It has not been canceled but it is still not launched. South Korea's KF-X indigenous fighter program has received limited 2014 funding from parliament, subject to conditions that implicitly threaten to kill it if it goes off the rails.

Korea Aerospace Industries (KAI), meanwhile, is restructuring its internal organization to sharpen its focus on the KF-X and the LCH-LAH helicopter program. And Airbus Defense and Space, formerly EADS Cassidian, is continuing to propose support for KF-X development in return for South Korea choosing the Eurofighter Typhoon for F-X Phase 3, even though that separate fighter requirement seems to have been settled in favor of the Lockheed Martin F-35 Lightning.

Airbus is also raising the possibility of South Korean participation in a big turboprop airliner that it and Alenia Aermacchi, its partner in ATR and Eurofighter, are considering.

KAI has raised the status of its KF-X and LCH-LAH offices so that each is now one of the main divisions of the company, says an industry source. The move will emphasize to the defense ministry just how serious KAI is about the programs. It will be the prime airframe contractor for both, thanks to its experience in building the Surion utility helicopter as well as the T-50 supersonic trainer and its light attack variant, the FA-50.

Parliament has allocated only 20 billion won ($19 million) for the KF-X program in 2014. That was twice as much as the finance ministry proposed but far less than the 50 billion won that the defense ministry sought. The funding level, approved on Jan. 1, means that the KF-X will remain in the design-study stage this year and cannot be launched into full-scale development before 2015.

Parliament imposed conditions on the funding that are evidently designed to ensure it can keep tight control over the program and kill it if it misses targets—though South Korean defense technology projects are almost never canceled. Instead, they tend to creep along on low budgets until, finally, they are fully launched with major funding.

In granting limited KF-X funds for 2014, parliament mandated that development must not cost more than 8.4 trillion won and must be completed by 2025. Furthermore, export licenses from the U.S. government must be obtained. Critics have said that if the KF-X uses major U.S. systems, Washington may block its sales to protect the market for U.S. fighters.

Another key parliamentary demand is that the KF-X program must attract a 15% investment from a “technical assistance company,” a foreign fighter maker that would help develop the aircraft. Moreover, that investor must validate the cost, schedule and aircraft performance estimates set by KAI and the Agency for Defense Development (ADD), a government defense technology organization that is the key advocate of the KF-X. Finally, parliament has demanded that it receive an annual report confirming that its conditions are being met.

These terms were adopted from a December resolution of the parliamentary defense subcommittee, which is chaired by Yoo Seong Min, a leading critic of the aerospace and defense industry. In Yoo's view, the defense budget is for protecting the country, not for developing the industry.

The development budget that parliament is willing to countenance is a little more than the latest estimate from the Defense Acquisition Program Administration (DAPA) of 8 trillion won for a twin-engine ADD design called C103. That tail-aft design has been prepared in anticipation of working with a U.S. partner. A tail-forward design, C203, has been worked out to suit a European partner.

Parliament is also allowing more time, since DAPA said development could be completed by 2024. It may have assumed a launch in 2014, however. Further confusing that issue, DAPA sees initial operational capability in 2023 and full operational capability in 2025, according to the newspaper Chosun Ilbo. Initial operational capability has been previously defined at a very low level, with the aircraft carrying only short-range air-to-air missiles and South Korean GPS-guided bombs.

A year ago, DAPA estimated that development would cost 6 trillion won, a widely doubted figure. According to another member of parliament, 6 trillion won would be the cost of developing a single-engine KF-X—such as the KFX-E design, which KAI proposes and ADD opposes.

Airbus says it still is willing to invest 2 trillion won in the KF-X, as previously proposed, and that Eurofighter can deliver 40 Typhoons from 2017. Much of Airbus's investment presumably would be technological know-how.

The European company also is offering South Korean participation in a 90-120-seat turboprop that could be adapted as a military transport. That seems to be the first public definition of the intended seating range of the proposed new ATR type, which should have a fuselage of about 3.4 meters dia. (11.2 ft.) for five-abreast economy seating. Such an aircraft would offer only limited utility as a military transport, but if given a new fuselage wide enough for vehicular loads, the aircraft would be a very close and unwelcome competitor to the C-27J of Alenia Aermacchi, part of the Eurofighter consortium. The other Eurofighter airframe partner is BAE Systems.

South Korea is studying the development of a turboprop airliner of 72-88 seats, working with a foreign partner, but that proposed program faces great obstacles. Some industry and government officials say the effort is almost dead, but it still has official support.

The South Korean joint chiefs of staff announced in November that the country would buy 40 Lockheed Martin F-35As for F-X Phase 3, which was initially set at 60 aircraft. The announcement seemed to put an end to Boeing's hopes of supplying South Korea with more F-15s, although a plan to possibly order a further 20 fighters, not necessarily F-35s, left open a limited chance for Eurofighter. By offering 40 Typhoons and stressing the ability to deliver from 2017, Airbus is still pitching for the initial order. Early delivery is a key concern of the air force's top leadership.

Air force chief Sung Ilhwan told the parliament in October that by 2019, given the expected rate of retirements, there would be a shortfall of 80 aircraft in South Korea for a war against North Korea. This assessment was based on the current Operation Plan 5027 of the South Korean and the U.S. militaries and the associated air-tasking order. More U.S. aircraft, introduction of South Korean tankers or more long-range air-to-ground missiles could alleviate the shortfall, he said. Sung also agreed with a lawmaker who suggested that more surface-to-surface missiles would help. South Korea has large but low-profile programs for ballistic and cruise bombardment missiles.

Because Sung was speaking at a time when the F-X Phase 3 was delayed and without a clear delivery target, his figures may not have included aircraft from that program. Accordingly, the 2019 shortfall would now be 40, but the air force has issued contradictory information on future force levels.