Summary and Key Points: The U.S. Department of Defense (DoD) has resumed deliveries of the F-35 Lightning II jets from Lockheed Martin but is withholding $5 million per aircraft until the delayed Technology Refresh 3 (TR-3) upgrade is fully implemented.
-The first jets with a partial TR-3 upgrade were delivered last month after a year-long pause, but a significant backlog remains. The TR-3 is crucial for enhancing the F-35's digital infrastructure and combat capabilities.
-The withholding of payments will impact Lockheed Martin's profit margins, particularly as the F-35 accounts for a significant portion of the company's sales.
The United States Department of Defense (DoD) is withholding payment for each of the F-35 Lightning II aircraft now being delivered by Lockheed Martin. The Pentagon will withhold $5 million for every single jet until the long-delayed Technology Refresh 3 (TR-3) is completed.
It was over a month ago that the U.S. Air Force announced it would accept delivery of the aircraft after a year-long pause, while the aerospace firm worked on the TR-3 upgrade. The Pentagon finally agreed that the Lightning IIs could be delivered with a "truncated" version of the enhancement, and further upgraded at a later point. The first two F-35 Lightning II fighters equipped with the not-quite-complete TR-3 were delivered last month to Dannelly Field, Alabama, and Nellis Air Force Base (AFB), Nevada.
There were more than 100 F-35s still in storage and awaiting delivery with the truncated TR-3 at Lockheed Martin's facilities in Fort Worth, Texas, as of last month. Even as the first two have been delivered, it would take nearly a year to clear out the backlog of F-35s, a recent Government Accountability Office (GAO) report warned.
"The F-35 remains a top priority, and we recently delivered the first TR-3 configured aircraft to the customer and anticipate deliveries for 2024 to meet our expected range of 75-110 F-35s," Lockheed Martin CEO Jim Taiclet said on an earnings call with analysts last month.
As previously reported, the TR-3 is meant to provide numerous enhancements to the Block 4 models of aircraft, and its delay caused the Pentagon to refuse to accept any new F-35 aircraft since July 2023. TR-3 has been seen as crucial for enhancing the jet's digital infrastructure and weapon systems.
According to the F-35 Joint Program Office (JPO), TR-3 provides "the computational horsepower to support modernized Block 4 capabilities for the F-35 including new sensor suites, more long-range precision weapons, improved electronic warfare features, more powerful data fusion, and increased cross-platform interoperability. These capabilities provide the warfighter a combat-edge to identify, track, engage, and survive against advanced air, ground, and cyber threats. TR-3 significantly updates core processing power and memory capacity, which will allow the F-35 to run advanced software packed with state-of-the-art warfighting capabilities."
The deliveries of the F-35s will "trigger a payment to Lockheed Martin, but withholding $5 billion per jet will [the company's] profit margin, and push the company this issue which it has said will still take months," Reuters reported.
The F-35 accounts for 27% of the aerospace firm's sales, and Lockheed Martin had planned to deliver around 100 of the fifth-generation stealth fighters to customers including the U.S. military and foreign partners this year, while it set a goal of delivering more than 150 in 2025.
"We have coordinated the terms and conditions with Lockheed Martin. As a portion of the agreement, approximately $5 million per aircraft is being withheld and will be released as combat capability is delivered," an F-35 Joint Program Office spokesman told Reuters.
Peter Suciu is a Michigan-based writer. He has contributed to more than four dozen magazines, newspapers, and websites with over 3,200 published pieces over a twenty-year career in journalism. He regularly writes about military hardware, firearms history, cybersecurity, politics, and international affairs. Peter is also a Contributing Writer for Forbes and Clearance Jobs. You can follow him on Twitter: @PeterSuciu. You can email the author: Editor@nationalinterest.org.
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