Lockheed expects more F-35 upgrade delays, tempering 2024 deliveries

WASHINGTON — A comprehensive upgrade for the F-35 Joint Strike Fighter may be delayed yet again, out to the third quarter of this year, according to Lockheed Martin Chief Executive Officer Jim Taiclet.

The upgrade, known as Technology Refresh 3 (TR-3), was previously expected sometime between April and June 2024 after slipping past an original goal to field it by April 2023. Although the company is still targeting to finish TR-3’s development in the second quarter of 2024, the third quarter “may be a more likely scenario,” Taiclet told investors today during the defense contractor’s 2023 year-end earnings call. 

Lockheed, which surpassed analysts’ forecasts for the fourth quarter, met its revised expectations of 97 F-35 deliveries in 2023, delivering a total of 98 jets in the TR-2 configuration during the year. But amid TR-3 delays and potential supplier challenges, the company is forecasting a delivery range of 75-110 stealth fighters in 2024 — and up to “90 percent” are expected to be handed over in the “back half” of the year, said Chief Financial Officer Jay Malave. 

“That’s rather concerning, and implies that the TR 3/Block 4 problems are persisting longer than expected,” Richard Aboulafia, managing director at AeroDynamic Advisory, told Breaking Defense today regarding Lockheed’s 2024 F-35 delivery target. “That’s definitely a disappointing objective on many levels.”

TR-3 essentially provides the computing power needed to support a suite of new upgrades for the stealth fighter known as Block 4, which would facilitate better sensing, improved electronic warfare and other features. The separate Block 4 effort has experienced cost growth and delays that the Government Accountability Office has previously said it cannot fully account for. 

During a December 2023 congressional hearing, F-35 Program Executive Officer Air Force Lt. Gen. Mike Schmidt additionally warned that Lockheed’s suppliers were struggling to keep up with the TR-3 production tempo, risking delays for new jets and older ones slated for retrofit. According to F-35 Joint Program Office spokesman Russ Goemaere, Lockheed was on contract to deliver 52 F-35s equipped with TR-3 in 2023, but only 21 have completed production so far. 

Due to issues with the maturity of TR-3’s software, the Pentagon is not accepting TR-3 jets as development work continues and is warehousing each, withholding about $7 million in payments per plane in the process. As a result, Bloomberg reported about $147 million has been withheld from Lockheed to date. The company has also forfeited $60 million in fees on TR-3’s cost-plus contract, Goemaere said, which lawmakers warned during the December hearing is set for a budget overrun of about $1 billion.

As previously reported by Defense News, the Pentagon is exploring a plan to accept F-35s with TR-3 before its development completes, which would later be updated with validated TR-3 software. Goemaere confirmed today that plan is still being explored, adding that “any aircraft involved and delivered as part of the truncation plan will provide valuable capability to the warfighters while TR-3 completes final verification and validation.”

Once Lockheed finishes TR-3’s development, the contractor will have to gradually clear out its inventory of warehoused jets as the government proceeds with acceptance. But that process will take time: Malave said a total of 100-120 aircraft might be “undelivered” by the end of 2024 as a result of the backlog.

“We have to be brutally honest as an industry … to say what is feasible to keep the production rate up. I think that’s starting to get traction,” Taiclet said. “I hope it gets more traction, because we cannot afford to be over-optimistic in the ability to deliver these technologies as rapidly as one might like.”