How selecting the Lockheed Martin F-35 could impact Canada’s economy

Avatar for Chris ThatcherBy Chris Thatcher | August 12, 2020

Estimated reading time 7 minutes, 21 seconds.

The Lockheed Martin F-35A Lightning II has long been considered the favourite to replace the Royal Canadian Air Force (RCAF) CF-188 Hornet. But in a competition now being contested in a weakened economy in which the government faces a ballooning deficit and an uncertain job market, how well each fighter jet scores on acquisition and sustainment costs and economic benefits to Canada – worth 40 per cent of the evaluation – could be almost as important as how well the aircraft meets the Air Force’s capability requirements.

Lockheed Martin F-35 Lightning II Joint Strike Fighter. Larry Grace Photo
Lockheed Martin submitted its 7,000-page bid on July 31 to replace the RCAF’s 94 legacy Hornets with 88 F-35A fighters. Larry Grace Photo

The Joint Striker Fighter (JSF) has become the most expensive weapons program ever for the U.S. Department of Defense and could cost more than US$1 trillion over its 60-year lifespan, according to the New York Times. The Department of National Defence in 2013 estimated the full cost of procuring and operating the F-35A at US$45 billion over 30 years. Others have pegged the number far higher.

Furthermore, under the rules of the JSF partnership agreement, to which Canada is a signatory, Lockheed Martin cannot offer traditional industrial and technological benefits (ITBs) to Canadian industry.

If company officials are feeling at a disadvantage, they aren’t admitting it.

“We understand the rules, we understand the way the competition is structured and the requirements,” said Steve Callaghan, Lockheed Martin’s vice-president of F-35 development and a former U.S. Navy F-18 squadron commander and Fighter Weapons School instructor.

In an online briefing to media on Aug. 6, Callaghan shared the results of an economic impact assessment that suggested selection of the F-35 could impact GDP by almost $17 billion and generate more than 150,000 jobs over the life of the program.

Lockheed Martin submitted its 7,000-page bid on July 31 to replace the RCAF’s 94 legacy Hornets with 88 F-35A fighters. The proposal is one of three the federal government received at the deadline for a contract valued at up to $19 billion. Boeing’s F/A-18E/F Super Hornet and Saab’s Gripen E are also in the running.

The government may begin negotiations with one or more of the compliant bidders once the initial evaluation is completed, likely by next spring.  The final decision is expected in 2022 and first deliveries by 2025.

As the RCAF and Public Services and procurement Canada now begin to evaluate the proposals, Lockheed Martin was keen to remind Canadians the F-35A is the only fifth-generation fighter in the competition. “It truly is a generation ahead of any other fighter in production and can be procured for about the same or less than the far less capable fourth-generation aircraft,” said Callaghan.

Though the Joint Strike Fighter program was originally launched with the intent of developing a more cost-effective family of aircraft with a shared design and common systems, and high production volume to reduce procurement and sustainment costs, the ambitious program has struggled with high development costs and the final price tag.

The F-35A's presence at Bagotville raised questions about whether the Canadian military was attempting to tip the scale in favour of the single-engine jet. Joe Letourneau Photo
Lockheed Martin is aiming to bring the cost per flight hour on the F-35 down under US$25,000 by 2025. Joe Letourneau Photo

However, between the second Low Initial Production Rate (LRIP) in 2008 and LRIP 10 in 2016, the cost of an F-35A decreased by about 60 per cent. As Lockheed Martin ramps up to a production rate of about 141 aircraft per year for LRIP 14, its reached a per unit cost of about US$78 million.

The aim now is to bring the cost per flight hour down under US$25,000 by 2025.

“We are putting that same level of focus, that same level of rigour and innovation to reduce sustainment costs,” said Callaghan. “With … every flight hour, the enterprise gets smarter, more mature, more effective, more on track to meet several critical performance and affordability targets.”

