Japan F-35 purchase could reduce price tag for Canada

OTTAWA—The U.S. defence giant Lockheed Martin—and, by extension, the Canadian government—celebrated Japan’s decision to jump on the F-35 stealth fighter bandwagon.

The announcement late Monday that Tokyo plans to purchase 42 of the advanced radar-dodging jets gives the much-maligned program a boost at the same time it’s been under increased scrutiny in Ottawa.

As part of the deal, Japanese aerospace companies will be allowed to make some parts for their own F-35s. The could also open to them becoming global suppliers, even though the country did not participate in development of the aircraft.

Steve O’Bryan, the company’s vice-president of F-35 integration and business development, says Japan’s inclusion will have an impact on Canada’s planned purchase in four-years’ time.

“It lowers the cost of procurement and support of the Canadian airplanes,” he said in a conference call from Fort Worth, Texas, on Tuesday.

The minister in charge of buying equipment for Canada’s military, Julian Fantino, issued a news release saying Japan’s decision bolsters his government’s case for the F-35.

The price tag has been the subject of furious debate in Parliament, with the Harper government insisting it will pay roughly US $75 million per aircraft when it starts buying in 2016. Critics say the figure has been low-balled.

The U.S. and Britain recently signed a deal for the delivery of early-production aircraft at between US $140 million-$145 million. Canadian officials have long insisted that the price will drop as the assembly line ramps up.

Media reports in Japan say the defence minister there will pay US $114 million per aircraft.

The purchase price in any given year depends on how many other countries are placing orders and, while O’Bryan won’t speculate on what Ottawa will pay, he says the company is looking at opportunities to bring other countries onboard, including South Korea. Doing so could drive down the price even further.

The Japanese air force has 362 jet fighters that are reaching the end of their serviceable life. The new deal covers replacement of the country’s aging F-4 Phantoms and O’Bryan said Lockheed Martin plans to bid when the much-larger fleet of F-15s is ready to retire in a few years.

Access-to-information documents show the Canadian government expects to buy 13 of the stealth fighters before 2020 when the air force begins to retire the current fleet of CF-18s. Another 52 aircraft will follow in the years after that.

It is unclear over how many years Japan plans to stretch out its purchase.

Fantino pointed out that Canadian aerospace companies have landed about $370 million in parts contracts to build the state-of-the-art fighter, which is assembled in the U.S.

In order to bid on those opportunities, the federal government had to contribute to the development of the plane through arrangements with the U.S. government and other allies.

To date, the federal treasury has cut cheques totalling $203 million and expects to contribute as much as $741 million over the nearly five decades of the project.

That cash was supposed to have purchased not only premium access for Canadian companies, but a preferred purchase price.

O’Bryan said Japan was not a partner in the development.

Japan’s defence ministry said Tuesday that Mitsubishi Heavy Industries Ltd., IHI Corp. and Mitsubishi Electric Corp. will participate in production of the plane, but details of how much participation there will be have yet to be decided.

Japan is not the only exception.

Israel, essentially an observer in the development, insisted last year that its country’s defence industry be allowed to participate in the program for the 20 aircraft it was planning to buy.

The U.S. has not agreed to install Israeli-made parts in the initial batch of aircraft, but suggested that could change with further orders.