Lockheed's F-35 fighter attracts foreign interest

FARNBOROUGH, England Thu Jul 12, 2012 1:21am IST

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FARNBOROUGH, England (Reuters) - More than 25 countries have expressed interest in Lockheed Martin Corp's F-35 Joint Strike Fighter, including Singapore, which is still evaluating its options, and South Korea, which is due to pick a winner in its fighter competition by year's end, top Lockheed officials said on Wednesday.

South Korean officials are due to visit Lockheed's Fort Worth, Texas, production facility and other sites later this year for weeks of data-gathering, including classified simulator tests, as they weigh the F-35 bid, according to sources familiar with what will be handled as a government-to-government sale.

Lockheed's F-35 Joint Strike Fighter is vying with Boeing Co's F-15 fighter and the four-nation European Typhoon for the multibillion-dollar 60-jet South Korean order.

Lockheed beat Boeing to win the lucrative Joint Strike Fighter contract in 2001. After years of cost overruns and technical challenges, as well as a 10-week strike earlier this year, Lockheed's $396 billion F-35 program is now focused on what officials describe as normal goals for any new military aircraft: completing development and testing, starting pilot training and drumming up more foreign orders.

"We're executing to plan, and executing to plan means that we're becoming predictable," Larry Lawson, executive vice president for aeronautics at Lockheed, told Reuters during an interview at the Farnborough International Airshow.

"And predictable is a very good thing ... with the amount of oversight that we have on the F-35 program," he said.

Japan's decision to buy the F-35 last December gave the program a big boost, but U.S. officials are keen to lock in more customers to help increase the number of jets being built, which in turn will reduce the price of all planes that are eventually built.

Lockheed had hoped to drive down the price per plane by quickly ramping up production to around 18 to 20 planes a month. Instead, production will stagnate at around 30 planes a year for the next few years.

Lockheed officials and F-35 test pilots touted the program's progress during a media briefing at the air show, where a mock-up of the radar-evading, single-seat aircraft drew a steady stream of interest from industry executives and foreign delegations.

The program has conducted 595 test flights thus far in 2012, versus the 445 test flights planned, and four more jets were delivered to the U.S. government this week, bringing the total number of deliveries to 30.

Lawson said Lockheed should be able to complete production of all 30 planes planned for this year, despite a 10-week strike by 3,650 workers at the Fort Worth plant and two military bases in California and Maryland.

SOUL-SEARCHING

Lockheed is building the new warplane for three U.S. military services and eight international partners -- Britain, Italy, Turkey, Canada, Australia, Denmark, Norway and the Netherlands. Israel and Japan have also ordered the plane.

The Pentagon restructured the $396 billion weapons program for a third time this year, postponing production of 179 fighter jets until after 2017, to allow more time for development and testing, and to reduce the number of needed retrofits.

The move added $1 billion to $6 billion in cost to the program, according to various estimates, because it eliminated anticipated economies of scale that were meant to start sharply reducing the cost as production quantities increased.

It also spurred some soul-searching among foreign partners on the program, including Italy, whose own budget pressures have prompted it to cut back its planned orders by one-third.

However, since then, the U.S. government and six of the eight partner countries have put jets under contract. Israel and Japan have also signed agreements locking in their procurements.

"That's the ultimate measure of normalcy," Stephen O'Bryan, vice president of F-35 business development at Lockheed, told Reuters in a separate interview at the air show. "It's the ultimate measure of confidence in the program."

Italian Air Force Lieutenant General Paolo Civalleri told Reuters at the air show that his country was satisfied with progress on the plane. "Everybody is comfortable; the only problem is the budget," Civalleri said.

Lockheed officials declined to identify any of the other countries exploring possible F-35 purchases, which are handled on a government-to-government basis, but said they had been engaged in nonstop meetings at the air show.

Lawson said the cooperative nature of the F-35 program, in which eight countries are chipping in to fund development of the new plane, would be increasingly important in coming years as budgets in the United States and Europe come under increased pressure.

Lockheed remains in protracted negotiations with the Pentagon about a contract for 30 more production jets, talks that have been under way since early December 2011.

The two sides remain at odds over overhead costs, with U.S. military officials asking for thousands of pages of additional documentation, on top of the 6,000 pages in Lockheed's initial proposal submitted in April 2011. U.S. officials submitted their first counter-offer in April 2012.

Lockheed officials declined comment on the state of the negotiations. Navy Vice Admiral David Venlet, who heads the F-35 program for the Pentagon, did not attend the air show.

The four jets delivered this week will fly to Eglin Air Force Base in Florida, where Air Force and Marine Corps officials are getting ready to start training pilots later this year.

"We will be in full swing by the end of the year," said Marine Corps Colonel Arthur Tomassetti, vice commander of the 33rd Fighter Wing at the Air Education and Training Command.

(Reporting by Andrea Shalal-Esa; editing by Matthew Lewis)

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