March 24, 2014

South Korea to buy 40 F-35 fighter jets from Lockheed Martin

The stealth fighter currently costs $100 million per plane but the cost is expected to drop to about $85 million by 2019, or $75 million in today’s dollars, as production ramps up.

South Korea, which is boosting its air defenses amid ongoing tensions in the Pacific, formally decided Monday to buy 40 F-35 stealth fighter jets for $6.7 billion from Lockheed Martin.

The commitment by South Korea marks a “big day” for the F-35 program in Fort Worth, said Steve O’Bryan, Lockheed’s vice president for F-35 business development.

“This is a two-year process that South Korea held, an open competition where they looked at capabilities, their defense needs, the price as well as the timing and they chose the F-35. It was another open, transparent process that really verified the capabilities of the F-35 and what we are doing in Fort Worth,” O’Bryan said.

“All of these jets will be built and delivered off the line here at our facilities. Our suppliers, a lot of them in Texas and Dallas-Fort Worth, will build all those parts,” he said.

The F-35 currently costs $100 million per plane but the price is expected to drop to about $85 million in 2019, or about $75 million in today’s dollars, Lt. Gen. Chris Bogdan, F-35 program manager at the Department of Defense, said last week.

The South Korean purchase will help drive a build-up in production on the more than one-mile-long F-35 assembly line. About 2,000 people currently work on the line at the company’s west Fort Worth facility that employs a total of 12,500.

The 100th F-35 rolled off the line in December and 93 aircraft have now been delivered to the Department of Defense. Lockheed expects to build 35 this year, up from 13 in 2011.

Current capacity is 60 F-35s a year and an additional 2,417 workers would be needed to ramp up to 150 aircraft by 2018-2019, O’Bryan said.

With commitments for over 3,100 planes, including 2,443 for the U.S. military, the F-35 program is going to be an economic force for the next 25 years and beyond, O’Bryan said.

“The key about the F-35 and the workforce is that we have a production run that goes all the way out to 2039,” he said.

To put that in perspective, Lockheed’s enormously successful F-16 program, which started in the 1970s, was originally for 900 planes for four countries. Today, more than 4,500 F-16s have been built and are flown by 27 countries, said Mike Rein, director of F-35 communications.

South Korea is the 10th country to make a firm commitment to buy the F-35, joining the United States, Britain, Australia, Norway, Italy, the Netherlands, Japan, Israel and Turkey.

Those commitments reflect a “growing realization that the F-35 is going to be the same mainstay the F-16 has been,” O’Bryan said.

Three other countries are also evaluating the F-35.

Canada and Denmark, which helped fund development of the stealth fighter, are still deciding whether to buy F-35s or other fighters. Singapore has also expressed interest in the planes, O’Bryan said.

The South Korean announcement provided some good news for Lockheed after a series of critical reports on challenges with software development for the fighter, the emergence of additional bulkhead cracks during long-term durability testing, and news that Italy could further scale back its plans to buy 90 F-35s.

Italy had already cut its planned order by 30 percent two years ago.

The separate branches of the U.S. military are ordering three variants of the F-35. The fighter will replace the A-10 and F-16 for the U.S. Air Force, the F/A-18 for the U.S. Navy, the F/A-18 and AV-8B Harrier for the U.S. Marine Corps, and a variety of fighter aircraft for at least 11 other countries.

South Korea was the eighth-largest importer of major weapons in the world between 2009 and 2013, with 80 percent of the imports supplied from the U.S., according to the Stockholm International Peace Research Institute, a think tank.

The latest purchase is a tribute to Lockheed’s Fort Worth workforce, O’Bryan said.

“This is independent verification and another statement of what they have done in designing, sustaining and producing a fifth-generation airplane. Another of the world’s great air forces has again selected the F-35,” O’Bryan said.

The report includes material from Bloomberg News.

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