(Bloomberg) -- The Pentagon will take deliveries of F-35 fighter jets again next week instead of continuing to wait for a delayed hardware and software upgrade, a decision that could bring $700 million to manufacturer Lockheed Martin Corp. by the end of the year.
Officials decided that the Defense Department couldn’t wait any longer for the full TR-3 upgrade to complete testing given that jets were piling up on the tarmac at a Lockheed facility in Texas — where they might suffer weather damage — and pilots weren’t able to train on the aircraft.
Instead, the Pentagon has decided to retrofit the jets later when the new upgrade is fully tested.
F-35 program manager Lieutenant General Michael Schmidt made the decision to go ahead with orders on July 3 “after extensive coordination with the Services, Joint Strike Fighter Executive Steering Board, pilots, maintainers, and industry,” F-35 spokesman Russell Goemaere said in a statement. “Deliveries will resume in the near future.”
The Pentagon was withholding about $7 million in final payments for each undelivered aircraft, according to estimates by Jefferies aerospace analyst Sheila Kahyaoglu. Lockheed projects delivering between 75 and 100 aircraft by Dec. 31, meaning the change could bring $700 million to the company in that time, Kahyaoglu said.
“Deliveries help investor confidence,” she said.
The first aircraft delivered will be F-35A Air Force models with Navy and Marine Corps versions to follow once those jets with an interim upgrade pass flight worthiness tests.
The new plan is consistent with a proposal Schmidt outlined to Congress in April. He said he was mulling a two-phase approach for delivery: accepting jets with hardware and software that don’t meet all warfighting requirements but can used for training and upgraded later.
“There are certain capabilities that will not be available in the truncated version of the TR-3 software,” he told a House armed services committee panel that month.
“This is an important milestone in our continued development of TR-3 capabilities,” Lockheed said in a statement. “We look forward to delivering the first TR-3 F-35s with combat training capabilities soon.”
The Air Force jets will be accepted with interim training capability software, not combat full capability. Those jets will then need software uploads for full combat capability once that portion of the software is complete, which will likely take place next year.
The upgrade will increase the jets’ processing power 37 times and memory 20 times over the F-35’s current capabilities. The first fully capable TR-3 jets were supposed to be delivered in July 2023, but the program has been dogged by problems with the new software and a new integrated core processor for combat missions.
US taxpayers could be on the hook for millions of dollars in repairs if the parked jets suffered major weather damage while waiting on the Texas tarmac for the long-delayed software upgrade, according to the Pentagon’s contracts management agency.
(Updates with Pentagon confirmation, in fourth paragraph and analyst comment, in fifth paragraph.)
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