Lockheed signs pact with Tata to make F-16 planes in India

Xavier Trudeau
Juin 19, 2017

The deal includes all three variations of the sophisticated F-35 Lightning II jet, a Lockheed spokesman said Monday.

The multi-year deal for the fighters would consist of three tranches over fiscal years 2018-2020. Those nations included Australia, Denmark, Israel, Italy, Japan, the Netherlands, Norway, Turkey, South Korea, Britain and the United States.

Customer nations are expected to increase their purchase to up to 150 F-35s in the following fiscal years at an average price of $85 million per jet in fiscal 2019 and less than $80 million per unit in fiscal 2020, according to the people familiar with the negotiations. If the projections prove accurate, it would be the lowest price ever paid for the aircraft.

The F-35 has been widely criticized for being too expensive, including by U.S. President Donald Trump and other U.S. officials who have criticized the Pentagon's most expensive program for delays and cost overruns.

Lockheed Martin (NYSE: LMT) is in talks with the US and 10 other countries over a potential contract worth at least $37 billion for the manufacturer to deliver a total of 440 F-35 fighter aircraft, Reuters reported Sunday. They have been working to reduce the cost of the jets through streamlining the supply chain and purchasing materials in bulk.

One of the sources said revised estimates show the Defense Department expects to allocate $379 billion in funds to build and procure 2,443 F-35s until 2039. "If it gets done, it would be a plus for Lockheed, allowing for better long-term production management", said Robert Stallard, an analyst at Vertical Research.

In February, the Pentagon agreed to a deal for a tenth batch of fighter aircraft and to pay below $95 million per jet for the first time, compared with $102 million in the previous purchase.

The F-35 business accounts for about 37 percent of Lockheed's total revenue. The company's market value subsequently fell by around $4 billion.

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