made until the U.S. Congress approves an annual budget for those years.

This year’s agreement will lower the cost of each F-35A, the most common version of the aircraft, to $81.35 million, Under Secretary of Defense Ellen Lord said, down from $89.2 million under a deal inked in August 2018.

Under the options covering the second and third years of the purchase, the price of each jet will drop below $80 million, Lord said. In those later years production would be around 160 jets per year.

The F-35 program has long aimed at growing the fleet to more than 3,000 jets and bringing the unit price of the F-35A below $80 million through efficiencies gained by ordering larger quantifies.

“I am proud to state that this agreement has achieved an estimated 8.8% savings from Lot 11 to Lot 12 F-35A’s, and an estimated average of 15%” reduction across all variants from Lot 11 to Lot 14, Lord said in the statement. That savings exceeded expectations in a RAND Corp study. Read more

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