How Lockheed Martin plans to speed up sales with commoditized F-16The US Air Force (USAF) and Lockheed Martin believe a commoditized version of the F-16 will accelerate Foreign Military Sales of the fighter.
The jet is already the most popular combat aircraft in the world, with 2,280 examples in service at the end of 2019, according to FlightGlobal’s 2020 World Air Forces report. That is about 16% of the total world fleet, or more than double the second-most numerous competitor, the Russian-built Sukhoi Su-27/30.United Arab Emirates air force F-16s
Yet, Lockheed Martin believes it can sell even more – faster – with the help of a new base model configuration.
As part of an indefinite-delivery and indefinite-quantity (IDIQ) fixed-price-incentive contract, which has a $62 billion ceiling and was granted by the USAF in August, the company plans to offer standardized examples of its new-build F-16 Block 70/72 aircraft.
The traditional process of pricing and customising the F-16 for foreign buyers was cumbersome, says JR McDonald, vice-president of business development in Lockheed Martin’s integrated fighter group.
“The development of the pricing, and the back and forth with the country on the pricing, and then the actual pricing when we deliver it to them in the form of an offer and acceptance letter, that takes a very long time,” he says. “And, it takes a lot of money to develop those individual contracts for each individual country.”
Now, the US government’s Foreign Military Sales process will start with a base model of F-16 that comes with a standardized price and a standard set of features, including avionics, mission systems, an active electronically scanned array radar, an electronic warfare suite, an Automatic Ground Collision Avoidance System and an engine, among other typical items. The standardized items in the contract are at the lowest possible price, adds McDonald.
The idea for a standardized F-16 pricing list came from the USAF’s System Program Office. Lockheed Martin believes all international sales of the fighter will now go through the IDIQ contract and the Foreign Military Sales process, with the exception of the potential F-21 variant the company is proposing for the Indian air force’s 110 fighter programme.
The USAF and Lockheed Martin believe using the same contract over and over again, instead of writing new contracts for each customer, time will be saved in the sales process of the fighter.
“It’s a way to streamline contracting, make the pricing as transparent as possible in an [Foreign Military Sales] environment,” says McDonald. “Everybody knows what the baseline is.”
The process should also save time and money on the production line as customizations typically slow work, he adds. Lockheed Martin builds the F-16 at its Greenville, South Carolina facility, which started producing the fighter in 2019 after production was moved from Fort Worth, Texas.Should a customer want a particular item, say a different heads-up display, that request would be fulfilled via a separate contract, while the rest of the base model fighter would be configured with the standard IDIQ contract. Speciality technologies to be incorporated into the F-16 as part of an offset agreement with a foreign nation would be handled via a separate contract also.
The USAF plans three pricing periods over 10 years for the base model F-16. The initial pricing period will be relatively short. Lockheed Martin is already in negotiations with the US government for the second period, which will last two or three years. The third pricing period will span the remainder of the contract.
Lockheed Martin has already secured two contracts via the IDIQ totalling 90 aircraft: 66 examples of the F-16 for Taiwan and 24 examples for Morocco.
The aerospace manufacturer believes now is a particularly ripe time to offer a commoditized F-16. McDonald points out that many former member states of the Soviet Union, especially those still flying the ageing Mig-21 or Mig-23 fighters, are on the market for new jets. “Those are in the end of service life and countries around the world are having to find themselves in a situation where they need to replace them,” he says.
There are 348 Mig-21s still in service, including a couple of dozen between newer NATO members Romania and Croatia, according to Cirium fleets analyser. The Mig-21 was introduced into service in 1959. And, there are 214 Mig-23s still in service, many within the air forces of African nations, such as Angola and Ethiopia. The Mig-23 was introduced into service in 1970.
Some customers of the former Soviet Union that have attempted to renew their fleets with Russian-made aircraft have been frustrated by the USA’s Countering America’s Adversaries Through Sanctions Act, which punishes countries for buying from Moscow, said Viktor Kladov, director of international cooperation and regional policy for Rostec at the 2019 MAKS air show. Rostec is the Russian-government owned holding company which controls Sukhoi and Mikoyan’s parent company United Aircraft Corporation.
“We feel like some nations are more cautious,” said Kladov in August 2019. “For instance, yesterday I talked to the Indonesian chief of the air force and he mentioned CAATSA, the US law. From what he says, I understand they receive threats. They are dependent not just on Russian equipment, they are dependent on a large part of US-made equipment. If as a punishment measure, let’s say, American manufacturers stop supplying spares, stop supporting American-made equipment, then there will be a breach in security in national defence in Indonesia. So, they are very cautious.”
In November 2019, Jakarta said it planned to buy two squadrons of F-16 Block 72 fighters, while also buying a squadron of Sukhoi Su-35s. The country appeared to attempt avoiding financial sanctions with a cash and barter arrangement with Russia that might include local farm products such as palm oil and coffee. Then in July, the nation’s plans appeared to change again when it reportedly made an offer for 15 of Austria’s Eurofighters.
Sanctions have no role in countries deciding to switch from Russian fighters to the US-made F-16, insists McDonald. Rather, what’s driving sales is the fighter’s performance, low life-cycle cost and its ability to serve as a connection to the USA’s security apparatus, he says.McDonald says, for some nations, the F-16 could serve as a stepping stone to the Lockheed Martin F-35 stealth fighter – sales of which are tightly controlled by the Pentagon and permitted only to the USA’s allies and most-trusted partners.
“Not every country in the world is ready today for an F-35. And, that can be either because they from a policy perspective haven’t become that level of partner with the United States yet, or maybe just the maturity of their military, it’s hard to jump from a Mig-21 directly into an F-35,” he says. “An F-16 is the perfect pathway to F-35. You gain that familiarity with the United States, you become a reliable partner with the United States and then the next step into the F-35 is not such a stretch.”