Air Platforms

Farnborough 2014: Officials announce F-35 affordability measures

09 July 2014
Lockheed Martin and the DoD expect that affordability measures announced in the build-up to Farnborough will see the aircraft hit its approximately USD80 million unit price target by 2018. Source: Lockheed Martin

Lockheed Martin and the US Department of Defense (DoD) both announced measures ahead of the Farnborough Airshow that are geared at driving down costs and increasing the affordability of the F-35 Lightning II Joint Strike Fighter (JSF) programme.

Speaking at the Royal International Air Tattoo (RIAT) at Royal Air Force (RAF) Fairford on 10 July, Lockheed Martin F-35 Program Manager Lorraine Martin and DoD F-35 Program Executive Lieutenant General Christopher Bogdan both revealed a raft of initiatives that should enable the programme to achieve its goal of an approximately USD80 million unit cost about a year ahead of the 2019 target date.

"Right now, 80% of the costs of the aircraft will be adjusted by volume and economies of scale," said Martin. "The more aircraft we produce each year, the better our supply base can address their production expectations to get economies of scale throughout their supply base. That's just the economics of production. The other 20% will come from us taking action - changing what materials we use and how we produce the aircraft. To do that, you actually have to invest to get money out, and that is where the Blueprint for Affordability comes in."

The Blueprint for Affordability will see Lockheed Martin and partners Northrop Grumman and BAE Systems front-up a combined USD170 million in extra investment over the next two years, with the purpose of taking costs out of the aircraft.

"With the [Joint Program Office] we will look at each opportunity for cost reductions and include these cost savings in future negotiations, so that the US government will get those savings as we put these ideas into action," she said.

"At this point we are anticipating that we can save USD10 million on every production aircraft going forward [through this initiative], which is big money when you're talking about 3,000 aircraft. As an industry base we will only be able to make a return on our investment when we give a benefit to the US government; we will only get out money back when we get costs out of the aircraft."

According to Martin, this initiative should see the programme achieving its Selected Acquisition Report projected affordability target of approximately USD80 million per aircraft (including engine) by 2018.

"All of this came about in 2012 when [Under Secretary of Defense for Acquisition, Technology and Logistics, Frank] Kendall laid down the gauntlet on affordability. This is something very novel, and not something that we as industry have done before," noted Martin.

Sharing the same platform as Martin at RIAT, Gen Bogdan noted his enthusiasm for the industry-led Blueprint for Affordability, and also spelled out some initiatives he is looking at to increase overall affordability.

"I have been trying to rebalance the risk in the programme from government to industry, and industry has been a willing partner in this. They understand that to sell more airplanes the risk has to be balanced more appropriately. This will result in better outcomes, whereas the previous balance [with the government taking on most of the risk] resulted in bad behaviours," he said.

"The thing that worries me the most about performance on this programme is affordability, and in particular two aspects of affordability; [namely] what does it cost to buy the airplane, and what does it cost to operate and support it in the future?"

Gen Bogdan highlighted the Blueprint for Affordability initiative as an important industry-led means of helping to address these aspects, saying: "We are very happy that industry is going to invest its money upfront for the first two years. The important part of that is that if industry wants to get their money back I have to see the savings. [If they provide those savings] that is a win-win for everyone - they get to make more profit and I get a lower priced airplane. We are all happy."

Gen Bogdan has identified production volumes as another means for bringing down costs. In order to ensure that the much vaunted economies of scale of the F-35 programme are achieved, he announced a new initiative to incentivise partners to commit to numbers and timelines.

"It's just simple economics that if you build more airplanes you get a production line that's at [its optimum] rate, and the airplane and engine are just going to cost less. What I want to try and do is to keep everyone on their commitments to buy airplanes when they say they're going to buy airplanes. It does nobody any good when an international partner or a US service pushes their order to the right. Every time that someone delays an airplane, everybody else that didn't [delay] sees their costs go up," he explained.

"[To stop this] over the next three to four years we are looking to find a way to incentivise those partners that already know how many airplanes they are going to buy and who already have the commitment from their government, to lock them into a block buy that is similar to a multi-year buy in the US. This gives them a much lower price on their aircraft, [and] it stabilises industry as they know what they are going to be building over the next three to four years, which allows them to invest even further to again drive down costs. It also allows those partners that have not committed to see what the price of the aircraft could look like if they did."

Gen Bogdan also revealed other measures being taken or planned. "What are we doing today to drive costs down so that our partners can know that this airplane is affordable?" he noted. "In 2013 we stood up a reliability and maintainability programme [for the aircraft and engine] which should reduce [sustainment] costs to the tunes of tens-of-millions of dollars over the next three or four years. We need to attack those sustainment problems now, because if you wait until you are producing 150-180 planes a year then it's too late and too costly to make the required changes. We're hitting that with earnest now."

Gen Bogdan added that these and other measures are all geared at driving costs down to the point where affordability is no longer seen as an issue for the programme, exclaiming: "Boy, do I want to get away from being called the trillion dollar airplane!"

(1054 words)
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