Israel, U,S. sign $2.75 billion F-35 fighter deal

NEW YORK Thu Oct 7, 2010 10:11pm EDT

NEW YORK (Reuters) - Israel signed a $2.75 billion deal on Thursday with the United States to buy about 20 radar-evading Lockheed Martin Corp F-35 fighter jets, calling it the world's most advanced combat plane.

Israel is to receive the jets from 2015 through 2017, according to an Israeli statement at a signing ceremony at the consulate in New York. The Jewish state is the first buyer outside the aircraft's nine-nation co-development group.

The agreement was signed after years of talks on such issues as aircraft price, Israeli industrial participation in F-35 production as well as integration of Israeli capabilities on its own F-35 fleet.

The cost was put at about $96 million per aircraft, including the engine. In addition, the deal includes simulators, spare parts and maintenance -- making the total value $2.75 billion, the Israeli statement said.

At least 19 F-35s are expected to be part of the first batch. The total value could be as high as $15.2 billion if all options are exercised, the Pentagon told Congress in an initial notification in September 2008.

"The signing ... is an event of great strategic and historic significance," Michael Oren, Israel's ambassador to the United States, said in a separate statement.

Describing the F-35 as the world's most advanced fighter, Oren said it would boost Israel's ability to defend itself, "by itself, against any threat or combination of threats, from anywhere within the Middle East."

Retired Major General Ehud Shani, director-general of the defense ministry, signed for Israel. U.S. Navy Vice Admiral David Venlet, head of the Pentagon's F-35 joint program office, signed for the United States.

Contrary to the written statement, Shani told reporters the F-35 would start arriving in 2016, a one-year discrepancy with the press release that was not immediately explained.

The statement did not say how many jets were involved, possibly because this could depend on the ultimate cost of incorporating home-made Israeli technology.

When asked if Israel planned to buy more than an initial 20, Shani told reporters Israel had an option to buy a "couple of dozens" more.

Company representatives referred questions about the number of F-35s to be supplied and their configuration to the U.S. government, which is brokering the deal under the U.S. Foreign Military Sales program.

The U.S. Defense Department had no immediate comment.

Asked about Israel's arch-foe Iran, he said Tehran is "a problem for all the democratic and free world, and one of the answers ... concerning this problem is the F-35."

The contract had been delayed by Israel's push to build in its own electronic warfare, communications and other high-tech systems -- changes that U.S. officials generally opposed as overly costly and potentially counter-productive.

"The F-35 is a system where all these subsystems are fused and integrated," Richard Genaille, deputy head of the Pentagon's Defense Security Cooperation Agency, told Reuters a month ago. "And integrating something that wasn't originally planned in the design will be very costly and will take a significant amount of time."

Moreover, it "probably will not be in the best interest in the long run of our partners," he told the Reuters Aerospace and Defense Summit in Washington Sept. 9.

Lockheed Martin, the F-35's prime contractor, said it was "very pleased" Israel was moving forward.

Tom Burbage, general manager of Lockheed's F-35 program, said the aircraft, also known as the Joint Strike Fighter, would strengthen Israel's national security posture both militarily and industrially.

Israel has discussed building the wings for about 25 percent of the more than 3,000 F-35s that Lockheed expects to build for the United States and partner countries over coming decades, an Israeli official told Reuters in August.

The United States is co-developing the F-35 with eight foreign partners -- Britain, Italy, the Netherlands, Turkey, Canada, Australia, Denmark and Norway. Together, the partners have been projected to buy about 730 planes.

BAE Systems Plc and Northrop Grumman Corp are Lockheed's chief F-35 subcontractors.

Competing engines for the fighter are being built by United Technologies Corp on one hand and a joint venture of General Electric Co and Rolls-Royce Group Plc, on the other.

(Reporting by Lynn Adler in New York and Jim Wolf in Washington; editing by Carol Bishopric)

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