Defence Watch Editor’s Note: There was some relief last week in the F-35 camp, when news came that the Netherlands was committing to the purchase of 37 of the stealth fighters. The plan sets a budget of 4.5 billion euros, or $6 billion, for the aircraft and a further 270 million euros a year for maintenance and operating costs — equivalent to the annual operating costs of the current F-16 fleet, the New York Times has reported.
But some Defence Watch readers noted that Lockheed Martin should not be celebrating too soon. They point out that the order is 48 fewer than the Netherlands had originally planned.
Here is what one individual wrote, looking at the numbers and what that might mean for Canada:
“The numbers are really adding up against Canada’s budget for the F-35. In addition to the Netherlands, Denmark is now holding a competition, Italy has cut its order and Turkey appears to be in a holding pattern.
How does that impact us?
In the 2013 DND F-35 annual update, it states:
Page 10
The Joint Strike Fighter Program is a United States-led multinational cooperative effort to build an advanced combat aircraft equipped to fulfill multiple roles. Planners intend the Joint Strike Fighter Program to run until at least fiscal year 2051/2052 and to produce approximately 3,100 F-35 Lightning II aircraft for
purchase by Joint Strike Fighter partners by 2035.
Then on Page 34:
Specifically, if partner nations delay the timing of their purchases and/or reduce the number of aircraft they purchase up to and during, the period Canada would be purchasing its aircraft, the unit price for Canadian orders may be higher. Given the current fiscal constraints in the post financial crisis environment, the likelihood of this risk is considered higher than last year’s. However, some of the risk is also reduced as more aircraft are produced and the notional Canadian buy period approaches. In addition, the availability of more information due to the maturity of the project has allowed a more precise and refined analysis that looks at the likely aircraft reductions before and during Canada’s potential buy period. As a result, the assessed maximum impact based on the updated analyses is estimated at 250 aircraft, and would result in an increase in the acquisition cost for Canada of approximately $600 million.
Notional Buy Profile (page 34) weighted cost $88.5M per unit.
If you look at the presentation by Lockheed to Australia and Canada in 2011, where they continue to present the rosiest of numbers, you see the following:
2011 – 3,140 F-35s among partner countries
Today:
Netherlands: 37 (-48) + one year later to start (2019 instead of 2018)
Denmark: 0 (-30) – Denmark is now holding a new competition
Italy: 90 (-41)
Turkey: ? (-100 – no longer committed at present).
This is a reduction of 219 planned purchases, which brings the numbers down to 2,921 F-35s.
A drop in that number of aircraft results in a $525.6 increase to Canada for a potential acquisition. If we only now have a $342 million acquisition contingency, this means we are now over $9 billion.
If you leave Turkey on the buy side, that still is a $288.6 million increase, leaving just $53.4 million in the contingency kitty. One more hiccup and Canada’s “frozen” acquisition budget is blown.
It also means the cost of F-35s to Canada is going to increase anywhere between $4.4 million to $8 million a copy.”
