Development of production costs for the acquisition of the F-35 aircraft
The government has recently been informed about the current development of the cost of the F-35 aircraft, which should be in service in our army or in the Air Force from 2029. The government decided to purchase two dozen American machines at its meeting on 27 September 2023.
In the aforementioned decision, the government approved the acquisition of 24 F-35 5th generation supersonic aircraft with a total financial volume of USD 5 billion (the price in CZK is based on the current exchange rate of the Czech crown against the US dollar at the time of individual payments during the contract), with deliveries from 2029 to 2034, including munitions, logistics support, spare parts and spare engine, delivery of simulators and simulators, training and training of personnel.
On December 20, 2024, the U.S. Department of Defense published information on the progress of negotiations and reaching an agreement with Lockheed Martin regarding the establishment of a non-transferable framework for a future contract for the acquisition of F-35 Lightning II aircraft from production lot 18 (Lot 18), which concerns deliveries to the U.S. and selected foreign customers, but not to the Czech Republic. As the central contracting authority for major military equipment acquisitions in a government-to-government format, and also the lead for their project management, the DoD regularly informs its political representation and contractors in this format on the progress of complex project implementation.
The content of the published information was mainly the updated financial limit of the future contract between the US Department of Defense and Lockheed Martin for the delivery of aircraft from Lot 18, which is higher than originally planned. The price increase is justified by the evolution of the global economic and security situation, specifically the significant increase in inflation caused by the global pandemic covid-19 and the war in Ukraine, which is reflected in all basic cost items such as raw material, labour and transportation prices.
Although the negotiations regarding production batch No.18 do not directly concern deliveries to the Czech Republic, the above information is an indication of future price developments and it can be assumed that price updates will subsequently occur for aircraft destined for the Czech Republic under batches No.21 to No.26, which will also reach a higher technological level than aircraft produced in batch No.18.
Due to the fact that the details of the aforementioned contract for Lot 18 deliveries will not be known until mid-2025 at the earliest, it is not possible to derive a possible percentage price increase for the acquisition for the Czech Republic at this time. 18, in addition to the delivery of all three variants of the aircraft in different configurations (F-35A - aircraft with standard take-off and landing, F-35B - aircraft with shortened take-off and vertical landing and F-35C - aircraft designed primarily for aircraft carriers with the ability to take off with the help of an on-board catapult and landing with interception on braking lines; B and C versions are generally more expensive than the A version the Czech Republic is buying, so the nominal increase for these is higher), but also the acquisition of production tooling and equipment for assembly and service capabilities built in Italy and Japan.
In any case, the agreement between the Czech and US governments already takes into account the impact of inflation. In 2023, a provision of 6% of the total contract value was negotiated and incorporated into the contract, which is intended to cover the risk of a possible increase in inflation. This reserve should be sufficient for further future changes in an average economic scenario. It should be recalled that, for a contract of this length (11 years), adjustments of the type described above are quite normal and expected, when it is necessary to react continuously to economic developments.