F-35 Fighter: Lockheed Martin Sky High From Landing $23 Billion Pentagon Deal

November 15, 2018, 10:51 AM UTC

Aviation giant Lockheed Martin has won a revised $22.7 billion contract with the U.S. Department of Defense for the twelfth batch of F-35 jets. This is the first contract for the so-called Lightning II Joint Strike Fighter at full production rates.

The contract covers 106 jets for the U.S. armed forces, 60 for foreign production partners, and 89 for other foreign customers, totaling 255 jets of the 3,000-or-so that Lockheed expects to someday sell.

Defense buys its jets in batches, as manufacturers build up their supply chain reliability. This usually means that per-unit costs drop, and other buyers can jump into the market as the plane’s capabilities (and failings) become clearer. That helps manufacturers achieve economies of scale. The per-unit cost for an F-35A, the cheapest variant, was around $89 million in the low rate initial production Lot 11 contract covering 141 aircraft, issued in September, Reuters reported.

A revision to the Lot 11 contract, included new provisions such as penalties for missing monthly production targets and committing production errors.

The next batch of F-35As are supposed to cost around $83 million per unit, and Lockheed says it is aiming for future unit costs to drop to $80 million per aircraft.

The F-35 program has attracted U.S. government criticism for its low initial production quality and high prices.