New fighter jets could cost more than Liberals Projected

By: DANIEL LEBLANC AND STEVEN CHASE, The Globe and Mail 

The Liberal Party promised massive savings on the purchase of new fighter jets in the last election, but the recent purchase of Boeing F/A-18 Super Hornets by Kuwait suggests bargains will be hard to find.

The federal government is nearing a decision on the replacement of its fleet of CF-18s, facing pressure to deliver a better deal than the previous, Conservative government had put together.

While straight comparisons are never easy in military procurement, Kuwait’s recent purchase of 40 Super Hornets for $13.5-billion raises questions about Canada’s ability to meet its own financial targets for new fighter jets.

During the 2015 election campaign, the Liberals said they could acquire their own fleet of Super Hornets for $65-million per unit - a figure far less than then $335-million Kuwait just agreed to pay. 

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The deal means Kuwait will be paying an average of $335-million per aircraft, a price that includes training, spare parts and engines, weaponry and logistical support.

During the 2015 election campaign, the Liberals said they could acquire their own fleet of Super Hornets at a flyaway price (which does not include training or spare parts) of $65-million per unit; by way of comparison, the Liberals said the Lockheed Martin F-35, which had been favoured by the Conservatives, had a flyaway price of $175-million per aircraft.

Military analyst David Perry said the Kuwaiti deal suggests the Liberals were overly optimistic before they came to power.

“This cements my skepticism about the assumption that some fighter options are horrendously expensive and others are dirt cheap,” said the senior analyst at the Canadian Global Affairs Institute.

The previous government had set aside an envelope of $9-billion to acquire a fleet of 65 fighter jets.

Mr. Perry said it is impossible to determine how much Canada would pay for a fleet of Super Hornets or F-35s today, but the numbers out of Kuwait show “all of these aircraft are expensive.

“Some of them may be relatively more or less costly, but there is no such thing as cheap fighter aircraft.”

The federal government is promising a decision on the final process to replace its CF-18s by the end of the year. The matter will go to cabinet shortly.

“We have a lot of credible information and analysis that were done over the summertime and we’re putting the final touches onto that,” Defence Minister Harjit Sajjan said in an interview.

“At the end of the day, I want to make sure that our men and women have the right type of aircraft and that we have the right benefits as a nation, because we’re making a very big decision here and I want to make sure we get this right,” the minister added.

During the campaign, the Liberals said they would change the requirements for the new fighter jets to place less emphasis on “first-strike stealth capabilities” and greater emphasis on the ability to contribute to the “defence of North America.”

“We will reduce the financial procurement envelope for replacing the CF-18s. Instead of budgeting for the acquisition of 65 F-35s, we will plan to purchase an equal or greater number of lower-priced, but equally effective, replacement aircraft,” they said.

Still, they promised to launch an “open and transparent competition” for new fighter jets, which officials at both Lockheed Martin and Boeing continue to advocate.

Sources said there are three options before the cabinet: launching a competition, buying a new fleet through a sole-source process or acquiring a few aircraft to form an “interim fleet” and finalizing the fleet at a later date.

The Department of National Defence predicts that its fleet of CF-18s will be able to fly into the next decade, with some aircraft due to be retired in 2023; but the Canadian Armed Forces will need a new fleet of fighter jets by 2025.

U.S. approves Boeing, Lockheed fighter jet sales to Middle East Allies

Announced late yesterday, the US has approved sales of both the F-15, F-16, and F/A-18 Super Hornet to three Middle Eastern allies. This news might help Canada in its search for a replacement for the CF-18 Hornet's as it could possibly extend the Boeing Super Hornet production line to allow Canada time to buy the aircraft before it is official retired by the manufacturer. 

Here is the article announcing the sale: 

By: Andrea Shalal, Reuters -  Berlin Office 

The United States on Wednesday began notifying lawmakers that it has approved $7 billion in long-stalled sales of Boeing Co (BA.N) fighter jets to Kuwait and Qatar, and more than $1 billion in Lockheed Martin Corp (LMT.N) jets to Bahrain, sources familiar with the decision said.

The sales had been pending for more than two years amid concerns raised by Israel, Washington's closest Middle East ally, that arms sold to Gulf Arab states could be used against it, and criticism of Qatar for alleged ties to armed Islamist groups.

U.S. officials began notifying lawmakers informally about the sale of 36 Boeing F-15 fighter jets to Qatar valued at around $4 billion, and 28 F/A- 18E/F Super Hornets, plus options for 12 more, to Kuwait for around $3 billion, the sources said.

They also told lawmakers about plans to sell 17 Lockheed F-16 fighter jets to Bahrain, plus upgrades of up to 20 additional aircraft.

The deals will be formally announced once the 40-day informal notification process has ended. Then lawmakers will have 30 days to block the sales, although such action is rare.

Reuters reported earlier this month that the U.S. government was poised to approve the long-delayed sales to Kuwait and Qatar.

The State Department said it could not comment on any ongoing government-to-government arms sales.

Delays in the process had caused frustration among U.S. defense officials and industry executives, who warned that Washington’s foot-dragging could cost them billions of dollars of business if buyers grew impatient and sought other suppliers.

The approval of the fighter jet sales comes as the White House tries to bolster relations with Gulf Arab allies who want to upgrade their military capabilities. They fear the United States is drawing closer to Iran, their arch-rival, after Tehran's nuclear deal with world powers last year.

Sources said officials at both the State Department and Pentagon had largely agreed to the deals some time ago, but had been awaiting final approval from the White House.

Qatar, home to the largest U.S. air base in the Middle East, and Kuwait have ramped up military spending after uprisings across the Arab world and amid rising tensions between Sunni Muslim Gulf Arab states and Iran, the region's Shi'ite power.

Both Qatar and Kuwait are part of a 34-nation alliance announced by Saudi Arabia in December aimed at countering Islamic State and al Qaeda militants in Iraq, Syria, Libya, Egypt and Afghanistan.

The sales will boost fighter production for both companies.

Boeing's F-15 line is set to close in 2019 after Boeing completes work on a large order for Saudi Arabia, unless a follow-on order is approved.

As orders slow, Boeing is increasingly relying on technology upgrades and services sales to maintain its revenue stream from fighter jets, Shelley Lavender, president of Boeing's military aircraft division, said in an interview.

The company is adding new technology to the F-15 and F/A-18 and other aircraft, and is refurbishing them on the same assembly lines use to build new aircraft, she said.

When the current fighter jet lines end, that loss of revenue will be offset by upgrade efforts. "We're blurring the traditional lines of new aircraft builds and sustainment," Lavender said.

Boeing's broad portfolio from commercial derivatives rotocraft, autonomous vehicles, fighters and weapons "will allow us to remain healthy for the decades to come," she said.

Byron Callan with Capital Alpha Partner said he expected all three sales to be approved.