Lockheed Martin Targets $80 Million Price Tag For F-35 By LRIP 14

FARNBOROUGH INTERNATIONAL AIRSHOW--Lockheed Martin [LMT] has reached a “handshake” agreement on the low-rate initial product lot 11 (LRIP 11) contract for the F-35, according to a program update provided by a company executive on Monday at the Farnborough International Air Show.

The company will not confirm specifics of the new deal until the agreement is finalized.

According to Greg Ulmer, vice president and general manager of the F-35 program for Lockheed Martin, a total of 309 F-35s have been delivered to date. Moving forward, the company is focused on continuing to drive the cost of production, operation and sustainment of the aircraft down. There are currently 190 F-35s that are in work in progress (WIP) status, Ulmer said.

The F-35 Joint Strike Fighter. Photo by Lockheed Martin.

The F-35 Joint Strike Fighter. Photo by Lockheed Martin.

“We have reached an agreement with the customer relative to a settlement for LRIP 11,” said Ulmer, adding that Lockheed is “working to definitize the contract.”

Beyond LRIP 11, Lockheed also has LRIP 12, 13 and 14 in a block buy arrangement, and is working on its first multi-year contract with the Pentagon. Between LRIP 1 and LRIP 10, the cost of the F-35 has been reduced by 60%, the aircraft’s program manager said.

By the end of LRIP 14, Lockheed’s goal is to establish an $80 million per plane price tag for the F-35, Ulmer said.

“We understand that for every dollar we invest, for operational and support cost, 47 cents of every dollar has to do with industry, about 13 cents of that dollar has to do with the propulsion system. The remaining 40 percent has to do with the government ‘O’ and ‘S’ cost,” said Ulmer, referring to operations and support.

The F-35 program chief said Lockheed is on a trajectory over the next decade to establish an operational cost for the F-35 that matches that of fourth generation fighter jet.

As Lockheed has focused on driving down cost, the company has found two of the biggest costs it faces are reliability of the aircraft and maintenance. However, that problem has been steadily improving. Between LRIP 8, 9 and 10, military units operating the F-35 are seeing an an aircraft availability rate of 60% on average.

While the cost of the aircraft continues to go down, the production and delivery rate will steadily increase. In 2018, Lockheed will deliver a total of 91 F-35s, which is up from 66 deliveries completed last year. By 2023 the delivery rate will reach 160 per year, Ulmer said. 

So far, more than 650 pilots and 5,800 mechanics have been trained to fly and maintain the F-35 across 15 different bases globally. By the end of 2018, Lockheed will complete its first delivery of the F-35 to Australia. Through the end of 2019, Korea and Turkey will receive their first F-35s.

In the near future, Lockheed will also consider opening competition for various systems and components for the aircraft.

“I think its good business for us to continually look at our supply and should we re-source or compete that material…we want best value, as we produce material we want to make sure that we’re producing material that meets the requirement for the least amount of cost,” said Ulmer.





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