Can Lockheed’s F-35 Be Replaced?

Earlier last month, President-elect Donald Trump took to Twitter to express his concerns regarding the mounting costs of the F-35 program. In his post, he mentioned that he will approach Boeing (NYSE:BA) to provide quotes for a “comparable” F/A-18 jet. This would seem to be a canny negotiating tactic. It enables Trump to ask for concessions from Lockheed Martin (NYSE: LMT) without having to make any concessions of his own. However, what Trump didn’t realize while writing this is that there is absolutely no comparison between the fifth-generation F-35 Lightning II and fourth-generation the F/A-18 Hornet. A quick comparison between the two will show us why.

The F/A-18 is a fourth-generation jet, designed at a time when the U.S. commanded complete air superiority in any conflict. The jet is easy to operate and quick to equip. For example, it can pick up bombs and missiles from an aircraft carrier, and deliver them to a target, with fast turnaround times. That said, the F/A-18 is not a stealth aircraft. It is easily detectable on a radar, and for that reason, is relatively easy to track and target.

On the other hand, the F-35 is a fifth-generation fighter, designed with the sole purpose of combating advanced 21st century enemies capable of superior air defences. For this reason, the F-35 is a stealth capable fighter. The jet’s radar absorbing skin and configuration make it invisible to the radar. Furthermore, the aircraft is equipped to take on opponents in the information age. One of its most important attributes is its ability to collect, process, and disseminate information with assets across the battlefield. Additionally, it has the capability to perform the tasks of multiple legacy carriers combined. For example, it is equipped to provide close air support, vertical take-off and landing, engage in electronic warfare, surface-to-air missile suppression and much more. In this respect, an alternative to buying the F-35, is to buy and maintain multiple legacy planes capable of each of these tasks.

Despite F-35’s benefits, the program has had its fair share of teething issues. At present, the program has run up almost $379 billion in costs. Since the beginning, critics have argued that the plane has many design flaws that have led to heavy additional costs and significant delays in the development process. Many have blamed the procurement process, in which Lockheed was allowed to design, test, and produce the aircraft all at once, instead of first identifying the defects before starting production. It was further argued that the program’s mammoth sunk costs and political momentum has made the program too big to cancel now.

That said, it seems as though Lockheed Martin is working hard to bring down the costs of its planes. The Air Force had in the past asked the company to bring the cost per plane down to about $85 million. As recently as May this year, Lockheed managed to bring the cost per plane down to just under $100 million (not including the engines), which is a significant drop. The latest bulk purchase by the Pentagon shows that LMT has made further progress in this respect. Last month, the Pentagon ordered 90 planes at a price of about $7.2 billion. This brings the cost per plane down to a whopping $80 million. This again is exclusive of engines, however. At present, each engine costs about $16 million, bringing the cost for the complete plane to a grand total of $96 million. Regardless, this a major accomplishment by the company. What it essentially means is that Lockheed has managed to shave off about 20% of the airplane’s cost in just six months. At this rate, Trump’s argument could very soon be invalid.

The need to cut costs and save the taxpayer billions is a noble thought . . .  but at what cost? It is argued that despite the high costs, the F-35 is one of the most advanced fighter available, perhaps second only to its air-superiority counterpart the F-22. Building a superior air fleet is essential for any country’s national security. Are “savings” made now worth the potential threats it may create in the future?

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