Pentagon says near deal with Lockheed for more F-35 fighter jets

By Andrea Shalal

RAF FAIRFORD, England (Reuters) – The U.S. Department of Defense and Lockheed Martin Corp are in the final stages of negotiations about two contracts for 160 fighter jets, tandem deals valued at more than $14 billion, the Pentagon’s F-35 program manager said on Saturday.

“We’re in the end game,” Air Force Lieutenant General Chris Bogdan said in an interview at the Royal International Air Tattoo the world’s largest military airshow, where six F-35 Lightning II jets are flying this week.

Bogdan said an agreement could be finalised soon, but declined to predict if it could be announced at the Farnborough International Airshow next week. He said all the major issues had been resolved and the fate of the deal was largely in Lockheed’s hands at the moment.

Lockheed’s F-35 program manager Jeff Babione had told reporters on Thursday that he expected to reach an agreement soon about contracts for the ninth and 10th production contracts for the new warplane.

Sources familiar with the two contracts said they would likely be valued between $14 billion and $15 billion.

Babione said the price of the F-35A conventional takeoff and landing version of the jet would drop to under $100 million per plane in the 10th low-rate production batch, including an engine built by Pratt & Whitney, a unit of United Technologies Corp.

Bogdan said he was continuing to work on a block buy deal for international partners on the $379 billion warplane project, the largest arms program in the world, as part of a larger effort to drive down the jets’ cost.

Buying larger numbers of jets at a time — starting with the 12th production batch of jets — could generate savings of $2 billion to $2.8 billion, even if the U.S. military was not able to join in until it got congressional approval, he said.

The U.S. military services would likely join in starting with the 13th and 14th production lots, which would reduce the initially anticipated savings by “hundreds of millions of dollars,” he said.

Bogdan told reporters the program office was carefully assessing any potential impact on trade and tariffs stemming from Britain’s vote to leave the European Union, but the initial expectation was that it would not have much impact.

A drop in the value of the British pound could help lower some costs, since 15 percent of the jet is built by UK firms.

(Editing by Louise Heavens)