October 20, 2015 / 7:54 PM / 3 years ago

UPDATE 1-Canada election results seen as bad news for Lockheed's F-35

(Adds F-35, Boeing comments, further background)

By Andrea Shalal

WASHINGTON, Oct 20 (Reuters) - The election of Canada’s Liberal leader Justin Trudeau as prime minister spells bad news for Lockheed Martin Corp’s F-35 fighter jet program given Trudeau’s staunch opposition to any F-35 purchases, U.S. industry and government sources said on Tuesday.

Trudeau’s election offers hope to Boeing Co, whose F/A-18E/F fighter jets are nearing the end of production and could be considered to replace Canada’s current aging CF-18 fighter jets.

Industry executives and government officials said there would be difficulty ahead for the F-35 program.

Trudeau last month said that, if elected, his party would launch an open and transparent competition to replace Canada’s older aging CF-18 jets with more affordable aircraft. He said his government would not buy any F-35 jets.

Pentagon data show the last batch of F-35 A-model jets cost $108 million each, although that price is slated to drop to $85 million by 2018. Boeing’s F/A-18E/F currently costs $60 million per aircraft, according to the U.S. Navy.

For now, Canada remains one of the nine countries in the initial F-35 partnership. It pledged to invest $150 million in the program’s development when it signed up in February 2002.

Those funds will not be reimbursed if Canada exits the program. Many Canadian firms that supply parts worth hundreds of millions of dollars to Lockheed each year could also lose those orders, according to two sources familiar with the program but not authorized to speak publicly.

Lockheed and the Pentagon’s F-35 program office said they had not been notified by the Canadian government of any change in its status as an F-35 partner.

Boeing said it supported competition for the CF-18 replacement to ensure the best value for Canadian taxpayers and the greatest benefits to Canadian industry.

Canada’s ruling Conservatives announced plans in 2010 to buy 65 F-35 jets, but scrapped those plans in 2012 after a probe found officials had played down the costs and risks of the deal.

A subsequent review found that Lockheed’s F-35 scored the best on various tests, but Boeing’s F/A-18E/F Super Hornet was almost as capable and cheaper.

The 65 aircraft orders at stake could amount to well over $6 billion in revenue for Lockheed, engine maker Pratt & Whitney, a unit of United Technologies Corp, and other key F-35 suppliers such as Northrop Grumman Corp and Britain’s BAE Systems Plc. (Reporting by Andrea Shalal; Editing by Grant McCool and Lisa Shumaker)

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