Canadian aerospace companies and manufacturers, including four in British Columbia, have benefited from the F-35 stealth jet fighter program to the tune of about $500 million, according to its maker, Lockheed Martin Corp. (NYSE:LMT).
But whether they will continue to profit from $11 billion worth of contract work could be up in the air, said Larry Glenesk, vice-president of business development, defence, for Avcorp Industries Inc. (TSX:AVP).
“If Canada, for any reason, chose not to buy the airplanes, a country that is buying F-35 would end up with all the future work share that Avcorp is currently slated to provide out to the end of the program,” Glenesk said.
Avcorp is one of four B.C. companies that have won contracts with Lockheed Martin under the F-35 Joint Strike Fighter program.
Canada is part of an 11-country consortium that, in total, has ordered 3,100 high-tech stealth fighters, which clock in at more than $100 million per plane.
The project has faced delays and rising costs, prompting the Canadian government to review its participation. Canada ordered 65 of the new jets.
Ottawa estimated the cost to Canada for 65 jets, plus ongoing support from Lockheed Martin, to be $9 billion.
But Canada’s auditor general last year revised the estimate to $25 billion, prompting the government to press the pause button and Boeing Co. (NYSE:BA) to launch a campaign to lobby Canada on a much cheaper fighter jet.
Avcorp, a Delta-based aerospace company, won the contract to make wing assemblies for the carrier versions of the F-35 for the US Navy.
To date, Avcorp has built and shipped 10 pairs of wing assemblies, under a $50 million contract that has employed 60 full-time workers, and plans to ship a dozen more by the end of 2014. It hopes to secure more contracts over the lifetime of the project.
Lockheed Martin has built only 100 planes out of a total order of 3,100, to date, so there should be plenty of work to be had for B.C. companies.
“It will mean well over 200 long-term jobs and, in terms of revenue, it’s going to be somewhere north of $600 million,” said Glenesk, who co-chairs the Canadian JSF Industry Group, which represents 41 Canadian companies.
Stephen O’Bryan, vice-president of Program Integration and Business Development Lockheed Martin’s F-35 program, said the project is worth $11 billion to Canadian companies. He was in town last week for the 2013 Aerospace, Defence and Security Expo in Abbotsford.
“We have over $11 billion of opportunities for Canadian industry, and we already have over $500 million in contracts with Canadian industry before Canada has decided to procure a single airplane,” he told Business in Vancouver.
He added Canada’s participation in the program could also result in contracts with other partner countries.
“For Canadian industry, this gives them opportunities, not [just] on the 65 airplanes that Canada’s procuring, but the 3,100 – and growing – that are out there buying the airplanes.”
He said the Canadian military would also benefit from flying the same fighter jets as its allies.
“The [Canadian Forces] will have interoperability with all these great air forces of the world. They’ll leverage the economies of scale of over 3,000 airplanes.”
