$610M Bump Strains Budget, Adds To Contract Squabble

Switzerland has reduced the order of Lockheed Martin F-35 Lightning II fifth-generation fighter aircraft after the U.S. government enforced a price increase of $610 million, after a contract dispute by the two parties. The original order was for 36 of the stealth aircraft.

The Swiss Federal Department of Defence, Civil Protection, and Sport said in a statement that “due to foreseeable additional costs, it is not financially viable to maintain the originally planned number” of aircraft. They instead signaled that a “maximum” quantity of the stealth jets will be acquired in line with an approved 6 billion Swiss Franc (7.5 billion USD) budget. The statement did not indicate the revised number of jets to be acquired.

The statement also noted, “Talks held with the US in the summer revealed that Switzerland cannot enforce the contractually agreed fixed price for the F-35A fighter jet. The US cites increased costs due to inflation, rising raw material prices, and other factors.”

A U.S. Department of Defense official said in August that “costs associated with the F-35 program, particularly for airframes and engines, have been trending higher than the initial estimates outlined in the F-35 Letter of Offer and Acceptance (LOA), originally offered to Switzerland.”

That official said the “estimated $610” million price increase is the result of inflation, raw material price increases and supply chain disruptions.

The DoD official also added that a specific note requested by Bern confirms that “the [Swiss] aircraft will be purchased using fixed-price contracts but clarifies that the price estimated in the LOA may differ from the actual contract price. Fixed-price contracts account for inflation and provide cost predictability but do not guarantee that the estimated LOA price will match the final contract price.”

 A Lockheed Martin spokesperson said in a statement, “We value our partnership with Swiss government and industry and are committed to delivering the world’s most advanced fighter jet, the F-35A Lightning II, to Switzerland. Components of Switzerland’s first F-35 recently started production. Major assembly work will begin early next year, with deliveries planned to begin in 2027.”

FMI:  lockheedmartin.com/