Italian MoD Waffles on F-35 Funds In Run-up to White Paper
(Source:; published April 20, 2015)

By Giovanni de Briganti
The first Italian-built F-35A was rolled out from the Final Assembly and Check-Out (FACO) facility at Cameri in mid-March. Italian lawmakers worry that the program will not deliver its promised industrial benefits. (Finmeccanica photo)
PARIS --- The Italian government’s Supreme Defense Council is expected to release the long-awaited defense white paper tomorrow, April 21, but is likely to defer decisions on individual procurement programs, including the F-35 Joint Strike Fighter, for several months.

Detailed acquisition numbers and funding for individual programs will only be made public in a technical annex being prepared by the defense staff and known as the Documento Programmatico Pluriennale della Difesa, or multiyear defense program document. No publication date has yet been announced.

While a previous Italian government cut the planned number of F-35s from 131 to 90 because of its excessive cost, the current government of Prime Minister Matteo Renzi has studiously avoided taking a position, and has instead publicized its industrial benefits and job creation.

This is a particularly sensitive subject in today’s Italy, where high-paying, high-tech jobs are both rare and valuable because of the enduring economic crisis. However, initial claims of over 11,000 jobs and of large production contracts now appear to have been much overstated.

Many Italian lawmakers, on the other hand, believe that whatever economic benefits the program might bring are dwarfed by its projected cost to Italy, currently estimated at about 13 billion euros for 90 aircraft. These would be a mix of 60 F-35As for the air force and 30 F-35B STOVL variants, 15 each for the air force and the navy.

Competing scenarios for F-35

Several scenarios are currently making the rounds in Rome, and what is striking is that none appears to be favored, and sources say there is no indication of which way the government is leaning.

According to one scenario, the government has in fact already decided to buy 90 aircraft as planned, but will delay and stretch out deliveries to reduce annual outlays. Orders and deliveries of the more expensive F-35Bs will be pushed back to the late 2020s, and annual F-35 expenditure will be halved in 2015-2017, when financial pressures are expected to peak.

A second scenario sees the government publicly halving the program’s funding until 2020, but without publicly acknowledging that a proportional cut in the number of aircraft, to 45, is inevitable. A variant of this scenario would see the order cut back to 75 aircraft by canceling only the 15 F-35Bs that are currently planned for the air force, leaving the air force with 60 F-35As.

Finally, according to a third scenario, the government could launch a long-term financing plan to raise additional revenue for several of its largest weapon programs, but as this would increase the national debt it is seen as unlikely.

Government, Parliament still at odds

Renzi’s government has been sparring with Parliament about the F-35 since it assumed office. In May 2014, incoming Defense Minister Roberta Pinotti clashed for the first time with members of her own party in Parliament’s defense committee, which voted in favor of a moratorium on F-35 orders and payments pending a radical review of the program’s technical problems, costs and economic returns for Italy.

The debate went back and forth for several months, and on Sept. 24, 2014 Parliament approved by a large majority (275 for, 45 against) a resolution requiring the government to “review the entire F-35 program to clarify its critical aspects and its costs, with the final objective of halving [the program’s] original budget” and thus the number of aircraft.

The resolution, tabled by members of the Prime Minister’s own Partito Democratico (PD) party, was approved by the government, which however has since maintained it is not binding.

The government’s ambivalence on the F-35 program was most recently confirmed on April 9, when during Parliamentary question time Defense Minister Roberta Pinotti again side-stepped questions on the subject.

Asked to explain why government documents on the 2015 defense budget do not mention any details on funding for the F-35, Pinotti repeated that the government will “redefine the program in light of the findings of the White Paper,” reaffirmed the government’s commitment to redefine the program’s size, but also noted that its decisions will take into account “previous investments, industrial returns and impact on employment.”

Pinotti added that the F-35 “acquisitions authorized by the government to date are numerically entirely compatible with what Parliament has approved,” a sibylline statement that manifestly does not clarify the situation.

This lack of clarity does nothing to dispel the continuing uncertainty, which the government seems to find politically safer than announcing a decision to cut funding.

