Pentagon nears $30bn worth F-35 jet deal with Lockheed

The U.S. Department of Defense is about to seal a deal with Lockheed Martin Corp (LMT.N) for around 375 F-35 fighter jets over the next three years_ three sources said on Monday_ Reuters reports. The news comes amid expectations of a price increase for the most common version of the jet due to lower quantities and inflation.

The first F-35A cost $221mn when it came off the production line in 2007. Since then_ production quantities and know-how have been raised_ helping the price of the stealthy fifth-generation fighter fall to $79mn as it gained buyers.

A meeting was held Monday in Washington and it assumed that a "handshake" decision is about to finalize on both a price range and quantity_ two people familiar with the matter told. If an agreement is reached_ finalized pricing would not be locked in for several weeks if not months_ but an ultimate total value is in a range around $30bn.
 
The handshake agreement would come as the aviation industry gathered for the return of the Farnborough Airshow_ aiming for a display of confidence after the devastation of coronavirus pandemic_ even though the only records likely to be broken at the event in southeastern England are for sweltering temperatures.

The F-35 fighter jet comes in three configurations_ the A-model for the U.S. Air Force and U.S. allies; an F-35 B-model_ which can handle short takeoffs and vertical landings; and F-35C jets for aircraft carrier landings.

A Pentagon previous three-year "block buy_" signed in 2019_ was for 478 F-35 fighter jets_ allowing Lockheed to buy larger quantities of components to reduce costs by about 8 per cent_ to $34bn_ versus negotiating annual contracts.

Foreign military sales like those of the F-35 are considered government-to-government deals where the Pentagon acts as an intermediary between the defense contractor and a foreign government.

The F-35 jet program represents about 27% of Lockheed's total revenue.