Maybe Another F-35 Defection ... How Much Should It Matter?

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The recent news that Canada has once again opted to shop around for an F-35 alternative didn’t come as a shock. Ottawa has long been embroiled in a controversy over whether the government was too eager to accept early -- and some say questionable -- cost estimates on buying and operating the aircraft.

Canada announced in July 2010 it planned to buy 65 F-35s at a cost of roughly $9 billion. But concern that the cost estimates were overly optimistic has prompted another review of alternatives. This opens the door, once again, to a sale of Boeing F/A-18E/Fs (Australia’s impatience over F-35 has kept that line humming), Eurofighters or, possibly, F-16s. But, it does not close the door to the F-35.

While this is big news in Canada, and in the international realm, I do question what it means in the big picture for the F-35 program.

The U.S. estimates it will pay more than $400 billion on developing and buying the aircraft; and operating estimates now exceed $1 trillion (though the Pentagon says it is trying to revise that).

During the past 11 years, since Lockheed Martin won the F-35 contract, the media rightly has covered the on-again, off-again relationship between foreign partners and their plans to buy the single-engine, stealthy jet. It is our job to write about this for the record and explore what it means from various angles. But there has been a lot of swirl around each individual decision that sometimes causes me pause. Does the loss of a single customer outside the U.S. really move the needle on the program?

I really don’t think so. Perhaps I’m colored by the beat I cover; the Pentagon is the largest military market on the planet. As long as the U.S. Air Force is committed to the F-35 – whether it is 1,763 aircraft or fewer, it will move forward. Even the threat of the demise of the B-version jump jet didn’t, in my view, fully jeopardize the sale of the conventional A variant.

The near-term question, as I see it, is at what pace and what cost does the program move forward? And, the USAF bears much of the burden of answering this question. From a strategic vantage, the question of whether F-35 lives up to the promise of being an international panacea for aging fighter fleets among allies on four continents – fostering interoperability and low-cost buys and maintenance – is a valid one. But one that will take years to fully rectify.

Back to the question of the impact of international waffling on F-35 …

The marketing strategies of Lockheed Martin and Boeing – its rival fighting to keep operations on the St. Louis manufacturing line alive – have fostered this mania. Lockheed always said that a hearty upfront international buy was crucial to keeping the cost of the aircraft down, even if those orders came at the sacrifice of delivering jets that weren’t fully tested and needed upgrades to fix deficiencies discovered in flight trials. The company even pushed unsuccessfully for an international “coalition” buy – attempting to pressure allies for commitments as early as possible -- to bulk up the early quantities.

Boeing’s strategy has also fostered the mania. Each time a would-be F-35 customer waffled, the company aggressively pitched the Super Hornet. And, rightly so. Its investors would have every right to scream if company officials didn’t exploit every chink in F-35's armor.

They both pushed the “too big to fail” argument – Lockheed because it wanted the commitments and Boeing because it wanted the failure. Both companies – for their own reasons – have argued that the loss of one customer is damaging because it could ignite a mass exodus of buyers, driving a wedge into the central F-35 tenet of building an interoperable, international coalition around an inherently international fighter.

But, you really don’t hear this line of thinking from customers anymore. Once Vice Adm. David Venlet took over the program in Washington, the joint program office stopped pushing Lockheed’s line of reasoning publicly. Amid the global financial crisis, it seems to be each man for himself when it comes to would-be F-35 customers.

So, should we really buy the idea that a single F-35 defection alone – or even one that triggers a mass exodus – could tank the program? I go back to my earlier point. The lion’s share of the F-35 lies with the U.S. Air Force. As long as the Air Force is willing to pay whatever it has to in order to buy the aircraft, it will move forward. Period. And, the service has a topline. Its goal is to squeeze as many jets out of that topline as possible. So, I’m sure the guys in blue want international buys to bring down the price. But, they aren’t marketing it that way.

In Canada's case, the purchases are slated to start in 2015 with deliveries beginning in 2017. The majority of Canada's aircraft are slated for delivery through 2021 during what program officials hope will be full-rate production when the aircraft price should drop. So, a Canadian slight wouldn't change the calculus in the near term, while the F-35 is fighting high-cost in the production ramp-up phase. 

Additionally, allies may groan at the price of the jet, but there will always be some willing to pay a premium if they have to. Take Japan, for example. That customer always values high technology and buys however much it can afford. Israel is the same way. And South Korea may also follow along on this path.

I’m not arguing that Canada’s wavering over F-35 again is inconsequential. Any customer lost by Lockheed Martin is a blot on the promise once pitched by the company. And, it is possible that others may divorce themselves from the program, but not likely because of a single defection. With each man for himself, it would be because of the politics in each country and each nation’s willingness to balance the cost of the so-called “fifth-gen” capability versus the size of their own bank accounts.

But I do think there was a lot of hysterical flaking behind the “mass exodus” theory, and I'm not sure it passes muster.

Thoughts?

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