AIRSHOW-Gulf buyers eye future purchases of Lockheed's F-35 jet

Reuters

By Andrea Shalal-Esa and William Maclean

DUBAI, Nov 21 (Reuters) - Gulf buyers are nearing decisionsto buy more current generation fighter jets, but the buzz at theDubai Airshow was about Lockheed Martin Corp's radar-evading F-35 fighter - a plane not yet operational and noteven on display there.

The U.S. government sent a big delegation to this year'sshow, eager to reassure Gulf leaders about their continuedcommitment to the region despite policy differences over Syriaand Iran and signs that Egypt is looking at buying Russianweapons after a slowdown in U.S. military aid.

For the first time, U.S. government and industry officialsalso spoke about the process under way to allow the sale of theLockheed jet to the Gulf - probably about five years afterIsrael receives its first F-35 fighter jets in 2016.

One Gulf source familiar with the region's defence marketsaid the F-35 was generating a degree of excitement even beforeany U.S. decision to allow its sale to Gulf buyers.

The possibility that the F-35 aircraft might becomeavailable could explain why Gulf countries are taking their timewith decisions on purchases of other fighters, the source said.

Heidi Grant, U.S. deputy assistant secretary of the AirForce for international programs, said Gulf buyers were focusedon buying additional fourth-generation jets but were clearlyinterested in the F-35 - a so-called "fifth-generation" warplanethat is designed to be nearly invisible to enemy radar.

"They're just asking me to monitor it, and when it becomesavailable let (them) know," Grant told Reuters in an interview."They understand that we haven't made a policy decision to openup in this region right now."

COMPETITIVE EDGE

Grant said she continued to press for a release of the F-35technology to the Gulf region, but was also at pains to stick toU.S. military policy.

"I'm constantly telling the partners in the region that astheir advocate, I'm pushing (other officials) to look at it,"she said, underscoring the growing importance of buildingcoalitions in the region and using common equipment.

In addition to U.S. policy guidelines that call for Israelto maintain a competitive military edge, the U.S. governmentalways reserves certain capabilities for its own use, Grantsaid. At the same time, Washington also wants its partners to beready to help conduct coalition operations.

Boeing Co's F-15 and Lockheed's F-16 were approvedfor sale to Gulf countries about five years after Israel.

U.S. military sales are handled on agovernment-to-government basis, and decisions about releasingsensitive technologies are made by a committee that includes thePentagon, State Department, Commerce Department and otheragencies, depending on the technology in question.

U.S. officials say the United Arab Emirates (UAE) hasrapidly evolved to become the most capable and reliable U.S.partner in the Gulf region. Washington recently approved thesale of $4 billion worth of munitions to UAE, as well as anadvanced missile defense system built by Lockheed.

The $392 billion F-35 JSF, the Pentagon's biggest armsprogram, has seen a 70 percent increase in costs over initialestimates and repeated schedule delays, but U.S. officials saythe program has made progress in recent years. The U.S. MarinesCorps says it is on track to start using the plane in mid-2015.

Lockheed is building three models of the F-35 for the U.S.military and eight countries that helped fund its development:Britain, Canada, Norway, Denmark, Australia, Italy, Turkey andthe Netherlands.

Israel and Japan have also placed orders, and South Korea isexpected to announce its plans to buy F-35s on Friday.

"There's demand," Patrick Dewar, executive vice president ofLockheed's international unit, told Reuters. "There have beenmultiple countries - and there will be more - that arerequesting a date certain when F-35 will be released to them,and the U.S. government has that on their to-do list."

"LET'S DELAY IT"

Dewar said the U.S. government had provided publiclyavailable information to potential Gulf buyers but no classifiedbriefs had yet been provided to his knowledge.

He said the F-35 is a multi-role fighter that was designedto replace the F-16, the F/A-18 and many other warplanes.

"Any air force that currently flies those jets has anexpectation - and should have an expectation - that in thefuture at some time, the United States would release the F-35 toreplace those jets," Dewar said.

He said Lockheed was working with the U.S. government toensure its release policy was in synch with the planning processrequired by each of the governments for big arms deals.

Carrol Chandler, a senior executive with engine maker Pratt& Whitney, told Reuters earlier this week there was stronginterest in the plane, but it would likely be several yearsbefore exports to the Gulf were approved.

One U.S. source familiar with the world fighter market saidcountries like the UAE and Saudi Arabia that currently operateseveral types of fighters were more likely to buy othercurrently available jets in the interim. But countries withsingle-fighter fleets like Kuwait could decide to wait for theF-35 to become available, said the source.

Advanced as it is, the F-35 Lightning must contend withcompetition from European manufacturers and Boeing Co, whichtout the benefits of their jets compared with the F-35, andraise questions about the schedule for the Lockheed jet.

French firm Dassault's Rafale jets and the BAESystems -backed Eurofighter Typhoon are in a tight raceto win a deal for at least 60 new aircraft to replace the UAE'sMirage fleet. UAE is also looking at buying 25 more LockheedF-16s as well as upgrades for its existing jets.

The Eurofighter, built by Britain's BAE, EADS andItaly's Finmeccanica, is being marketed by BAE, whichis chasing deals in Saudi Arabia, Qatar and Bahrain.

Douglas Barrie of the International Institute for StrategicStudies in London said Lockheed could be trying to stall anyEuropean purchase to buy time to complete development of theF-35, and get through the U.S. approval process.

In past competitions "when they looked like they weren'tgoing to win with their current offering ... the strategyprocess went from 'Let's win this' to 'Let's delay it'," hesaid.

"The delay arguably was about getting the decision point towhere you could put the F-35 on the table and say 'Why don't youbuy the Lightning?'"

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