F-35A Lightning II aircraft receive fuel from a KC-10 Extender from Travis Air Force Base, Calif., on July 13, 2015. Staff Sgt. Madelyn Brown/Air Force
The Price of an F-35 Was Already Falling. Can Trump Drive it Lower?
Analyzing the changing cost of the JSF since the first production orders were placed in 2007.
How much does an F-35 Joint Strike Fighter cost? It hasn’t always been easy to tell, thanks to a complicated program that began production before development wrapped up. But now that a new F-35A can fairly accurately be priced at just north of $100 million, President Trump has a new answer: too much.
In the wake of Trump’s Dec. 22 tweet asking rival Boeing to “price-out a comparable” F/A-18 Super Hornet, Defense One went back to figure out just how much the price of Lockheed Martin’s fifth-generation combat jet has come down, and what the prospects might be for further reductions. The prices are particularly relevant now: the Pentagon and Lockheed are expected to soon announce an agreement to buy a new lot of 90 jets.
Using data from Pentagon budget documents, the JSF program office, and Lockheed Martin, Defense One analyzed the price of the F-35A, the variant that will be flown by the U.S. Air Force and most allies that are buying the jet. Of the 2,443 planes the Pentagon plans to buy, 1,763 are F-35As.
The goal was to determine the “flyaway” cost of an F-35A — that is, the amount it cost to build a single unarmed plane at any given point, not including the cost of designing and developing the jet. So the tallies include only procurement costs, not development ones, and do not include aircraft built purely for testing.
Bottom line: the price of an F-35A has come down dramatically since the first lot was ordered in 2007 at an average cost of $241 million per plane. In today’s dollars, that’s $279 million each. Almost without exception, each of the succeeding eight orders included more aircraft at a lower average cost.
The curve began to level out after the project was restructured in 2011. The most recent order, Lot 9, was placed on Nov. 2, and includes 42 F-35As at $102 million apiece. Compared to Lot 1, that’s an inflation-adjusted price drop of 64 percent.
Lockheed executives expect the cost of the F-35A to drop below $100 million in the next lot, whose contract details they are currently negotiating with the Pentagon.
“We’re very close to a deal that would allow us to close [the 10th production contract] in the near term,” Marillyn Hewson, Lockheed’s chairman, CEO and president, said Tuesday during the company’s quarterly earning call.
Other Variants
The price tags of the other two versions of the F-35 are more difficult to figure out. That’s because the Navy did not start separating the cost of the Marine Corps F-35B and the Navy F-35C in its budget documents until 2011, several years after production began.
Let’s look at the cost of the F-35B, which can take off from short runways on land or ships and land vertically. The Marine Corps and U.K. Royal Air Force have purchased the jet; Italy plans to buy them down the road.
Pentagon budget documents show F-35Bs ordered in 2011 cost $172.9 million apiece ($190 million in today’s dollars). The ones ordered last year cost $131.6 million, an inflation-adjusted drop of more than 30 percent.
Finally, the F-35C — the version exclusively flown by U.S. Navy carrier squadrons — cost $177.8 million in 2011 ($196 million in today’s dollars) and now costs $132.2 million, an inflation-adjusted drop of 32 percent. But the price of the F-35C actually went up from $129 million in 2015. The F-35 program office said that was because the Navy cut its 2016 buy in half, ordering two instead of four planes.
To date, Lockheed has received orders for 373 F-35s. By the end of 2016, the company had delivered 200 of the jets, including 46 last year. Another 66 are slated for delivery in 2017, a year Hewson would mark “another inflection point” for the project.
The CEO said the next batch of F-35A jets will cost less than $100 million per copy, meaning the price of the jet will have come down 60 percent since the first production JSF rolled off the line in Fort Worth, Texas. (Hewson’s price-drop percentage did not adjust for inflation.)
“This demonstrates a learning curve as efficient as any achieved on any modern tactical aircraft,” she said.
She also said the company has beat the government’s pricing expectations for F-35A eight years in a row, “showing our ongoing commitment to producing this aircraft with increasing affordability.”
As the U.S. and its allies buy more planes, the price tag is expected to continue falling each year. By 2019, Lockheed expects the F-35 to cost $85 million.
“We believe this will result in the best combination of capability and price of any aircraft ever offered while at the same time growing valuable job opportunities for our American workforce,” Hewson said.
Over the past five to six years, the F-35 program “has performed pretty close to the [budget] estimates,” said Jamie Morin, who ran the Pentagon’s Cost Assessment and Program Evaluation office from 2014 until last week.
Now the Pentagon must determine how many planes it will buy and how it will operate them in order to get better long-term cost projections for the program, Morin said in a Jan. 18 interview.
“The services are working through those issues,” he said. “I think you’re going to see a lot of progress and learning on that program in just the next couple of years as the operators start getting their hands on it.”
Enter Trump
Since Donald Trump started calling out the high price of the F-35 in December, he has talked to Hewson several times.
“He is really focused on making sure that the cost comes down on the program,” the Lockheed CEO said. “It’s not about slashing our profit, it’s not about our margins when we have those discussions; it’s about how do we get the cost of the aircraft down today and in the future.”
“I have welcomed the opportunity to talk to him because it gives me an opportunity to share with him what we have been doing in terms of bringing the cost down,” she said.
In recent years, the company has invested in production and manufacturing improvements with the aim of cutting the F-35’s price tag. Pentagon officials have said they would like to buy the plane in bulk, signing a deal for up to 450 aircraft over three years, as a way to drive down the cost. Sen. John McCain, R-Ariz., chairman of the Senate Armed Services Committee, has several times expressed his disapproval of the idea, citing the F-35 program’s troubled history.
On Tuesday, Hewson alluded to the possibility of a bulk buy, sometimes called a multiyear deal.
“I’ve also had the opportunity to share with [Trump] things that the Department of Defense can do and how they might buy the aircraft differently in the future that would help continue to drive the cost down,” Hewson said. “He welcomed that discussion.”
Another looming bill for the program is retrofitting existing jets to a finalized configuration that will add more firepower. The Government Accountability Office estimates the cost at nearly $3 billion over the next six years.
“In the meantime, we will continue on the current negotiations...to continue to drive the cost down,” Hewson said.