Equally important to a government that will be eying more well-paying jobs in the aerospace sector for decades to come, Callaghan highlighted Canada’s involvement in the JSF program. The federal government was the first nation to sign on to the U.S. partnership and to date “more than 110 Canadian companies have contributed to the development and the production of the F-35,” he said, resulting in about US$2 billion in contracts.

According to the economic impact study, conducted by Offset Market Exchange (OMX), a Toronto-based firm that helps OEMs develop their Canadian supply chains and provides analytics to ensure compliance with ITB obligations, the full impact of the program between production (2007 and 2046) and sustainment (2026 and 2058) could result in $16.9 billion to Canada’s GDP.

Though contracts are awarded on a “best value” basis among all participating countries, Canadian companies have proven their ability to compete and deliver quality, he added. And suppliers would be building parts not just for 88 aircraft, but likely for over 3,000.

With the F-35 manufactured in the U.S. and many sustainment hubs already selected, several Canadian companies have been raised concerns about access to high-value in-service support work. Though Callaghan wouldn’t commit to specifics, he noted that more than 2,500 F-35s could be operating in North America past 2060, resulting in “a large number” of potential sustainment opportunities.

“I think Canadian industry is in a very good position to capture quite a few of those contracts,” he said.

If Canada opts for another aircraft, the current contracts would be honoured “to their conclusion,” but would then be placed up for best value bids to JSF nations, he added.

Though Lockheed Martin is still ramping up production and addressing software issues, the F-35 is a rapidly maturing program. Over 550 aircraft have been delivered and the entire fleet has accumulated over 300,000 flight hours. Eight services, including five outside of the U.S., have declared initial operating capability and the Royal Australian Air Force is expected to do so before the end of 2020.

F-35s have been part of operations and joint and international exercises. Both Norway and Italy have conducted NATO Iceland air policing with their fleets.

“These are indications of the maturity of the program,” said Callaghan. “We are a mature program that is really hitting stride.”

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  1. Canadians have so many illusions regarding business that if they stopping beating children the young men will stop hunting tourists and our tourism industry might rebound. Our delivery business is a complete write off and will invite massive distribution problems by profiting from illegal behavior, ignoring traffic and parking rules. This shabby excuse for a sustainable business sector is part of Canadian business’s self sabotage, that is conveniently ignored while profits are up. The minute some child is run over, it’s all over. Between the high prices caused by high rents of business or the shabby negligence that prevents Canada to thrive, we are in deep trouble. Ever see a Canada Post vehicle obey any traffic rules? We look the other way, like in 1929. Buying billion dollar military vehicles is similar. If civic negligence wasn’t so pervasive on the streets of the G-7, we wouldn’t need the big artillery, folks. Like the street thugs in Germany in 1939, lawless streets, adults, communities and businesses reach critical mass and war starts, due to social negligence breeding crime and war. Think about why the capital of Manitoba has a winning football team that the media and most of the public affectionately refers to as the “Bombers!” In Canada, getting it right is difficult for a business community that is too busy to see the collateral damage, from a freewheeling economy. It’s not rocket science. The President of Macdonald Detwiler bragged about breaking traffic laws on his daily drive, ten years ago. It’s not rocket science, folks.

    1. And having a dollar referred to as a loonie, is another example of the Canadian business community being sabotaged. Our economy deserves dignity and not laughter, internationally.

  2. Not really mature program when internal gun is still not working, ALIS replacement is years away and current avionics-architecture is a dead-end. Considering acquisition law, legally there is no serial production permission.

    1. Yet the Israelis are flying them then into Syria, past SAM defences ie ( s300 & s400) and striking targets at will and returning home undetected. You should actually follow the planes history before commenting on topics you clearly are uneducated about.

  3. …RCAF ,PLEASE stay away from this expensive honker…STICK with the SUPER HORNET …a proven jet that is even better … 17 billion

    1. Although the super hornet is a proven platform it’s a 4th gen fighter and will be obsolete in a few years. F35 is 5th gen and has stealth capabilities and won’t put our allies at risk by giving away their positions.

      1. 5th generation is a marketing slogan. Its meaning changes over time. If you mean stealth say stealth.

