What really caused that F-35 price drop

Ronald Reagan famously said, there is no limit to the good you can do if you don’t care who gets the credit.

So who gets the credit for a price breakthrough in the next order for the controversial and long-troubled F-35 fighter? We know who’s taking  the credit.

In Pentagon-Lockheed-speak, the Low Rate Initial Production Number 10 covers the next 90 copies of the F-35. Most, 76 to be exact, are F-35As — “A” meaning the Air Force version that takes off normally from a runway. Of these, 44 go to the Air Force and the rest to allies. That includes eight for Australia, whose prime minister had a testy phone call last with President Donald Trump. Mexico isn’t buying the F-35.

At $94 million per plane, they are in fact down 7.3 percent from the last batch. The Navy and Marine Corps versions — which take off from carriers or straight up and down, respectively — are also down by similar percentages. Prices have fallen by more than half since Lockheed finished the very first of the stubby planes.

President Trump is taking credit for the price reduction on this next batch. During the transition period, he browbeat Lockheed — via Twitter — over F-35 program costs. Lockheed didn’t dispute him, but instead cited something called the Blueprint for Affordability and the natural learning curve. The F-35 is Lockheed’s gravy train for a long time to come, so why would it argue with the President publicly?

The exchange no doubt surprised and vexed the F-35 program executive officer, Air Force Lt. Gen. Chris Bogdan. The fact is, prices were supposed to drop for this batch long before the election. When making complicated things, industry always relies on the learning curve and economies of scale from volume to bring down costs and prices. So does its customers. For example, it may cost $1 billion to design and fabricate the first unit of a new microprocessor. Yet the chip maker sells them to game console or computer makers for $300 and makes money on volume. That’s in part thanks to the learning curve.

Although they’ve reached what the Air Force calls initial operating capability, the new planes still don’t do all that much. Problems keep popping up. Last month it was something to do with insulation of the fuel pipes. The Air Force and its contractor keep knocking them down.

The armed forces are running against short-term and long-term clocks. Short-term, according to numerous published reports, the Navy has grounded more than half of its F/A-18 Hornets for various problems it doesn’t have the money to fix. This interview with Amy Schafer of the Center for a New American Security details why Marine Corps aviation accidents — and fatalities — are on the rise because of budget-constrained maintenance. Fleets are getting older and more expensive to maintain.

Short-term budget relief will help. But long-term, the military needs new platforms. They’ll have to follow the learning curve on pricing too.

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