Costing Canada’s Fighter Options (Updated)
 
(Source: defense-aerospace.com; last updated Dec. 12, 2012)
 
By Giovanni de Briganti and J.B.

(This is an updated and expanded version of a story first posted Dec. 10)
 
 
PARIS --- The huge controversy that has erupted in Canada over the projected cost of its proposed 65 F-35 fighters, and that may well claim the head of at least one cabinet minister, has mostly concentrated on their ballooning operating costs.

Relatively less attention has been given to the government’s stated acquisition cost - $8.9 billion for 65 aircraft – that has been widely accepted, and even confirmed by the KMPG audit, if a Dec. 7 report by the National Post is to be believed.

Yet, this figure works out to an average of $136.9 million per aircraft - possibly but not necessarily including engines, which the program counts separately – as well as related equipment, and initial spares, but no weapons.

This figure is much lower than what two other F-35 buyers have agreed to pay for their own aircraft, which makes it likely that, when Canada finally gets around to signing a contract, it may well find the $8.9 billion price tag has exploded.

The figures in the table below show that, if the government’s figures are to be believed, Canada expects to pay half to two-thirds of the price that Japan and Israel are paying.

However, unlike these two countries, Canada has not yet signed a contract, nor even an agreement, for its F-35 acquisition, and so it has no binding quote, nor any guarantee of any type, of what its aircraft will finally cost.

What are other countries paying?

First of all, a note of caution: The contract amounts quoted below include, in addition to the aircraft, initial spare parts, support equipment, ground equipment, training aids, and documentation. So, dividing the total contract value by the number of aircraft does not provide an accurate unit price.

Yet, as the aircraft cannot operate without this ancillary equipment, its cost cannot be excluded from the reckoning. And that is why, although wrong in theory, dividing a contract’s value by the number of aircraft still provides the most accurate guide of what it costs to buy and operate an aircraft.


To date, no partner nation has yet signed a firm contract to buy the F-35, except for four test aircraft bought by the Netherlands and the UK, so there are as yet no precise contractual prices for program partners.

However, Australian, Dutch and Norwegian acquisition costs have been published either in government submissions to their national Parliaments, or in reports by their respective national auditors. They can thus be estimated with some confidence.

So far, only two countries have negotiated to buy F-35A fighters under the Foreign Military Sales program, and these plans have been notified to the US Congress by the US Defense Security Cooperation Agency (DSCA). Both sales carry much higher price tags than the one quoted by the Canadian government:

-- Japan will pay $10 billion for 42 F-35A fighters, according to an April 30, 2012 notification to Congress by the DSCA. This works out to an average of $238.1 million per aircraft (N.B.: this notification can no longer be downloaded from the DCSA website, so the link is to our own archives.);

-- Israel, whose planned acquisition of 75 F-35As was notified to Congress on Sept. 29, 2008, will pay $15.2 billion, which works out to $202 billion per aircraft, although this price will no doubt increase to allow for inflation since 2008.

These figures are respectively about 75% (Japan) and 48% higher (Israel) than the $136.9 million price tag quoted by the Canadian government. Again, these are the only two countries whose prices are locked in by an official agreement.





Governments or national auditors in three F-35 partner countries – Australia, Netherlands and Norway – have published official cost figures. These are still estimates, however, and will only be finalized once they are locked in by contract.

Australia will spend $13.2 billion to buy 100 F-35As, according to the latest available estimate by Australian National Audit Office in its September 2012 report on the program (Management of Australia’s Air Combat Capability—F-35A Joint Strike Fighter Acquisition; see Paragraph 4.51, page 136). This works out to $132 million per aircraft.

Norway’s government in March 2012 submitted to Parliament its 2011-2012 defense plan, which included the purchase of 52 F-35A fighters at a cost it estimated at NOK 71 billion, or $12.5 billion (Proposisjon til Stortinget, page 73, paragraph 6.2.3.2 ). This works out to $240.4 million per aircraft.

In the Netherlands, the Algemene Rekenkamer (court of audit) on October 24, 2012 published a report on the “Cost of withdrawing from the Joint Strike Force programme” (see pp. 73 and 74, Dutch version), in which it includes a government estimate that the price of buying 68 F-35A fighters will total €6.5 billion, or $8.4 billion. This works out to $123.5 million per aircraft.

However, given the F-35’s escalating price, the incoming Dutch government has decreed a budget cap of 4.5 billion euros for the program. The Dutch MoD says this will now buy 48 F-35As (at €77.6 million, or $122 million each), and that it will simply reduce the number of aircraft it buys if prices increase.

And the Super Hornet?

Australia, like Canada, operates F-18 fighters that it plans to replace with the F-35 but, unlike Canada, it has ordered two-seater F-18F Block II Super Hornets as an interim fighter until its F-35s are delivered.

Australia is paying $3.1 billion for the aircraft, including related equipment and services, or about $129 million per aircraft. Moreover, according to a March 6, 2007 defense department statement, the entire program will cost “about $6 billion over 10 years, which includes acquisition and all support costs as well as personnel.”

Thus, operating and support costs amount to about $3 billion for 10 years, which can be extrapolated to about $12 billion, plus inflation, for 40 years – even though the Super Hornet is a twin-engined fighter.

Benchmarking: other recent fighter prices

The Sultanate of Oman bought the latest variant of the single-seat fighter, F-16C/D Block 50/52, in 2010. It will pay $3.5 billion for 18 fully-equipped aircraft (also included is the upgrade of 12 earlier aircraft it already operates), according to the DSCA notification.

The Swiss cabinet on November 14, 2012 submitted to Parliament its plan to purchase 22 Gripen E single-seat fighters from Saab, for a total cost of 3.126 billion Swiss francs. At current exchange rates, this works out to $3.37 billion, or $153.45 million per aircraft, although a share of the price will go to contribute to the development of the new Gripen E version.

And, although no deal has been signed, it has been widely reported that India will pay about $20 billion for the 126 Dassault Rafales it is negotiating to buy, or double the amount initially earmarked for the MMRCA program. Even though most of the order will be locally produced with technology transfer, both of which inevitably boost costs, this works out to an average of $158 million per aircraft, everything included.

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