  4. If we will be using our aircraft in more deplorable attempts to “keep the peace” in countries that don’t want us and where we can’t tell allies from enemies, then the F-35 might be considered a good choice.

    If, however, we plan to defend Canadian airspace from Russian or Chinese aggression, then a long range, twin engine fourth generation fighter is better. The best of those is the newly upgrade F-15 which Boeing is now bringing back into production for the USAF.

  5. Stay away from this over hyped underperforming expensive piece of junk. It can’t fly more than Mach 1 for 15 minutes without having the stealth coating repaired after the flight. It requires special AC hangering, and new refueling aircraft and systems to keep it in the air. It has state of the art software that is USA proprietary, i.e. we need US permission to modify the software. Need I go on, it is the ultimate fighter money pit.
    The Super Hornet will not be sustained in 25 years and every Canadian knows our government runs aircraft until the fall apart in the sky ( 40 yrs +).
    The J39 Gripen has decent industrial offsets and excellent performance. It’s software can be updated independent of the flight control software and Sweden does not demand a proprietary agreement. The initial price is about the same of the F35 and SH but the operating costs are 1/3 to 1/2. It carries all the ordinance required by NATO and is datalink blends nicely with US fighters. This is a no brainer folks. I hope our government sees it the same way.

    1. We are too deep into the program to chose something else. We’ve been paying for years just to stay in the program

  6. The F35 is a blank cheque for Lockheed Martin and a bottomless money pit for the Canadian tax payer. It’s “fifth generation” status is based primarily on its stealth capabilities. Take those away and you’re left with a markedly inferior fighter which can be defeated by lesser “fourth generation” types. Stealth will not remain a “cloak of invisibility” forever. The Russian S-400 air defence system, one of the most advanced in the world, already claims to have anti stealth capabilities. The Latin phrase “Caveat emptor” definitely applies here. We should heed the warning.

  7. Canada should look at this as an interim capability. Buy the Gripen, have them built by Bombarder and save a major canadian company at the same time as buying a new fighter. In simulations AI has a 5-0 win rate over human pilots, the day of the manned fighter is rapidly drawing to an end. F-35 will be in service for no more then 15 years.. if that

    1. Mark, the 5 – 0 win rate was rigged effectively. The AI knew everything about the aircraft it was fighting and the “kills” wouldn’t in most normal instances have been sufficient to guarantee a kill on the target. There’s quite a bit about it available online including from military pilots who have pointed out several other flaws in the result.

  8. The current F35 A, B and C models have some significant problems that have been well reported for a couple of years now. Canada should steer clear of this Lockheed Martin bird and purchase something less expensive to operate and maintain such as theForme J39 Gripen.
    Below is information published by a former SNCO on some of the current pitfalls of the F35.

    Former SNCO, United States Air Force
    Is there anything that Lockheed Martin is afraid of?
    At this point in time I think that their biggest fear or pressing concern as a company is that someone will figure out how to reliably track the F-35 Lightning II (Multi-role Stealth Fighter).

    If it were to become trackable its major selling point, or initial interest point, would be seriously compromised. Yes, it does have an amazingly sensitive sensor suite with which to ferret out the enemy aircraft at great distances; however that is hard to use and direct if you have SAMs locked on and coming up to/on you.

    I certainly wouldn’t buy the F-35 with all its associated maintenance costs and flight limitations when I can buy the F-16/F-21 Viper, F-18 Super Hornet, or the Swedish JAS-39 Gripen, (or even the larger F-15 Eagle) for less money, and a very significant savings on operational and maintenance costs. The F-35 has limited internal weapons stores, and hanging weapons on the six underwing hardpoints of course compromises its low observability. But even if that isn’t a concern, it still limits speed and maneuverability to have the weapons on her externally.

    It is my understanding that Lockheed-Martin has recently told the Pentagon that some of the bigger issues with the F-35 aren’t within anyone’s power to fix with the available 2020 technology that they are aware of.

