Bloomberg News

Lockheed May Offer India Stealth F-35s to Rejoin Sales Race

June 21, 2011

(Updates with analyst comments from 10th paragraph. Click SHOW for more on the Paris Air Show.)

June 21 (Bloomberg) -- Lockheed Martin Corp. may offer its latest warplane, the F-35 stealth fighter, to India in a bid to rejoin the Asian country’s $11 billion combat-jet competition after its older F-16 model was eliminated.

Lockheed’s chances of offering the F-35 for the 126-plane order were boosted last week when the U.S. Senate Armed Services Committee asked the Defense Department to study the “desirability and feasibility” of a joint strike fighter sale to India, said Patrick Dewar, senior vice president for corporate strategy and business development, in an interview at the Paris Air Show.

The Senate committee report accompanying the Pentagon’s 2012 budget “opens the window to fifth-generation fighter technology release to India, however the Indian services want to deal with it,” Dewar said.

The Senate committee request for a Pentagon study on selling F-35s to India was part of a broader amendment on U.S.- India military ties offered by Senators John Cornyn, Republican of Texas, where the fighter is produced, and Joseph Lieberman, independent of Connecticut, home to United Technologies Corp., which makes the plane’s engines.

Cornyn’s spokeswoman, Jessica Sandlin, said the amendment was “overwhelmingly adopted” by the Senate defense panel. Cornyn is the co-founder and co-chairman of the Senate India Caucus. The provision is a so-called “Item of Special Interest” that takes effect immediately after the bill report is issued. It doesn’t need House approval and “takes effect regardless of what happens to the bill itself,” she said.

MiG-Replacement

Lockheed’s F-16, based on a 30-year-old design, was eliminated in April from the six-way Indian contest to replace its aging fleet of 1970s-era MiG-21s, along with Boeing Co.’s F/A-18 Super Hornet. On the shortlist are Dassault Aviation SA’s Rafale and the Eurofighter made by BAE Systems Plc, Finmeccanica SpA and European Aeronautic, Defense & Space Co.

The competition is one of the largest in recent years and also attracted bids from Russia’s OAO United Aircraft Corp. and Sweden’s Saab AB, which offered the Gripen. President Barack Obama had lobbied on behalf of Bethesda, Maryland-based Lockheed and Chicago-based Boeing.

“I certainly believe it’s possible,” Dewar said when asked if the potential F-35 offer could lead to the Indian Air Force reopening the contest. India “might think differently about the competition” should the stealth jet become available.

‘Succumbing’ to U.S. Pressure

Admitting the joint strike fighter to the bidding at this stage would be “contrary” to India’s weapons-acquisition procedure, said Mrinal Suman, an arms-procurement adviser at the Confederation of Indian Industry in New Delhi. “It’s too late in the day,” he said. “It would be seen by many as succumbing to U.S. pressure.”

India’s air force considered the F-35 in “very informal discussions” at the start of its bid to upgrade its main fighter jet force, said Kapil Kak, a retired Indian air vice marshal who is a director of the Centre for Air Power Studies, a New Delhi think-tank. The plane’s “developmental time scale was unacceptable” because the air force needs planes that can be available as soon as possible to raise its fighter force from a current 30 squadrons to more than 40, Kak said.

Indian defense ministry spokesman Sitanshu Kar couldn’t be reached for comment.

Most Expensive Program

The F-35 jet is still in development. At an estimated $382 billion, it is the Pentagon’s most expensive weapons program. The U.S. Government Accountability Office has said the planes cost about $133 million each in today’s dollars. The Pentagon plans to buy more than 2,400.

Buying F-35s at $133 million each would boost India’s cost in acquiring 126 fighters by about 50 percent, from a currently estimated $11 billion to almost $17 billion.

While a sale of F-35s “would certainly raise concerns in Pakistan about India’s capabilities, they have bigger, amazingly complex challenges ahead of them,” said Kak. As India modernizes its military with an eye on China’s growing capabilities, “it’s in our interest not to score points against Pakistan,” he said.

India has tripled its defense budget over the last decade as it looks beyond its rivalry with nuclear-armed neighbor Pakistan, with which it has fought three wars since both countries gained independence from British colonial rule in 1947, to counter China’s rising power.

T-38 Partnership

The Senate defense panel’s request to study the F-35 sale to India was part of a broader provision that would require the Obama administration to prepare a “detailed assessment of the current state of U.S.-India security cooperation.” The bill seeks a five-year plan for more joint military exercises, defense trade and support for India’s military modernization, homeland security and coastal defense, and maintenance of secure sea lanes of communication.

The lawmakers also asked the Pentagon to study the possibility of a U.S.-India partnership for development of a replacement for the U.S. Air Force’s T-38 trainer jet. The planes, built by Northrop Grumman Corp.’s predecessor, have been in use since the 1960s.

India has bought several U.S.-made weapon systems, including C-130J transports made by Lockheed, and on June 15 signed an order for 10 C-17 transport planes made by Boeing valued at about $4 billion.

Corruption Scandals

In April, when India shortlisted the European jet makers, V.K. Kapoor, a retired lieutenant general in India’s military, said the choice was driven by technical merits.

“It was a by-the-book technical assessment that the American F-16 and F/A-18, despite their upgrades, are not future-generation aircraft,” Kapoor said in April. “They can remain current for another five or 10 years, but this deal is going to determine the operational capacity of our air force for the next 30 years.”

India’s arms-buying process has been slowed by officials’ sensitivities over corruption scandals in previous purchases, including one that helped drive Prime Minister Manmohan Singh’s Congress Party to defeat in 1989 elections, according to Rahul Roy-Chaudhury, senior fellow for South Asia at the International Institute for Strategic Studies in London.

Singh’s government already has seen its legislative program stalled by opposition protests over alleged official corruption in the sale of telecommunications licenses and in last year’s staging of the Commonwealth Games in New Delhi.

--With assistance from Tony Capaccio in Washington. Editors: Steven Komarow, Jim Rubin, Mark Williams

To contact the reporters on this story: Gopal Ratnam in Paris at gratnam1@bloomberg.net; James Rupert in New Delhi at jrupert3@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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