Concerns about the F-35's combat efficacy may have been overblown.
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Earlier this month, we regaled you with the latest report out of the Pentagon's Directorate of Operational Test and Evaluation, in which then-DOT&E Director Michael Gilmore(he's now out of a job)detailed a litany of complaints about the pace of development of Lockheed Martin's (NYSE: LMT) vaunted "stealth"fighter jet:
- "objectionable or unacceptable flying qualities"
- Plane parts failing at accelerated rates
- Wings incapable of carrying the bomb loads to which they were assigned
- Planes literally shaking themselves apart in flight
There were 276 "critical" deficiencies in all, rendering it unlikely the F-35 would achieve even "Initial Operational Test and Evaluation" status before 2019. And yet, earlier this month, this very same F-35 fighter jet participated in the U.S. Air Force's "Red Flag" war games at Nellis Air Force Base in Nevada -- and it flew just fine.
Lockheed Martin's F-35 is flying high after four victorious weeks in Nevada. Image source: Lockheed Martin.
Red storm rising
Actually, more than fine. Superbly. As reported by Wired.com earlier this month, over four weeks of training, the Air Force flew 13 "Blue team" F-35A fighter jets in simulated combat against a "Red" force of as many as 20 aircraft at a time -- enemies intent on jamming their radar and killing their planes, aided from the ground by batteries of advanced surface-to-air missiles.
The result: The F-35s achieved a 15-to-1 "kill ratio," shooting down 15 bad guys for every F-35 that got splashed.
Moreover, in addition to proving itself a formidable aerial combatant, the F-35 served as a force multiplier for its allies.
As Lt. Col. Dave DeAngelis, commander of the 419th operations group, explained, F-35s sortied alongside allied EA-18G Growlers, F-15C, F-16, F-22, British Typhoon fighters, B-1 bombers, and Australian airborne early warning and control craft.Using their advanced digital communications systems, "the F-35 was able to share one threat picture across 70 aircraft" simultaneously, giving its allies a clearer picture of the dogfight than they'd have been able to obtain on their own, and as a result, enhancing the Blue forces' fighting ability as a whole.
Indeed, despite all the complaints that DTO&E raised about the quality of Lockheed's software, 34th Fighter Squadron commander Lt. Col. George Watkinsinsisted that "all our mission systems were up every time." If given the option of flying a fifth-generation F-35 into combat, or taking in an older fourth generation F-16, Watkins was categorical: "Iwould not want to go back and take an F-16 back into Red Flag."
What it means to investors
Could it be that reports of the F-35's death have been greatly exaggerated? Judging from the nearly unanimous praise that Lockheed's F-35 is garnering in the aftermath of Red Flag, it sure looks like it.
And reports of the F-35's remarkable 15-to-1 kill ratio, combined with praise from the pilots who flew it, could give Lockheed Martin ammunition in future arguments with President Trump about whether the F-35 is or is not overpriced (and whether Boeing (NYSE: BA) can or cannot produce "acomparable F-18Super Hornet" at a better price). Sure, at average prices of more than $100 million a pop, F-35 model aircraft cost a lot -- but do they cost 15 times more than comparable fighter jets?
Probably not. Moreover, Lockheed Martin just inked a deal to sell the Air Force F-35As for as little as $95 million, which one imagines will defang future presidential arguments about the F-35's overpricedness. Could be, we're soon going to see Lockheed Martin start selling a lot more of these warbirds. And if management also succeeds in goosing its profit margins up toward the 10.5% operating margin it gets on its other aircraft, that could be even better news for Lockheed Martin stock.
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