Pentagon, Lockheed Martin agree on $30 bln F-35 jet deal

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The Pentagon and Lockheed Martin have agreed on the prices and quantities of new F-35 fighter jets that will be purchased over the next three years as per a company spokesperson.

On Monday, US media reported that the Pentagon and Lockheed Martin had reached an agreement worth approximately $30 billion for 375 F-35 fighter jets.

In a statement, a company spokesperson said later, on Monday, that "through a collaborative effort with the F-35 enterprise, including the Joint Program Office, suppliers, and teammates, we have successfully reached an agreement on Lots 15 through 17." 

"In the midst of continued COVID-19 impacts and decreased F-35 quantities, the F-35 enterprise was able to achieve a cost per jet lower than record-breaking inflation trends," the spokesperson added.

Final prices, the number of F-35 jets to be sold, and which countries will purchase the aircraft will be disclosed when the agreement is officially inked, according to the spokesperson.

The handshake agreement comes as the aviation industry gathered for the return of the Farnborough Airshow, hoping for a show of confidence following the devastation of COVID-19.

Lockheed began to warn that the cost of the jet would rise as economies of scale dwindled and supply chains faltered. 

A pre-pandemic forecast for this three-year purchase indicated that 485 jets could be included, but the 22 percent volume reduction would undoubtedly affect the overall cost of the F-35A, the most common version of the jet.

A previous three-year "block buy" signed by the Pentagon in 2019 was for 478 F-35 fighter jets, allowing Lockheed to buy larger quantities of components, reducing costs by about 8%, to $34 billion.

According to Lockheed executives, any country with an F-16 jet, the F-35's predecessor, is a potential customer.

It is worth noting that foreign military sales, such as the F-35, are classified as government-to-government transactions in which the Pentagon serves as an intermediary between the defense contractor and a foreign government.

The F-35 jet program accounts for approximately 27% of Lockheed's revenue.