Lockheed Martin [LMT] delivered 26 F-35 Lightning II fighters to the U.S. Air Force, Navy, and international buyers in the first quarter of this year, but the company will likely have to accelerate production in the last three quarters of this year to meet its goal of delivering 148 to 153 F-35s in 2022.
If the the first quarter pace holds steady, deliveries would fall 44 to 49 F-35s short of the goal for 2022, but Lockheed Martin said that monthly deliveries are typically not spread equally over a year and fluctuate “based on a number of factors.”
The company said that it still plans to deliver 148 to 153 F-35s this year and that it has delivered 44 of the aircraft so far in 2022.
Last September, the F-35 Joint Program Office agreed on a rebaselined program that will deliver between 133 and 156 planes in the coming years (Defense Daily, Sept. 27, 2021). At the time, Lockheed Martin said that it would deliver 133-139 F-35s in 2021, 151-153 planes this year, and 156 planes starting next year. The company said that it delivered 142 F-35s last year, thus exceeding the goal. Last September’s rebaselining was an effort to make up for a dip in aircraft production in 2020 when Lockheed Martin delivered 120 F-35s, the company said.
Through the first quarter of 2022, Lockheed Martin has delivered 779 F-35s overall, including more than 300 to the Air Force, the largest buyer, which has a goal of fielding 1,763 F-35A variants.
For three years, the F-35 Joint Program Office and Lockheed Martin have been negotiating the prices and quantities for the next three low-rate initial production lots of F-35s. Lot 15 may include 169 jets; Lot 16, 157; and Lot 17, 159.
DoD has issued nearly $3 billion in long-lead contracts for Lots 15-17.
“We remain in negotiations with the U.S. government on the Lot 15-17 production contracts,” Lockheed Martin said in its 10-Q report ending March 27. “Without additional contractual direction from the U.S. government, we will exceed the current contractual authorization and funding on the Lot 15-17 advance acquisition contract during the second quarter of 2022. If this occurs, it could negatively impact our results of operations, cash flows, and financial condition. We continue to engage with the U.S. government to reach a mutually agreeable solution.”
Backlog at Lockheed Martin Aeronautics fell from $56.5 billion in 2020 to $49.1 billion in 2021, “primarily due to prolonged negotiations for F-35 production contracts resulting in lower orders in 2021,” per Lockheed Martin’s 10-K report last December. Backlog represents sales a company expects to record based on funded and firm, but unfunded orders. When a company makes deliveries or performs work under a contract, backlog converts to sales.
The F-35 backlog at the end of March was 204 aircraft, compared to 230 at the end of last year.
“Given the size and complexity of the F-35 program, we anticipate that there will be continual reviews related to aircraft performance, program schedule, cost, and requirements as part of the DoD, congressional, and international countries’ oversight and budgeting processes,” Lockheed Martin said in its first quarter 10-Q report.
“Current program challenges include supplier, Lockheed Martin and partner performance (including COVID-19 performance-related challenges), software development, the receipt of funding for contracts on a timely basis, execution of future flight tests and findings resulting from testing and operating the aircraft, the level of cost associated with life cycle operations, sustainment and potential contractual obligations, and the ability to continue to reduce the unit production costs and improve affordability,” the report said.