    Although the A model has a slightly better record and can handle a full 9Gs where the B and C models have been restricted to no more than 7Gs, the gun mounts are cracking and shedding the coating on the A model. The B and C models also have restrictions on afterburner use, to help prevent the radar absorbing coatings near the exhaust from being damaged and shed. She is a very amazing aircraft when working as designed, but that isn’t happening a great deal.

    The only comforting factor for Lockheed-Martin is if such a tracking capability were to become available, is that they still have the F-15 and F-16 production lines running. Which would allow them to continue with the F-15EX and F-16C, as well as look to the upgraded F-16, the F-21 that had been tentatively offered to India for purchase and production, but is presently not happening.

    Original Question: Is there anything that Lockheed Martin is afraid of?

  9. Go with the Generation 5 fighter aircraft. The F/A18 E/F is a good aircraft, but it’s an upgrade on an airframe designed in the early seventies. It’s time to get with the 21st century. The F-35A is the future.

  10. I see virtues in all the options, and given what we have got, I am pretty certain the CAF could make any of these work; although in sum, I think Gripen offers the best value for Canada’s limited buck. I believe that F-35’s stealth technology will soon be defeated by newer technologies developed by Canada, other friendlies and other less friendlies. Of course, the US government will spend billions to maintain their edge. Can Canada afford go on that ride, to keep paying for upgrades? Lockheed hopes to get the cost per flight hours down below $25k; Janes’ pegs the F-18 at over $10k per flight hour, but Gripen is less than half that. The new Gripen E’s feature substantial state of the art of technology (and future upgradeability) that I believe permit the jet to perform the kind of missions that we have seen the CAF undertake, i.e. northern defense, maintaining Canadian sovereignty, supporting NATO and UN missions. It’s not clear to me that F-35 style ‘stealth’ is a particular requirement of the of CAF beyond ‘nice to have’ given other other situational awareness technologies, weaponry capabilities, aircraft performance, maintenance requirements, operational readiness, etc. offered by the Gripen. I also like the idea that the aircraft can take off from pretty rudimentary conditions, given the lack of runways up in the expansive Canadian North. What a lot of flexibility that could afford the military in establishing less than fully equipped bases up there as the North takes on an ever more important role in geo-politics. I think also the optics of this being a more frugal aircraft are a positive, given many Canadians aversion to military expenditure. Not-to-mention the fact of the Surface Combatant program is going to suck a lot money, no matter what; so being able to be a little bit frugal in one area (while being able to deliver capability), just seems responsible. And while the Super-Hornet is proven technology and possibly the best integrated into the Canadian context, I think it was designed for different air defense strategy and has seen its day; Gripen-E offers more ‘future’ security. Also, single engine jet fighters have proven their reliability over great distances and most warfare scenarios, such that the reduced cost and time to maintain twin engine aircraft must be a positive: twin-engines just aren’t that valuable anymore in the most common scenarios. Of course, there has got to be an important advantage to commonality and interoperability with US fighters at so many levels (including political). Canada must always include those factors in its calculations and as such I think the American offerings are very important, notably the F-35. This all said, I think the decision is very much influenced by factors beyond the the jets’ ability to defend Canada. If you are more of Canadian ‘Nationalist’ (possibly with a more global outlook) above all, and that Canada needs an independent-minded strategy for looking out for its own interests, present and future (particularly the North) I think the Gripen is a better choice; if you recognize Canada’s relationship to the U.S. as very important (if not intrinsic) to maintaining Canada’s quality of life and seeing the North American totality as an important economic and geo-political entity, as in the interest of Canadian sovereignty and identity in the end, I think the American jets are valuable.

  11. Here’s the future for the Boeing F -18 Super Hornet Block III. There is none. The line will close around 2030 for lack of buyers. The US Navy is now looking for a new plane. Where would that leave Canada for parts and any new buyers of which Canada appears to be the only one kicking the tires? Canada would be right back in the same position it finds itself today. Scrounging for parts and buying up other nations old Block III castoff’s, around 2035 and looking for a replacement.

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