Podcast: The F-35 Under Pressure
Lockheed Martin's premier combat aircraft is an essential part of the aerospace industry, infusing the economy with billions of dollars each year. The U.S. has a deal for three more years of production but will face continued challenges with international sales and technical upgrades.
Michael Cisek, a senior advisor at AeroDynamic Advisory, joins the podcast to discuss the program's future.
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Jen DiMascio: Hello and welcome to the Check Six podcast. I'm Jen DiMasio, the executive editor for Defense and Space. I'm here with Defense Editor Steve Trimble and Michael Cisek, senior advisor at Aerodynamic Advisory. We're here to discuss the US military's largest combat aircraft program, the F-35, which you both wrote about for this week's Aviation Week. Michael, you wrote a column about the F-35s importance, not just to the US military, but to its economy. Can you explain for our listeners why it's so critical to the nation?
Michael Cisek: Sure. Thanks, Jen. At Aerodynamic Advisory, we've recently looked into the F-35 program and its economic impact upon the US economy. And this was in conjunction with Lockheed Martin where we were able to see what they were doing, their numbers, their procurement and sustainment numbers. And they estimated originally the size of the F-35 program at just over $60 billion on the US economy. And what we decided to do was take a different approach. And our methodology differed slightly from Lockheed Martin's. And what we did was we separated all activities from production and sustainment because each one essentially has a different ecosystem. The supply chain is different, the suppliers are different, and the spending profile is different. And when we were done, we estimated that the economic impact upon the economy was about $72 billion. So that's $34 billion in direct impact from the production and sustainment of the aircraft, and then another $38 billion in indirect impact.
That's the money that flows out into the broader non-aerospace economy. A supplier gives money to their employees, those employees go out into the economy and buy clothes, go out to a movie, spend money at a restaurant. So it's over $70 billion in impact from the F-35 program. That is a humongous amount. When you're thinking about where American Aerospace stands right now, the manufacturing and sustainment of aircraft, it's no surprise that Boeing is going through some struggles right now, whether it's the KC-46 program, which is struggling or the Air Force One program. They're losing money and their role in American aerospace manufacturing, while not diminished, is struggling right now. And one of the main drivers that's picking up the slack right now is the F-35 program.
Jen DiMascio: Thanks Michael. Steve, you also wrote about some important developments on the program this week, critically that Lockheed Martin, the government, reached an agreement on three years of production contracts. What are the details of it? What did it reveal about some of the pressures now on Lockheed Martin?
Steve Trimble: It confirmed and I think elaborated on some of the pressures we knew were already building on the program. As Michael says, it's a very important program, not only for the US Air Force, but for the US economy. And it is one of the few aerospace programs that is growing in terms of output as the production rate goes on this sort of climb up to 156 aircraft per year for deliveries later this year. But at the same time, we're seeing kind of a divergence now, at least in the short term and perhaps even longer depending on what happens in a few years in terms of orders. So annual lot orders, the orders placed in each year, starts with lot one, and we're now entering the ordering period for lot 17, so the 17th year of orders. We're in the 15th year of production. So the aircraft that are supposed to be delivered this year will start with lot 15 somewhat later in the year because they're a little bit behind at the moment.
But what that order that came out with, that came out in very late December for lot 15 through 17 aircraft, that was 398 aircraft in total. That's a lot of aircraft for one order. And that's the US and international orders. But it also showed us that the orders in each lot are declining year over year since 2021. So in 2021 there were 160 orders, and that was lot 14 if I'm getting all these numbers right. And then it goes down to 145 aircraft in lot 15 and down to potentially 126 aircraft in lot 17. They haven't finalized the lot 17 numbers yet. They finalized the pricing on those units, but not the actual number of aircraft. That will happen later this year. Back in September as well, Lockheed released a request for information with a forecast for what they expect to be delivered in lot 18 and 19. And they showed that decline continuing or at least bottoming out in lot 18 with 118 orders. So we went from 160 orders a few years ago to 145 in lot 15 to 126 in lot 17 down to 118 or 119.
