Dutch Win $13M, Expect $100M+ Royalties on F-35 Export Sales
(Source: Defense-Aerospace.com; posted Sept. 21, 2020)

By Giovanni de Briganti
PARIS --- As part of their membership of the Joint Strike Fighter (JSF) program, the Netherlands have already received royalty payments on F-35 aircraft exported to non-partner nations, an official report revealed last week.

The existence of export royalties for program partners, and their specifics, had not been previously made public.

The Dutch Ministry of Defense’s annual report to Parliament on the F-35 program revealed that, for the years up to and including 2019, the Netherlands have received approximately $13.7 million in F-35 royalty payments. The report also estimates that future sales to non-partner nations will generate additional payments of over $91 million.

The Dutch to date have been paid royalties covering just 53 aircraft and 60 engines, with royalty payments amounting to $ 223,500 on each aircraft and $31,200 on each F135-PW-100 engine, for a total of $13.7 million.

On current plans, “a total of 77 aircraft and 84 engines will have been delivered by December 2020 to non-partner countries, and further FMS deliveries to non-partner countries are planned for 2021 and later years, on which The Netherlands will receive royalties,” the report states.

“For the time being, a total of 307 aircraft and a minimum of 307 engines are to be delivered and, based on these numbers, the expected royalty receipts are estimated at $79.4 million ($258,500 each) for the aircraft and a minimum of $12.2 million ($ 39,600 each) for the engines.”

Added to the $13.7 million already received, FMS sales of the F-35 are expected to generate over $104 million.

Incidentally, the increase in the number of aircraft also means that the Dutch financial contribution to the Production, Sustainment, and Follow-On Development (PSFD) phase has increased to €221.1 million excluding VAT, up from €213 million for 37 aircraft.

The Netherlands are the junior Level Two partner in the JSF’s System Development and Demonstration phase, to which they have contributed $800 million (Italy, the senior Level II partner, contributed $1 billion), and so are entitled to a share of the program’s profits when aircraft are sold to non-partner countries which, by definition, have not contributed to its development.

To date, the F-35 has been sold through the Pentagon’s Foreign Military Sales program to Belgium, Japan, Israel, Poland and South Korea, and additional FMS sales are anticipated to non-member countries.

Royalties on FMS sales are in theory proportional to the share of each partner’s production offtake, but the rules governing these payments have never been made public. In the case of Italy and the United Kingdom, only Level I partner, royalties are likely to be higher, but they will be lower for partners with smaller shares. Australia, Denmark, Norway, Canada, and Turkey, who joined the F-35 program as Level III partners, with contributions ranging from $125 million to $175 million.

Turkey, one of the original partners, has been expelled from the program for buying S-300 air-defense missiles from Russia, and by rights its share of royalties should be redistributed to the other six partners.

Dutch industry revenues

In addition to these royalties paid directly to the government, Dutch industry revenue from the F-35 program is growing, and the aggregate value of new contracts signed in 2019 was $363.3 million.

This brings the total value of orders received by Dutch industry from the beginning of the program to the end of 2019 to approximately $ 1,911 million, the report states.

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