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Australian Buy Comes at Key Time for F-35 Program

Apr. 28, 2014 - 03:28PM   |  
Big Buy: Australia's first F-35 on the assembly line in Fort Worth, Texas.
Big Buy: Australia's first F-35 on the assembly line in Fort Worth, Texas. (Beth Groom/Lockheed Martin)
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MELBOURNE, AUSTRALIA, AND WASHINGTON — When Australia announced it would purchase 58 F-35A joint strike fighters last week, it agreed to the single largest batch of F-35s acquired by an international partner to date — an important milestone for a program that appears headed to smaller domestic buys than planned.

The deal, worth AUS $12.4 billion (US $11.5 billion), also is one of the largest purchases of defense equipment in Australian history.

The latest batch is in addition to the purchase of 14 of the stealth jets previously approved by the Australian government, bringing the total order to 72 aircraft, enough to completely replace the country’s Boeing F/A-18A/B Hornets. Australia has a total requirement of up to 100 F-35As.

The large order is helpful to the F-35 program, which recently had to push some US procurement out to the future.

“The US ramp-up is a small part of what it should have been at this point, both for budget and technical reasons,” said Richard Aboulafia, an analyst with the Teal Group in Fairfax, Va. “It’s now much more dependent than planned on international buys to get to the program economics than expected.

“International buys could be that salvation of floundering program economics,” Aboulafia added. “Until now, you didn’t have anyone buying large numbers aside from South Korea, Japan and Israel. That’s why this is big — it’s the biggest and probably the best funded order to date.”

The importance of international partners was acknowledged by US Air Force Lt. Gen. Christopher Bogdan, the head of the US-led F-35 program, during the March rollout of the Pentagon’s fiscal 2015 budget proposal.

“If our partners and FMS [Foreign Military Sales] customers start shifting planes to the right, with them about 50 percent of the airplanes we’re going to build in the next five years, you will see the price change,” Bogdan said.

However, he cautioned that this does not mean a major price increase if partners cut their orders.

“When I say the price changes, everybody thinks the price is going up,” Bogdan said. “It’s not really going up. ... It’s not going down as fast as it would have otherwise. The price is still going to go down, lot after lot after lot, because we’re ramping up.”

In its most recent budget request to the US Congress, the Pentagon had to push the planned procurement of 33 F-35C aircraft carrier models and four F-35A variants out of the five-year defense plan to meet sequestration-related cuts. That procurement delay contributed to a $7.4 billion jump in the F-35 program’s price tag, according to a recent Pentagon analysis.

But Bogdan said international partnerships will help offset the loss of US orders.

“Even though you take 33 Navy airplanes and four US Air Force airplanes out of the [next five years], as long as your partners and FMS customers are staying there, the price on the airplane doesn’t change a whole lot,” he said.

Of the 14 planes planned before last week’s announcement, Australia has ordered just two. They are due to be completed in July and will join the F-35 international training center at Luke Air Force Base, Ariz., early next year to commence pilot training.

The Royal Australian Air Force will replace three operational Hornet fighter squadrons and an operational conversion unit with the 72 F-35As, and it has a future requirement to replace its 24 Boeing F/A-18F Super Hornets, delivered in 2009.

“The fifth-generation F-35 is the most advanced fighter in production anywhere in the world and will make a vital contribution to our national security in coming decades,” Prime Minister Tony Abbott said. “The first F-35 aircraft will arrive in Australia in 2018, and the first Royal Australian Air Force operational F-35A squadron will stand up in 2020.

“The government remains committed to building a strong, capable and sustainable Australian Defence Force,” the prime minister added. “The government will also consider the option of acquiring an additional squadron of F-35 aircraft to replace the Super Hornets in the future.”

Abbott also said that about $1.6 billion would be spent on infrastructure and facilities at the two future F-35A operating bases at Williamtown in New South Wales and Tindal in the Northern Territory.

“Australian defense industry has also been awarded over $355 million in work, and stands to win more than $1.5 billion in JSF-related production work over the life of the program,” he stated. “There are expected to be additional opportunities for Australian industry in the ongoing support of the F-35 in Australia.”

The F-35 has drawn criticism for risk remaining in flight testing as well as cost stability. But Andrew Davies, senior analyst with the Australian Strategic Policy Institute, welcomed the announcement, saying the joint strike fighter “overmatched“ anything that China or Russia has.

“One of the saving graces that Australia has is that, by the time we get our aircraft and are looking at introducing them to service, they should have been in service with the United States for two or three years already,” he told the Australian Broadcasting Corp.’s Radio National service. “So we should have some experience to draw on.”

Australian Defence Minister Sen. David Johnston told Radio National that the government has a risk-mitigation strategy if costs increase to unacceptable levels.

“If Australia decides that cost has blown out to such an extent, we are not bound to continue,” Johnston said.

“We are committed to the program. Every indicator at the moment indicates costs are headed in the right direction for us,” he said. “But should there be a major turnaround in cost, then the option is available for us to leave the program.”


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