Pentagon withholds $5 million per F-35 jet as deliveries resume

By Mike Stone

WASHINGTON (Reuters) -Deliveries of F-35 jets to the U.S. military have resumed, but the U.S. government is withholding the final $5 million payment for each jet until the completion of a long-delayed technology upgrade, the F-35 Joint Program Office said on Thursday.

The U.S. resumed taking F-35 deliveries of the jet this summer after a months-long pause despite the jet's Technology Refresh 3 (TR-3) running behind schedule. The software and hardware improvements include better displays, computer memory and processing power.

Deliveries trigger a payment to Lockheed Martin, but withholding $5 million per jet will impact Lockheed's profit margin, and push the company to resolve this issue which it has said will still take months.

The advanced fighter jet contributes 27% of Lockheed's sales as the company plans to deliver around 100 to the U.S. this year and more than 150 in 2025.

"We have coordinated the terms and conditions with Lockheed Martin. As a portion of the agreement, approximately $5 million per aircraft is being withheld and will be released as combat capability is delivered," an F-35 Joint Program Office spokesman said.

The F-35 costs an average of $82.5 million each for the F-35A variant being delivered in calendar years 2023, 2024 and 2025. The short takeoff and landing "B" variant and the Navy's "C" variant for use on aircraft carriers cost on average $109 million and $102.1 million, respectively.

"The F-35 remains a top priority, and we recently delivered the first TR-3 configured aircraft to the customer and anticipate deliveries for 2024 to meet our expected range of 75-110 F-35s," CEO Jim Taiclet said on an earnings call last month.

Last month, the company said it would take between 12 and 18 months to deliver the dozens of F-35s parked due to the delivery pause.

The stealthy F-35 fighter jet program has experienced delivery delays and production mishaps in the past.

(Reporting by Mike Stone in WashingtonEditing by Matthew Lewis)