And what that means is there's going to be a lot more pressure on Lockheed to get some new orders into the program by around lot 19 especially because they're going to be burning through their backlog. And unless they're able to get several dozen more orders by that lot 19 period, they are going to have to reduce production. Because remember, they're going up to 156 deliveries this year, but their orders that are coming in are going down to 118 or 119 potentially by 2025, 2026. So at some point they're going to have to figure out how to get more orders into the program in order to sustain this output that they're at, at 156. And that's even a lower output than they were expecting or projecting just a couple years ago when they were planning to go up to 170, maybe even 180. So that's the big issue I think for the program that we saw confirmed and elaborated upon with real numbers finally, from this sort of four year marathon process in negotiating the lot 15 to 17 contract. So that's where the pressures are right now.
Jen DiMascio: So it would seem that going forward, international orders are going to be extremely critical. But it also seems that we've seen a lot of countries place orders already. What's left out there and how do they make up the slack there, Michael?
Michael Cisek: Yeah, we've seen Finland, Switzerland, Germany, Greece, Czech Republic and Canada all recently either finalize orders or enter into negotiations with Lockheed. And you're right, Jen, there's not a lot of space out there for orders to take up with countries just because some countries are going to be excluded automatically based on some of the weapon systems they operate. And in my article I spoke about how the F-35 is kind of in the center of a Venn diagram between hard power and soft power. And one of the things that we've seen in the past is that some countries don't play nice. And we've seen this usage of soft power, not very successfully with the F-35 program, but we've seen it used specifically one with Turkey where we tried to use the F-35 as a bargaining chip to get them to abandon the S-400 air defense system because we did not want any Russian trainers having access to F-35 data. And we've seen it recently with the UAE where the US agreed to sell the UAE, I think 50 F-35s along with some MQ9s.
And that deal has been in limbo because of the UAE's relationship with China and China having 5G cell towers in the country. We don't want them to be able to get any information with F-35 flight profiles. And even most recently we've seen it with Israel where the F-35 program and Lockheed Martin said Israeli pilots with foreign passports can't operate the F-35. And that's trying to wean away China's effort to get pilots who have Western aircraft experience to go to China and then teach them how to land aircraft on aircraft carriers and possibly any type of technology or operational secrets regarding the aircraft. So it's definitely a way that the US wields soft power. And because of that, there are countries that are not going to be able to receive this. So the pool of available countries going forward is going to be smaller. For example, India, I'm just taking one for example, they have the S-400 in their military, so they're not going to be a customer ever. So things like that are going to prevent certain countries from participating in the program.
Jen DiMascio: So how do you keep the program relevant too? Upgrading it seems like one way you could make that aircraft more attractive into the future.
Steve Trimble: Sure. Actually, I just want to make one more point about what Michael was saying in that last point on orders and especially on the international market and how you're able to get orders to go up in the international market. Yes, Lockheed has been very successful and the joint program office has been very successful at getting new orders from international countries, especially in Europe. You mentioned the recent wins with Finland, Switzerland, Germany, Canada, selections and negotiations going on with Czech Republic and Greece, Spain. There's a lot of activity going on there. But still the actual ability to pump up orders relative to where they are with the production rate, 156, there's a limitation there. And the Canadian order I think really pointed that out because this is Canada, they signed for 88 aircraft, four squadrons, 22 aircraft per squadron.
Well, their delivery profile that they announced last week when they finalize the deal starts with 22 aircraft in the first four years. So four aircraft the first year, six aircraft a year for the next three years, and then 22 aircraft from 2032 each in 2030 to 2032. So four squadrons over the course of seven years, but back loaded with 66 aircraft in the last three years. There's no country outside of the United States that can take that many aircraft per year. I'd be very surprised if Canada's actually able to do that. And potentially what's happening here is that Canada sort of kicking the decision down the road so that the predecessor of the current government has to deal with this at some point and possibly reduce their orders starting in late next decade. So the real way to pump up orders over the next three or four years or five years, is to get the Defense Department to turn around from where they've been, where they've seen orders declined steadily.
And the US Air Force in particular, they were planning to buy at one point 72 aircraft per year, then they went down to 48 and they started buying F-15 EXs to balance that, then they went down to 31 aircraft last year. The future year defense program that they released last year expects them to go down to 24 aircraft instead of 48 in 2024 before they start going back up again. But still not at the same level that they were expecting. I think it's 46 or 47 aircraft per year in the out years. And that's just not enough to compensate for the reduced demand overall despite all of these orders relative to their current production rate. So something's going to have to give there at some point. They're either going to have to get a lot more orders or deliveries are going to go down.
