Sifting Through Future F-35 Production Numbers

The Department of Defense released its latest round of selected acquisition reports and tucked away in their review of the biggest program in DoD history was an interesting footnote that said the F-35 is now expected to operate in US service until the year 2088.

That’s 11 years later than previously expected. Yet the same report declared that the plane’s service life is still expected to be 30 years. So, if it’s retiring 11 years later but not staying in service longer, that implies it will be in production for 11 more years than anticipated.

At first blush, that sounds like a good thing for Lockheed Martin and its investors. But the target total number of aircraft for the US has not budged, so given an 11-year slowdown in procurement, that would imply lower numbers per year, at least for the United States.

Those who watch the program will know that the F-35 Joint Program Office capped overall F-35 production about two years ago at 156 jets per year. That was significantly lower than previously anticipated, but at least seemed to make the run rate predictable. (Our belief is that this cap was put in place to help encourage Lockheed Martin to reach a settlement favorable to the government on terms for production lots 15 through 17, and sure enough, once an agreement was announced on those production lots, the government allowed as how the cap was coming off. Coincidence, surely.)

But then a funny thing happened. After the 156-jet limit was announced, Germany, Canada, Finland, the Czech Republic, and the UAE all signed up for F-35s. Which meant that to fill those orders, the run rate would have to go into the low to mid 170s per year. Or would it?

If the US is spreading its buy of 2,356 jets over 11 extra years, that opens plenty of room on the production line to absorb not only the new foreign commitments but potential future orders, while keeping the run rate at or near – stop me if you’ve heard this before – 156. Couple that with a recent DoD notice that lots 18 and 19 could be below 130 or even 120 jets, and the B-side of “Anticipation” could turn out to be “Is That All There Is?”

It's not unlikely that new DoD projection is a negotiating gambit with regard to those future production lots.