(Reuters) – WashingtonThe United States Department of Defense and Lockheed Martin Corp. (NYSE: LMT) announced on Monday that they will collaborate to build approximately 375 F-35 fighter jets over the next three years.This comes as people expect the price of the most common version of the plane to go up because of inflation and slower production.
The Pentagon’s top weapons buyer, William LaPlante, said, “We are happy to announce that the Department and Lockheed Martin have reached a handshake agreement for the next lot of 375 F-35 aircraft.”
Reuters said earlier on Monday that the deal, which is worth about $30 billion, was almost done.
The aviation industry came together for the return of the Farnborough Airshow. They wanted to show that they were confident after COVID-19, even though the only records that are likely to be broken at the event in southeastern England will be for how hot it is.
The “handshake” deal is just a starting point for finalising the pricing and awarding of the contract, which is likely to take weeks or even months. So it’s still hard to say what the deal will be worth in the end and how much each type of jet will cost.
The F-35A, which takes off and lands on runways, is the most common type.
When the first one of this type came off the assembly line in 2007, it cost $221 million. Since then, the number of fighters made and the knowledge of how to make them have gone up. This has helped the price of the stealthy fifth-generation fighter go down to $79 million each as it has sold more.
The Pentagon said that the final number of planes in this deal could change if “the U.S. Congress makes changes to the budget for Fiscal Year 2023 or if international partners place orders.”
Lockheed said in a statement that “the F-35 enterprise was able to achieve a cost per jet lower than record-breaking inflation trends” even though COVID-19 was still having an effect and the number of F-35s was going down.
Last week, data from the U.S. showed that inflation jumped to 9.1% on an annual basis in June.
During the pandemic, Lockheed started to warn that the price of the jet might go up if economies of scale fell and supply chains broke down.
In 2019, the Pentagon signed a three-year “block buy” for 478 F-35 fighter jets. This meant that Lockheed could buy larger quantities of parts and save about 8%, or $34 billion, compared to negotiating annual contracts.
In recent jet fighter competitions, the F-35 has won in Finland, Switzerland, and Germany, among other places. Greece and the Czech Republic are both possible customers.
U.S. Air Force Lt. Gen. Mike Schmidt, Program Executive Officer at the F-35 Joint Program Office, said, “The F-35 is one of the most deadly, interoperable, and scalable capabilities in the DoD inventory.”
