The Pentagon will withhold some payments for new Lockheed Martin F-35 stealth fighters until the manufacturer fully certificates the latest version of the jet for combat duty.
The Pentagon’s F-35 Joint Program Office (JPO) confirmed the new payment arrangement to FlightGlobal on 29 August, noting the terms had been coordinated with Lockheed.
“As a portion of the agreement, approximately $5 million per aircraft, is being withheld and will be released as combat capability is delivered,” the JPO says.
The agreement covers F-35s assembled in the latest configuration of the jet, known as Technical Refresh 3 (TR-3), which is meant to deliver improved data processing and communications capabilities to the fifth-generation fighter.
Lockheed started producing TR-3-configured F-35s before completing flight certification of the new hardware and software. That has proven far more challenging than expected, with the manufacturer encountering protracted difficulties.
A 23 August financial filing with the US Securities and Exchange Commission confirms Lockheed has agreed to accept partial payments for aircraft with a “robust combat training capability”, while continuing to pursue full certification for TR-3 jets.
“The JPO will withhold a portion of final aircraft delivery payments from the company until TR-3 combat capability is qualified and delivered,” Lockheed says.
The “robust combat training capability” refers to the second increment of a phased plan to deliver fully combat-ready aircraft. F-35 deliveries resumed in July with less-capable initial training capabilities, according to the JPO.
Lockheed’s Fort Worth assembly line continued producing aircraft at the full rate of 156 annually during the delivery halt.
The TR-3 decision affects all F-35 customers, as the JPO manages procurement for all customers globally, including the three US military operators and overseas partners. In summer 2023, the office stopped accepting new-build F-35s in TR-3 configuration, citing a lack of airworthiness certification.
The extended pause has pushed at least one F-35 operator to make substantial adjustments to force deployments. In June, Denmark recalled six of its F-35As from the USA, where they had been stationed for the purpose of training Royal Danish Air Force pilots and support crew.
Those fighters had been produced in the older TR-2 configuration, which is still certified for full-combat use.
Concerns at the Pentagon about liability for damage to assembled aircraft being stored at Fort Worth, combined with the need to maintain a pipeline of incoming pilots, prompted the JPO in July to begin accepting new TR-3 jets in a modified configuration allowing for limited, non-combat flight operations.
A securities filing on 23 July indicates the company expects to deliver 75-110 F-35s in the second half of 2024, while continuing production at the normal annual rate.
Despite the temporarily reduced rate of payment, the resumption of F-35 deliveries will be an important financial win for Lockheed. Even without new aircraft being delivered, the F-35 programme accounted for 25% of Lockheed’s sales in the first half of 2024.
The cost of a conventional take-off and landing F-35A is approximately $78 million, with larger price tags for the short take-off and vertical landing F-35B and the aircraft-carrier-capable F-35C.
With the resumption of deliveries, Lockheed has now handed over more than 1,000 of the aircraft. As of 30 June, the F-35 backlog was 373 aircraft, according to financial disclosures.
Negotiations are ongoing between Lockheed and the JPO for a contract covering the next batch of F-35s under production Lots 18 and 19.
