Bloomberg News

Australia to Buy 58 More F-35 Jets, Scaling Back Initial Plan

April 23, 2014

Australia committed to buying a total of 72 F-35 Joint Strike Fighters, down from a 2009 plan to purchase about 100 of what has become the Pentagon’s most-expensive weapons system.

The U.S. ally is ordering 58 of the Lockheed Martin (LMT:US) Corp.- made aircraft for A$12.4 billion ($11.6 billion), on top of the 14 it pledged to buy in 2009, Prime Minister Tony Abbott said today in Canberra. Delays in the production and testing of the F-35s saw Australia announce last year it would purchase 12 more Super Hornets from Boeing Co. (BA:US) to address a shortfall in operational capacity.

“There has been some escalation in costs but nothing as dramatic as we sometimes see” in developing military hardware, Abbott told reporters. “We are confident that all of the logistical issues are well on the way to being ironed out.”

The projected acquisition cost of the F-35 has climbed 71 percent in inflation-adjusted dollars since the Pentagon signed its contract with Lockheed in 2001. Original international partners such as Italy, Turkey and Canada have indicated they are re-evaluating their plans, while Israel, Singapore, Japan and South Korea are being monitored for signs their procurement orders may be affected by rising costs.

“The delays meant Australia purchased other aircraft as a stop-gap measure, which reduced the number of Joint Strike Fighters the country needed,” said John Blaxland, a senior fellow at the Australian National University’s Strategic and Defence Studies Centre in Canberra. “They are expensive but the fact that America’s key, modern allies are on board is telling: they are convinced they have to have them.”

Rising Costs

Abbott, whose Liberal-National coalition was elected in September, is seeking to build out Australia’s defense capacity at a time of China’s rising military assertiveness in the region. Abbott must balance Australia’s interests between strategic ally the U.S. -- which has as many as 2,500 Marines based in the northern city of Darwin -- and top trading partner China, which it criticized last year for creating an East China Sea air defense identification zone.

Pentagon estimates released April 17 show the projected cost to develop and produce the F-35 fighter has risen 1.9 percent in the past year to $398.6 billion. Congress has approved spending $83.2 billion on the F-35 so far.

The project has also been beset by technical troubles, such as jittery images in the pilot’s helmet. The Pentagon has questioned the progress of the plane, finding in January that the fighter wasn’t sufficiently reliable in training flights last year and developed cracks in ground testing.

‘Very Effective’

A 2009 policy paper commissioned by the previous Labor government confirmed Australia planned to equip its air force with about 100 F-35s.

The 72 aircraft are expected to be fully operational by 2023, Abbott said today. Australia is retaining the option of purchasing a further squadron of 18 Joint Strike Fighters, he said.

“Countries like the U.S. and the U.K. are not in the business of being beaten,” Abbott said. “This aircraft is, in the judgment of the U.S. and the other principal Western powers, a very, very effective aircraft.”

To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net Andrew Davis


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Companies Mentioned

  • LMT
    (Lockheed Martin Corp)
    • $170.18 USD
    • 0.85
    • 0.5%
  • BA
    (Boeing Co/The)
    • $122.29 USD
    • -0.03
    • -0.02%
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