F-35 and the Cost Increase that really Wasn’t

The Lockheed-Martin F-35, the program everybody loves to hate, recieved some bad headlines recently, with Bloomberg proclaiming that “F-35’s $1 Trillion Support Cost Ticks Up as More Flights Seen” and The Wall Street Journal headlining their piece “Air Force to Extend Life of F-35 Combat Jets, Adding to Cost”. Looking at the numbers presented, however, meant a somewhat more complex picture emerged. Complex enough that I decided to contact Hill+Knowlton Strategies Helsinki-office to ask for some clarifications, with an emphasis on the less-covered F-35C variant (which I personally hold as the most likely F-35 candidate for HX).

Selected Acquisition Report 2015

What happened last week was that the F-35 Lightning II Joint Program Office (JPO), the body responsible for the program as a whole, published their annual Selected Acquisition Report (SAR) with updated cost data for the program. Notably this only covers the US part of the program, but it does adjust the US costs to account for the savings (and potential cost increases) stemming from the participation of the international partners and other exports, so the data should be quite representative for the HX-program as well. The estimates reflect the program as of December last year, while taking into account the US budget for 2017.

151003-N-KK394-110
F-35C on the deck of USS Dwight D. Eisenhower (CVN 69). Source: Wikimedia Commons/ Seaman Anderson W. Branch, US Navy

Compared to the earlier SAR 14, the new SAR 15 includes some money moving around, 300 mil. USD going from procurement to Research, Development, Test, and Evaluation (RDT&E), without causing any changes to the total cost of the program. However, the whole cost for the program did go up with 1.7 % or 16 billion USD (inflation adjusted to 2012 USD) compared to the SAR 14, which was what caused the headlines quoted.

The reason behind this increase was the decision to delay the planned retirement date of the F-35A in USAF service to 2070, coupled with all services (USAF, USMC, and USN) adding flight hours to the projected life span of their aircraft. This obviously grows the maintenance cost for the total lifespan of the program, and in fact SAR 15 would have shown a decrease in operating and support costs as well had this not been the case (minus 22 billion USD compared to the current increase by 23 billion USD, both in 2012 USD). Of interest is the fact that the projected flight hour cost have come down with 2.2 % per flight hour for the F-35A, 3.33 % for the F-35B, and 4.2 % for the F-35C, while the expected unit flyaway cost for series produced F-35A and C has fallen from 76.8 to 75.0 and from 89.1 to 88.1 million USD (2012) respectively relative to SAR 14. Especially the continued creep downwards for the F-35C is interesting, as I have earlier questioned whether this rare bird will benefit from economics of scale in the same way as the baseline F-35A. The C is thus set to come down significantly (14 %) in price compared to the current low-rate initial production batch 8 (LRIP 8).

All in all, interesting times up ahead for the Lightning II.

“The F-35 is now a 60-year program, with production through 2038 and operations through 2070. […] There is still much work to do, but the F-35 Joint Program Office continues to make significant progress in reducing the cost of designing, buying, fielding, operating, and sustaining F-35s for the warfighter.”

L t. Gen. Chris Bogdan, F-35 Program Executive Officer

One thought on “F-35 and the Cost Increase that really Wasn’t

  1. Jakesplanes

    I agree with your suggestion that the C is the most suitable model for our needs, carrier tough aircraft have worked thus far, however, I’m concerned by its lack of customers, its basically a US Navy only show right now and for the foreseeable future which was the reason many have dismissed the Super Hornet. Also incidently its the most expensive model which is saying something! Personally I would bet on the Gripen for HX, an outside bet on majority Gripen with a handful of 35Cs. But personally I’d like to see HX going to the Eurofighter though I can’t imagine it will.

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