Lockheed Martin F-35 Gains Production Contract Momentum

The F-35 program, which faced significant challenges recently, is showing signs of recovery. After a period of delivery delays, including TR-3 software issues, which resulted in “training-only” jets and subsequent Pentagon funding holds, recent agreements indicate a potential turning point for the fifth-generation fighter. Contract frameworks are now underway for upcoming production lots.

A week before Thanksgiving, Lockheed Martin earned a nearly $870 million contract for long lead items and support for Lot 20 F-35 production. Long lead contracts acquire materials that need early funding commitments to maintain desired production schedules.

Under the agreement, work will occur in several states across the U.S. and at the F-35 final assembly facility in Cameri, Italy. The contract also indicates Lot 20 production will support various customers, including the U.S. Air Force, Navy, and Marine Corps, international F-35 partners, and undisclosed foreign purchasers.

A day before the Lot 20 long lead contract announcement, the F-35 Joint Program Office and Lockheed Martin reportedly reached a “handshake deal” for the next production lots, 18 and 19. A firm contract announcement that could occur by the end of 2024 may detail future unit cost and production figures.

Previous production lots placed a flyaway cost for a single F-35A between $82 million and $83 million per fighter. Future individual aircraft costs will almost certainly exceed that figure due to inflation and a potential shrinking of DoD F-35 fleet goals.

In April, the Government Accountability Office published a report citing a projected DoD fleet sustainment cost increase of nearly half a trillion dollars from 2018 to 2023. Over the past several years, F-35 readiness rates and planned use have fallen, potentially pushing the DoD to curb future program spending.

Nonetheless, Lockheed Martin remains optimistic about its product. After Lot 18 funding dried up this year, the airframer committed its own funds to maintain production and protect the integrity of its supply chain.

Some $600 million lost from F-35 delays during 2024 are buoyed by a successful year for Lockheed Martin on the foreign market. The manufacturer secured finalized deals for new-build F-35 aircraft from Israel, Greece, and Romania. Portugal, Singapore, South Korea, and the Czech Republic have also announced intentions to sign or interest in pursuing F-35 orders. Accordingly, over half of the Lot 20 long lead contract will be funded by Foreign Military Sales (FMS) buyers.

With the Lot 20 long lead contract in hand and the Lots 18 and 19 agreements on the near horizon, at least on paper, Lockheed Martin could be turning the corner on its F-35 setbacks. Company officials maintain goals to build 156 F-35s annually and deliver 540 fighters over the next three years.