Canada says to stick within budget for F-35s

Wed Feb 15, 2012 6:20pm EST
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By Randall Palmer

OTTAWA (Reuters) - Canada will not spend more than what it has budgeted for the radar-evading F-35 fighter planes, a federal minister said on Wednesday, despite concerns that the unit price of the planes might go up as countries scale back or delay their purchases.

The Conservative government has faced persistent opposition questions as to whether it would now have to spend more than planned on the fighters, developed by Lockheed Martin Corp, but it says it is keeping abreast of the fluid picture.

"We are monitoring the situation, ongoing. Moreover, we have a budget allocated and we will ensure that we work and supply the assets necessary within that budget," Associate Defense Minister Julian Fantino, responsible for purchasing equipment, told Parliament.

The government has allotted C$9 billion ($9 billion) to buy 65 F-35s between 2017 and 2023, and a total budget of C$16 billion over 20 years including support and maintenance.

Canada has gained some flexibility because of the stronger Canadian dollar; the C$9 billion buys more U.S. dollars now than it would have when the government first drew up its spending plans for the F-35s.

But delays and reductions in planned purchases are also boosting the price in U.S. dollars. Italy announced on Wednesday it would now buy only 90 F-35s instead of a planned 131, and the Pentagon has postponed orders for 179 fighters over five years, though it still plans to buy 2,443 of them eventually.

The price is higher in the early years of production, when fewer planes will be produced, so one option for Canada if it needs to save money is to stretch out its timetable. Another option of course would be to take fewer than 65 jets.

Steve O'Bryan, the Lockheed official in charge of international orders, told Reuters he had assured Canadian officials during a visit last week that the price of the jets would increase by a nominal percentage amount "in the low single digits" as a result of the U.S. purchasing slowdown.

Canada has invited countries that are helping to fund development of the new plane to a meeting at its embassy in Washington on March 1-2 to try to get a clearer picture of what each nation is planning.

(Reporting by Randall Palmer; editing by Rob Wilson)