Canada to Drop F35 Joint Strike Fighter

Canada to drop F35 Joint Strike Fighter

Recently elected Prime Minister, Justin Trudeau, has pledged to cancel Canada’s 65 airplane order – a move that will cause great concern through the fighter jet market. Should this happen Canada will be the first country to reject the fifth-generation fighter — and, potentially, the first industrial partner to withdraw participation in the programme.

Although the remaining international partners are standing by their commitment to the joint strike fighter, Ottawa's potential exit is not exactly a vote of confidence in the fifth-generation fighter jet, especially as all remaining partners will be forced to pay higher prices for F-35s.

The move will also affect the country’s supply base as many Canadian companies have spent years building components for the new plane and stand to lose as much as CDN$11 billion (R122 billion at present exchange rates) in work over the life of the jet.

Impact to F-35 Partners

In 2010, Canada committed to buying 65 F-35s on a sole-source basis as the replacement for its fleet of CF-18s. Two years later, then-Prime Minister Stephen Harper paused that purchase amid accusations that his government had lied about the true cost of the fighter programme. The F-35's future in Canada has been called into question since Trudeau's victory in the Oct. 19 election.

Trudeau has said that the aircraft is too expensive and that Canada does not need a stealth fighter for its defence requirements. It seems likely that he will move quickly on replacing Canada's aging CF-18s with another plane through a competition.

In Washington last week, US Lt. Gen. Christopher C. Bogdan, F-35 Joint Programme Office chief, said the remaining international partners can blame Canada for a $1 million price increase per jet if Ottawa scraps its 65-plane buy.

If Canada pulls out, there would be no impact to the current development program, which ends in 2017, Bogdan stressed. However, the international partners would be forced to absorb Canada's 2.1 percent share in the cost of future sustainment and follow-on modernization, he said.

Despite a potential price increase, the other international partners remain committed to the F-35 program.

While the Israeli defence force has proclaimed itself as not happy about the possible increase, it in now ways deters the country interest in pursuing follow-on orders for the F-35I. Israel has 33 F-35Is on order, with a contractual option for another 17. The first aircraft is expected in December 2016, with initial operational capability planned by the end of 2017. Eventually, the Israeli Air Force expects a finalforce strength of 75 F-35Is.

Both Norway and Italy, with orders of 52 and 90 JFSs respectively, seem set to re-negotiate and do their own analysis regarding costs while Denmark is due to announce its decision about the fighter within the very near future. The JFS is in competition with short-listed candidates including Boeing's F/A-18E/F Super Hornet, Dassault'sRafale and the Eurofighter Typhoon. Should Canada pull the plug Sweden is likely to offer Trudeau the single-engine Gripen NG fighter as well as offering the Gripen to Finland.

A fighter-industry executive in the UK has said the F-35's problems went deeper than a possible price hike caused by any Canadian withdrawal.

"If the only problem the F-35 had was that the aircraft was $1 million more expensive, they wouldn't have a problem," he said. "The problem is the aircraft is tens of millions of dollars more than they originally told people it would be, and that's just the acquisition price. It's the sustainment cost that will destroy air forces."

"It's the precedent, not the price, that is the bigger danger for F-35 exports," he said. "If I was in a rival fighter company, I'd be thinking this development gives me a little more market leverage."

What's next for Canada?

Canada's expected decision to drop the F-35 was mixed with politics, as the cost for the fifth-generation fighter had dogged Harper's government. But Trudeau has positioned the argument as one of necessity, emphasizing that Canada should focus more on homeland defense than power projection with its new fighter buy.

Richard Aboulafia, an analyst with the Teal Group, points to Trudeau signalling he'll withdraw Canada from military operations against the Islamic State group as proof that the new government is focusing inward, rather than outward, with its security decisions.

"It was form fitting function — it's not about if it's a good fighter, but, rather, if this is a role Canada should have," Aboulafia said. "The F-35 is the perfect plane if Canada is going to be part of coalition warfare. If they just want something that provides air protection for sovereignty, something else fits just fine."

Gene Colabatistto, group president for defence and security at CAE, the largest Canadian-owned defense company, agrees that the primary mission set Canada needs to fulfill is the sovereignty mission.

The question now becomes what jet will fill that mission.

Trudeau has previously suggested that the F-35 would not be considered in any competition, but even if it were invited back in, it seems an unlikely winner. Any new competition immediately becomes a plum prize for jet producers, as there are few large-scale fighter procurements expected in the next few years.

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The obvious choice to replace the Boeing-made CF-18 fleet would be the procurement of Boeing's F/A-18 Super Hornets, said Aboulafia. The familiarity of pilots with the jet, interoperability with the older fleet, and the military ties between the US and Canada make it an easy choice.

And, while it seems unlikely Canada would pick a non-American supplier, Aboulafia says not to be surprised if the DassaultRafale, Eurofighter Typhoon and Saab's Gripen NG enter any competition. Rafale and Eurofighter have mounted strong marketing campaigns in the last six months as uncertainty over the F-35 grew.

Dassault aviation chairman Eric Trappier said Oct. 22 he wrote a letter of congratulations to Trudeau that included a pitch for Rafale.

A spokesman for Eurofighter Typhoon declined to comment, other than to say that officials are closely monitoring the political developments in Canada.

If Canada selects the Super Hornet over the European fighters, it would be a huge win for Boeing, which has sought to extend the life of its facility in St. Louis.

"That buys Boeing three more years," Aboulafia said, while noting it could also have an impact on US procurement. The Navy has argued for the procurement of more F/A-18s, and having the Canadian jets on the line could make the economic case that helps the Navy do just that.

A Boeing win "works out very well for the carrier part of the Navy," Aboulafia said.

But the decision to have a full competition instead of the sole-source selection of F-35 will result in a delay in getting the new fleets online, CAE's Colabatistto said.

That, in turn, means the existing training infrastructure — including the CAE-run NATO Flying Training in Canada (NFTC) program which trains pilots for the Canadian military — will likely need to be extended.

"The net is that [the competition] will delay the acquisition of a new fighter program," he told Defense News on Oct. 22. "It's not going to start in a year or two, which means that the fleet will start to be replaced in the early mid-2020s. Therefore, the training enterprise [will] extend the current training programs to get ready for that."

And, while Canadian firms tied to the F-35 base released a Sept. 25 statement warning Trudeau's decision would cost "current and future jobs," Colabatistto does not see reason to panic.

He sees more of a "reallocation" of defense funds than a major cut coming under Trudeau's government. Funding that may have gone in the short term to fighters will now instead be shifted to maritime assets, he said.

"It's all one budget, and they will have to accommodate that," Colabatistto said. "But I think the most visible part will be the delay, or the stretching, of the fighter programs."

By Lara Seligman and Aaron Mehta in Washington; David Pugliese in Victoria, British Columbia; Andrew Chuter in London; Pierre Tran in Paris; Barbara Opall-Rome in Tel Aviv; Gerard O'Dwyer in Helsinki; and Tom Kington in Rome.

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