Lockheed Martin and the F-35 Joint Program Office have reached a handshake deal on a contract for the next two production lots of the multiservice, multinational stealth fighter. The agreement, which has not yet been finalized, comes about a year later than expected, a delay which required the company to expend significant out-of-pocket funds to keep production going.
Notifications of the agreement on Lots 18 and 19 were sent to Congress on Nov. 21, but, uncharacteristically, the JPO did not publicly disclose the per-aircraft prices that will be paid for each of the three variants of the fighter. Although most previous contracts covered three lots, Lot 20 will be negotiated separately, because it could be the first under a long-planned multiyear contract.
“We have reached an initial agreement as part of ongoing negotiations for the Lot 18/19 Air Vehicle Production Contract,” the JPO and Lockheed said in joint response to a query from Air & Space Forces Magazine. “We will share the aircraft quantity and cost figures when a final agreement is signed.”
Sources said the agreement will likely cover about 300 aircraft.
Lots 15-17 came in at about $82.5 million for the Air Force F-35A version, with the B and C variants costing more. Inflation is up about 8 percent since the 2022 deal, suggesting a new price could boost the per-jet cost by $6.6 million, to a total approaching $90 million.
Long-lead funding for Lot 18 ran out in the third quarter of the year, and Lockheed, rather than shut production down, has been paying for production with its own funds ever since.
On the company’s Oct. 22 earnings call, company chief executive officer Jim Taiclet said continuing production was necessary to avoid serious supply chain disruptions.
The decision to keep producing was “essential for the health of lower-tier suppliers,” Taiclet said. The company incurred expenses of $400 million to continue production in the third quarter, and had to cover “an additional $300 million of impacts across the supply chain,” it said in a press release. Officials warned that if F-35 negotiations dragged into 2025, the company would be late in booking over $1 billion in sales and revenues from 2024.
Complicating and extending negotiations on the Lot 18 and 19 prices was the yearlong hold on F-35 deliveries, which started in late summer 2023 and ended in July 2024. Aircraft were produced with the Tech Refresh 3 upgrade, but the hardware and software package has not been fully developed and tested, preventing the Defense Contract Management Agency from approving deliveries.
The JPO also withheld payments of $7 million per jet from Lockheed during the delivery hold, and the company forfeited some $60 million in award fees.
The delivery hold was lifted in July, when JPO director Lt. Gen. Michael Schmidt was satisfied that the new TR-3 software was sufficiently stable and safe to release the aircraft for delivery and operations.
At peak, an estimated 120 aircraft were stored awaiting delivery. Lockheed recently reported it is managing to deliver about 20 F-35s per month, which includes both stored and newly produced jets. A company spokesperson said a previous estimate that 75-110 F-35s would be delivered in 2024 had been raised to 90-110. Company officials have said they expect to deliver about 156 F-35s per year starting in 2025.
Aircraft now coming off Lockheed’s Fort Worth, Texas, production line now have the Tech Refresh 3 upgrade and will soon start getting some of the more than 80 improvements planned in the Block 4 version of the jet.
Though prices have not yet been officially disclosed, sources said the unit cost of the F-35 under Lots 18 and 19 will be significantly higher, after a steady year-over-year decline. The increase is due to the triple whammy of inflation since the last multi-lot deal, greater complexity and capability inherent in current and future configurations of the jet, and the military services reducing their yearly buys of the F-35.
At the same time, international sales remain strong. Lockheed announced on Nov. 21 that Romania has agreed to buy 32 F-35s, making it the 20th country to select the fighter.