Now when we talk about upgrades, this is the big really interesting issue because what happened that came out over the holiday period was the JPO confirmed that the sort of offhanded announcement by the Senate Appropriations Committee that the lot 17 aircraft that they added to the budget for F-35 As for the Air Force, would have the APG 85 radar with those aircraft. And of course the existing aircraft has the APG 81 radar. It's an active electronically scanned array by Northrop Grumman. And as part of that confirmation from the Joint Program Office, we found out that Northrop Grumman is still the supplier. They were the supplier for APG 81. They're still the supplier for APJ 85. No big surprise, it's a really big deal to change radar suppliers. And Lockheed basically is stuck with Northrop for all our radars. But no other details about that radar.
There's been a lot of speculation, and I think it's probably true that it's a gallium nitride upgrade. So you're going from gallium arsenide as semiconductor and the transmit received modules to gallium nitride. It gives you a lot more radiated power, maybe more coupling between electronic warfare and the radar as a phased array as a transmitter for the electronic warfare system. Things like that you could sort of speculate on as natural upgrades. The weird thing is they're being so secret about it. They went through the last 13 months, they went through all these competitions in Europe where they explained all the advantages publicly of the F-35 that they could talk about and they never mentioned this one, which is it seems unusual for me. And now even after they've acknowledged it, they still won't give us any information about it. I've asked the Joint Program Office as well as other places, Lockheed and the State Department, if APG 85 is exportable. And so far I haven't been able to get a response back.
Northrop basically gave me a no comment. The State Department said, "Well, you'll have to ask the JPO," and the JPO said they'll get back to me. And they still haven't done that yet, although they say they're working on it. But that's a big deal. If APG 85 is exportable, that means all the international countries will have access to it versus just the US Air Force and the US Navy and US Marine Corp. If it's this secret and if it's going to be in lot 17 aircraft, that means it has to have completed safety of flight testing or is very close to completing safety of flight testing in order for them to start building it and then to put it in production configuration on production aircraft in lot 17, which enter assembly later this year. And if the radar is that far advanced, that means it's either coming from internal funds within the F-35 program or it's harvesting technology that's developed by more secret programs like [Next Generation Air Dominance] or B-21, which also might be using Northrop radar technology.
Anyway, so that's kind of a long monologue about where all that's going, but I'm really interested in how that plays out, especially for the international market with APG 85. But I'm curious if you have more thoughts on that, Mike.
Michael Cisek: Yeah, I think Steve, one point to make too is a lot of this discussion with upgrades, radar, hardware software upgrades, cannot happen without a different engine than the F-135. So you have limitations right now on the aircraft, thermal and power limitations from the new block four upgrades that are going to happen. And they can't happen with the current configuration with the engine. So there's two options. There's what Pratt calls the enhanced engine package. It's an improved engine, so it's an improved F-135 or an entirely new engine through the Adaptive Engine Transition Program. And that's GE or Pratt, one of their configurations that's going to use a three stream adaptive engine to take care of these thermal and power issues. But all these upgrades cannot happen without a different engine configuration so that's important to keep in mind.
Steve Trimble: Right. And then on top of that, and that's the other issue, is if the US Air Force goes down the adaptive cycle path with reengining, a full reengining for the F-35A, we already know US Marine Corps is probably not going to be a part of that, even though GE says the adaptive cycle engine would be compatible with the F-35B. Marine Corps doesn't seem to believe that at the moment. Navy seems very skeptical as well. But then when you go to the international market, there's a lot of operators out there who just don't need that extra power and extra range that you would get from an adaptive cycle engine. So you're going to have potentially different configurations between US and international with a propulsion system and the radar going forward.
Now, maybe not, maybe APG 85 is exportable. And the propulsion thing depends on what the Air Force is going to do, which we're probably going to find out about in several weeks, if not maybe two or three months when the budget comes out for fiscal year 2024. So it just sets up some interesting choices and decisions and options depending on whether it's US or international going forward.
Jen DiMascio: Absolutely. Well, unfortunately, that's all the time we have for today. But we'd love to have you back again, Michael, as we learn more about what's to come here. Join us again next week for another episode of Check Six. Don't miss it, and subscribe in your podcast app. One last request, if you're listening to us an Apple Podcasts and you want to support this, leave us a star rating or review. Thanks a lot. Bye for now.