Lockheed Martin Corp is in the final stages of negotiating a deal worth more than $37 billion to sell a record 440 F-35 fighter jets to a group of 11 nations including the United States, two people familiar with the talks said.
This would be the biggest deal yet for the stealthy F-35 jet, set to make its Paris Airshow debut this week.
The sale represents a major shift in sales practices from annual purchases to more economic multi-year deals that lower the cost of each jet.
The pricing of the jets was still not final, although the average price of the 440 jets was expected to be $85 million, the people said on condition of anonymity because they were not authorized to discuss the negotiations publicly.
The multi-year deal for the fighters will consist of three tranches over fiscal years 2018-2020.
A Lockheed representative said the U.S. company does not discuss negotiations on contracts and said any deal involving a "block buy" would be announced by the U.S. government. A representative for the customers including the United States did not immediately respond to a request for comment on Sunday.
Last week, representatives from 11 F-35 customer nations met in Baltimore, Maryland to discuss terms and toured a Northrop Grumman Corp. facility in Maryland that provides equipment for the jet. Those nations included Australia, Denmark, Israel, Italy, Japan, the Netherlands, Norway, Turkey, South Korea, Britain and the United States.
The memorandum of understanding being negotiated between Lockheed and the customers aims to procure 135 or more jets in fiscal year 2018 for delivery in 2020 for about $88 million per jet, the people said.
In the subsequent fiscal years, 2019 and 2020, procurement would ramp up to 150 or more jets per year.
The average price in 2019 could be $85 million for the F-35 "A" variant and could drop below $80 million in 2020, the people said. That would mark the lowest price ever paid for an F-35, making this deal an important step in reducing the overall cost of each jet. (end of excerpt)
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(EDITOR’S NOTE: Despite Lockheed’s claims of ever-decreasing F-35 costs, the company is still a long way from producing an $85-million fighter.
As we showed in a recent story, the latest F-35A unit price in Low-Rate Initial Production (LRIP) Lot 9 is $102.1 million without the engine, and Lockheed’s latest claim of $94.6 million Lot 10 cost including the engine is not backed up by any independent source.
Furthermore, our analysis of LRIP Lot 9 costs found that the unit cost, including airframe, engine and retrofits, is $206.6 million, or more the double the price Lockheed is promising for the block buy contract it is negotiating with foreign buyers.
Note that the Pentagon is forbidden by US procurement law from taking part in a multi-year buy before the end the of the LRIP phase, so Lockheed is pushing the block buy for foreign customers alone.
In other words, the promised $85 million unit cost for an F-35A appears to be pure marketing spin.
It will be instructive to see the final value of this “block buy” deal, and more importantly exactly what it covers, and what it does not.
The next three LRIP lots (12-14) comprise a total of 449 aircraft; see how they break down here).