Lockheed Martin, in a dogsled with Boeing, puts F-35 on sale – The Motley Fool

Lockheed Martin (NYSE: LMT) attempting to give his F-35 a layer against a rival fighter is offered by Boeing (NYSE: BA) is dramatic reducing the F-35 sticker price for the next series of jets, it will sell to the Pentagon.

The airline offers the base model of Fifth Generation F-35 for $ 80 million in negotiations with the Pentagon, according to a report by DefenseOne. It is a 11% reduction from the $ 90 million price in September last year when the last tranche of the warriors was ordered.

  A Lockheed Martin F-35A in flight.

Lockheed Martins F-35A in Flight. Image source: Lockheed Martin.

The F-35 has been destroyed with long development delays and cost overruns, but the aircraft is now operational and remains a central part of the US arsenal. The Pentagon is expected to complete its next fighter order this summer. Analysts have expected that each batch will be cheaper than the last, but the amount of this latest reduction will probably be a surprise.

New for the price of old

Lockheed Martin has been under constant pressure to bring down the cost of the F-35, but the noise has increased since the Pentagon reversed course and decided to buy new Boeing F-15s for the first time for two decades. The modernized F-15EX is significantly upgraded to its original 1960s, with a sophisticated electronics suite, but it is still the latest generation of technology that has been of little interest to military procurement officers.

The decision to buy the F-15s, according to the Pentagon's summary summary, "reflects the institute's team capacity strategy to tackle various threat situations." The government buys the F-35's "to tackle advance technology plugs that are being distributed by Russia and China," the report says. However, in order to defeat lower technology platforms, it will use older designs "nominally lower operating costs compared to 5th generation combat beams" such as F-35.

Cost is the key. The F-15 decision came down to the Pentagon who wanted to push as much military power as possible from limited funding, and at a time when the military had a long list of new equipment.

  Three Boeing F-15s on the run.

Boeing F-15 fighter. Image source: Boeing.

At $ 80 million per unit, the F-35 is within easy reach of an F-15. Lockheed's sales line to the government is that there is no logical reason to buy the latest generation technology when you can get ahead of about the same price.

More than just the sticker price

While Lockheed Martin has made steady progress down the sticker price, other costs remain in Boeing's favor. The Pentagon hopes to get the operating cost of an F-35 down to $ 25,000 per hour by fiscal 2025, down from about $ 44,000 per hour in fiscal 2018, but defense officials are not sure the goal is achievable.

Robert B. Daigle, director of the Pentagon's Cost Assessment and Program Assessment Office, under an early May subdivision committee said that the $ 25,000 is "a target, and it's not our projection for where we actually should be."

F-15, compared to, is significantly less expensive to operate at an estimated cost of less than $ 30,000 per hour. Daigle said the Pentagon estimates that the total cost of ownership of an F-35 over a 10-year period is $ 47 million more per aircraft than an F-15 at the same time.

"These 4 generation warriors are the most cost-effective way to meet lower mission requirements, ensuring that our fifth generation fighters are available for high-end battles," Daigle said in his prepared testimony.


Cost of acquisition per flight


10 years operating cost per flight

10 years cost of ownership


$ 100 million

$ 110 million

$ 210 million


$ 90 million

$ 73 million [19659025] $ 163 million

Data source: Pentagon Office of Cost Assessment and Program Evaluation. All figures in fiscal 2020 dollar. Acquisition cost is total unit costs.

Lockheed Martin for its part is much more optimistic that it can hit the target of $ 25,000 and notes that the company has reduced its share of the cost per flight time by 15% since 2015. The hope is that when jet production will also hit the production of widgets and components entering the jet, reducing the total cost of spare parts. Maintenance costs should also be reduced as the Pentagon gets more experience working on the F-35.

Lockheed is the long-term winner

Lockheed Martin's cost-saving effort is not likely to stop buying F-15s, but they are an important step in the right direction for the company anyway. Lockheed seems to be on track to set its long-term goal of lowering the airline ticket on a model model F-35 to $ 80 million by 2020, helping to ensure a stable order in both the US and Allies and retain F-35 on the goal of being a trillion dollar circuit for the company and its key suppliers.

Lockheed Martin is a best buy among defense contractors because of the variety of offers, but even with the broad portfolio, the F-35 remains a critical factor in the company's long-term success. No matter what the Air Force decides to do with the F-15, it seems certain that the Pentagon will buy many F-35s well into the foreseeable future.

No matter how this battle goes, Lockheed Martin is the winning war.

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