F-35 programme back to full steam ahead
The government of the Netherlands has confidence in the new US set-up of the F-35 programme. Not all problems have been resolved yet but the programme is back on the right track. The first Dutch test aircraft will be completed in September 2012. That is what Minister of Defence Hans Hillen and Minister of Economic Affairs, Agriculture and Innovation Maxime Verhagen say in the 10th Annual Report on the Replacement of the F-16 of 2011 that was presented today. The test programme is proceeding well, although the software development in particular requires ongoing attention. There have been new cost increases, partly caused by a number of countries having moved their planned orders back to later years.
In 2010 and 2011, the US government subjected the programme to a critical review. The outcome of that review has led to a new set-up for the programme. The use of resources has been redistributed so that more time and capacity are available for the test programme. Furthermore, the programme management has tightened the reins. Earlier this year, US Secretary of Defence Leon Panetta left no doubt that the F-35 will enter service, as this aircraft provides the technological lead that is necessary for taking on new threats.
The test programme is gathering pace now that the test aircraft fleet is almost complete and extra tests can be conducted thanks to the addition of two American F-35 production aircraft. The test programme is intended to bring to light aspects that need improving. The fact that modifications will be required does not come as a surprise since this aircraft contains extremely sophisticated technology. For example, the advanced pilot’s helmet and the software development. Hard work is being done to come up with solutions.
Calculated over the entire production period, the average unit cost of the F-35A, the version which the Netherlands intends to buy, has remained reasonably stable compared to last year. The average unit cost as of June 2012 is EUR 61,5 million. This year’s annual report again mentions cost increases, particularly for the operational costs of the F-35 during its entire service life (thirty years).
The estimated capital investment as of 31 December 2011 is EUR 7.5 billion if the Netherlands were to buy a total of 85 aircraft. This is similar to the estimate of one year before (EUR 7.6 billion). As of last year, the Defence organisation is using a lower dollar exchange rate. This is partly offset by increased costs resulting from the decision by the United States and a number of other countries, including the Netherlands, to move back the order of a total of 242 aircraft to later years. For the time being, a sum of EUR 4.5 billion has been earmarked for the successor to the Royal Netherlands Air Force’s F-16. A subsequent government will decide on the successor to the F-16, the number of aircraft to be purchased and the budget needed for that.
Since the F-35 is a new aircraft, there is only little user experience available. This makes it difficult to calculate the operating costs. The restructuring of the F-35 programme is based on a very conservative estimate. The estimated operating costs for the Netherlands amount to EUR 13.6 billion over thirty years. This amount could turn out to be EUR 1 billion higher after the latest pricing information from the US has been quantified.
F-35 is intended successor to F-16
As concluded by the National Audit Office in its monitoring report for 2011, the cost of keeping the F-16 in service will increase every year. Keeping the aircraft operational for three more years will cost at least EUR 300 million. In addition, maintenance costs will increase because older aircraft are more liable to suffer defects. From now on, presentations by the Defence organisation regarding the cost development of the F-35 project will also mention these and other costs related to the F-16. Despite new investments, the growing proliferation of advanced ground and air-defence assets means that F-16s are only deployable in an increasingly limited part of the world. When they are phased out in 2021, as is now foreseen, these aircraft will have served the Defence organisation for forty years. The successor to the F-16 will also have to serve for a very long time. This must be taken into account at this early stage, just as it was for the procurement of the F-16. Last but not least, our personnel deserve good materiel, and that means that the new aircraft should be equipped with the latest technology and sufficient scope for future upgrades. The Defence organisation therefore holds the opinion that the F-35 is the best successor to the F-16. However, a decision to that effect has not been taken yet.
The Netherlands is consulting mainly with Norway about further F-35 cooperation. Norway has ordered the first four aircraft. Belgium and Denmark are following developments with keen interest. Good contacts are being maintained with Italy and the United Kingdom, which have also ordered F-35 aircraft. Cooperation is not only about procurement and sustainment, but also about operational aspects.
Interest of the Dutch industry
The F-35 is still a good choice when taking into account the participation of the Dutch business sector. It must be said, however, that the discontinuation of the development of the F-136 engine and the fact that the orders of a number of countries have been moved back has caused the total of framework contracts to be reduced by a sum of EUR 42 million. Despite that, almost USD 1 billion in contracts has been assigned already. The expected production turnover for Dutch companies will be around USD 9 billion, provided the Netherlands decides to purchase the F-35. This concerns high-tech contracts that will provide an important boost to the jobs markets in the Dutch aviation and knowledge sectors.