F-35's maiden flight is called `successful'

Multinational jet fighter goes for a spin

Lockheed craft Pentagon's biggest contract

December 16, 2006|By BLOOMBERG NEWS

FORT WORTH, Texas --Lockheed Martin Corp.'s F-35 Lightning II jet fighter, the largest U.S. weapons program ever, successfully completed its first test flight yesterday, which may help pave the way for foreign sales of the aircraft.

After a five-year development effort, Lockheed chief pilot Jon S. Beesley took the F-35 on a maiden flight that lasted 35 minutes, said Thomas Jurkowsky, a Lockheed spokesman.

The plane was once known as the Joint Strike Fighter to reflect its many international partners.

But only half of the eight nations working on the plane with the United States have signed an agreement to buy it. The original 40-year business framework envisioned the sale of about 745 aircraft to those eight governments.

Canada, Australia, the United Kingdom and the Netherlands have agreed to buy the plane, while Italy, Turkey, Denmark and Norway are expected to sign by the end of the year.

"The first flight is the culmination of all development efforts," said Richard L. Aboulafia, vice president at the Teal Group, a Fairfax, Va., consulting company. "Now the foreign politicians have something they can take back home and say `Look at that great plane. We're going to buy some.' "

Lockheed, which has its headquarters in Bethesda, Md., won the $19 billion Joint Strike Fighter development contract in October 2001.

The Pentagon estimates the cost to develop and produce the aircraft at $276 billion. The eight U.S. allies had pledged more than $4.5 billion to help develop the jet, in return for the right to buy it.

Shares of Lockheed fell 21 cents to close at $90.04 yesterday on the New York Stock Exchange. They have risen 42 percent this year.

The Pentagon plans to buy 2,443 of the aircraft to replace older planes including the F-16 and A-10. The estimated average cost is $45 million to $60 million each, depending on which of three variants is purchased, according to Lockheed.

Lockheed is also the primary contractor for the FA-22 Raptor, the state-of the art fighter-attack airplane of the Air Force. Some of the F-35's systems derive from the F-22.

The world's biggest defense contractor is still gathering data on details of the F-35's performance during yesterday's maiden flight, Jurkowsky said. There was a one-hour "window" for the flight and the fact the flight was shorter doesn't imply there were technical issues, he said.

"From all initial indications, the first flight was very successful," he said.

As the F-35 enters production at the end of this decade, it will help Lockheed almost double sales of military aircraft to $20 billion annually by 2015, Ralph D. Heath, the company's executive vice president, told a conference on Dec. 5.

The aircraft flown yesterday, called the conventional takeoff and landing version, is intended for the Air Force and is the first of the three versions to be tested. A short-takeoff, vertical-landing version, to be used by the Marine Corps, will be tested in 2008 and a version that can land on Navy aircraft carriers is scheduled for testing in 2009.

"The Air Force version of the plane is the one that will get the lion's share of overseas sales," said Loren B. Thompson, a defense analyst with the Lexington Institute in Arlington, Va. "A successful first flight will send a positive signal to prospective buyers."

With the first flight out of the way, keeping remaining development work on cost and on schedule will be crucial to keep allied nations on board the program, said Byron K. Callan, a New York analyst with Prudential Equity Group. He rates Lockheed's shares "underweight."

The cost estimate to fully develop the fighter increased by more than 80 percent to about $45 billion, from the original estimate of $25 billion. The aircraft's operational capability also was pushed back by two years as Lockheed struggled to reduce the jet's weight, according to a March 2005 report by the Government Accountability Office, the investigative arm of Congress.

The GAO also warned of further cost increases, which caused some allies to question whether the jet, intended to be an inexpensive replacement for the F-16, can be delivered at the intended price.

Danish legislators estimated the aircraft's cost at about $80 million to $90 million each, which may put it out of reach to some buyers, Callan said.

"That wouldn't be affordable for a lot of countries," Callan said. "At end of the day, the key question for the F-35 is affordability. Some countries like Denmark could see cutbacks if the price goes up."

Yesterday's flight test was an "important milestone" for Lockheed and its partners, said Howard Rubel, an analyst with Jefferies & Co. who rates Lockheed shares "hold" and doesn't own any.

"That says it's real, it's not a museum piece," Rubel said. "This is the beginning of the next stage of getting the program into production."

The F-35 is assembled by Lockheed in Fort Worth, with a center fuselage portion made by Northrop Grumman Corp. in Palmdale, Calif., and an aft fuselage made in England by BAE Systems PLC of London.

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