When Reuters reported on Feb. 28 that Italy would maintain its order for 90 F-35s “despite political pressure to slash spending on the planes, after winning a major maintenance contract, sources in Rome and the U.S. told Reuters,”

Pinotti’s reaction was limited to tweeting “No confirmation no cancellation. Number of 90 decided by previous government. Program continues as stated to Parliament,” which obviously does not clarify the government’s position.

Some Italian media reports say that the government will still buy 90 aircraft, as planned, but will spread out their acquisition to reduce annual outlays. This entails pushing back the more expensive F-35Bs to the late 2020s, and halving F-35 expenditure in 2015-2017, when financial pressures are expected to peak.

To avoid a possible political crisis, the government will continue to play up the expected economic benefits that the program will generate for Italy, although initial claims of over 11,000 jobs and large industrial participation in production now appear much overstated.

On April 9, Pinotti reminded Parliament that “Italy has been selected as the maintenance hub for all the F-35s deployed in Europe….this is of great significance for our country, and will capitalize on our investment in infrastructure and industrial tooling, and will generate substantial benefits for Italy.” She glossed over the fact that Italy’s initial selection is only guaranteed for 2 to 3 years, and further that there is no guarantee that the volume of work will be maintained.

Uncertainty about industrial returns

In its Dec. 11, 2014 announcement of the European maintenance arrangements for the aircraft, the F-35 Joint Program Office (JPO) said that “Each nation that sets up a regional capability is guaranteed to always receive a workload that is equivalent to the number of aircraft it purchases,” which explains Italy’s reluctance to reduce its aircraft order.

Even then, the JPO statement said that “as basing decisions change over time, regionally-assigned workloads may shift based on who can provide the best value given past performance.”

The document also quotes JPO chief Lt Gen Christopher Bogdan as saying that "We will probably look at this on a two- to three-year basis….cost is not the only consideration in determining best value.”

Finally, Bogdan also said that the “United Kingdom would be assigned to provide additional air frame depot capability” if Cameri becomes involved in F-35 production.
All of these constraints are likely to depress the volume of the maintenance work flowing to Italian industry, especially as in March 2014 the UK and Norway signed a bilateral “agreement to expand cooperation on F-35 training and operations in Europe,” with a view to pooling maintenance.

Meanwhile, the FACO facility at Cameri is gradually working up, and on March 17 rolled out the first Italian F-35A, aircraft AL-1, that it had assembled. The facility currently employs “750 people dedicated to the F-35 aircraft and wing production,” Finmeccanica said in a March 17 press release. Seven other F-35As are being assembled there.

The FACO, owned by the Italian state and operated by Alenia Aermacchi, will produce all F-35A (CTOL) and F-35B (STOVL-Short Take Off and Vertical Landing) aircraft for Italy, as well as the production F-35s planned by the Netherlands. It also is the second source supplier for the whole wing sections (the central part of the fuselage with the wings) for all F-35s in production.

The Finmeccanica release added that “Alenia Aermacchi participated in the design of the wing which represents about 38% of all aircraft and whose parts of components are manufactured at [its] Foggia and Nola (Naples) plants, respectively for the composite and metal structures. The first full F-35A wing section for the USAF was recently completed and will be soon shipped to Lockheed Martin’s Fort Worth, Texas, F-35 production line for final assembly.”

Estimated Cost of Italian F-35 Program
According to the Parliamentary motion of Sept. 24, 2014, Italy would pay about 13 billion euros to buy 90 F-35 fighters. The total breaks down as follows: (N.B.: totals do not match because of the USD’s appreciation over the euro over the past year—Ed.)

a) 10 billion euros for acquiring the aircraft and their logistic support (on average €111 million per aircraft); payment to be completed by 2017;
b) 3 billion euros for related investments, of which about €2.7 billion have already been spent. These include:
-- $1 billion for the initial development phase (already paid);
-- $900 million for the Production, Sustainment, and Follow-on Development Phase, due to end in 2047 (already paid);
-- €795.6 million for the establishment of the Final Assemble and Check-Out (FACO) facility at Cameri air force base, near Novara (already paid);
-- €465 million for infrastructure modifications (air bases and aircraft carrier Cavour).


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