UPDATE 1-Budget cuts would trim flying hours, F-35 orders -US Air Force
* Air Force may have to renegotiate $52 bln Boeing tanker deal
* Orders for some Lockheed weapons already delayed
* Some military exercises may be scrapped
By Andrea Shalal-Esa
WASHINGTON, Feb 6 (Reuters) - The U.S. Air Force will have to curtail its orders for Lockheed Martin Corp's F-35 fighter jet, restructure a $52 billion tanker deal with Boeing Co and reduce its flying hours by 18 percent if lawmakers do not avert impending across-the-board spending cuts, the service told Congress on Wednesday.
The Air Force, in a draft presentation to Congress, said it faced shortfalls of $1.8 billion in war funding and $12.4 billion overall if Congress does not forestall the cuts, known as sequestration, which are due to take effect on March 1.
The impact of sequestration would be exacerbated, the Air Force said, if Congress did not pass a budget for the current fiscal year and stuck with the stop-gap spending measure currently in place, known as a "continuing resolution," or CR.
"Without substantial reprogramming flexibility, a year-long CR and sequestration disrupts modernization programs" and means a delay in getting weapons into the hands of troops, according to the presentation, a copy of which was obtained by Reuters.
All the military services must tell Congress by Friday how they plan to deal with the automatic budget cuts, which appear increasingly likely to take effect given a continuing impasse between the White House and the Republican-controlled House of Representatives.
It cited several examples, including expected reductions in the number of F-35 purchases, the need to renegotiate a big contract with Boeing for new refueling planes, and a delay in a new version of the MQ-9 Reaper drone built by privately held General Atomics.
Defense Secretary Leon Panetta is seeking authority from Congress to submit reprogramming requests that would allow the Air Force and other military services to shift funds between programs, which could help them avoid breaking the terms of specific contracts like the one with Boeing for tankers.
Panetta warned on Wednesday that congressional inaction on financial matters threatened U.S. security, and later announced delayed deployment of an aircraft carrier strike group to the Middle East because of budget uncertainty.
The Air Force says it got a great deal on the initial fixed-price contract with Boeing, but could see costs climb if it has to reopen the contract.
"We're going to be paying more for less, and that just doesn't make sense," said one defense official, who was not authorized to speak on the record.
Boeing has not offered, nor does the department expect, any assurances about maintaining the current pricing, Air Force spokesman Ed Gulick said.
ORDERS ALREADY DELAYED
The stop-gap spending measure prohibits any new programs from starting, and limits spending to what it was in the previous fiscal year's budget, hindering the ramping up of planned spending for new programs.
The Air Force said orders for several Lockheed weapons - new missile warning satellites, C-130J transport planes and the F-35 Joint Strike Fighter - were already being delayed.
In addition to the impact on procurement programs, Air Force officials say the cuts would cut into important work aimed at keeping troops ready to fight, and could jeopardize commitments to allies around the world.
For instance, the Air Force may have to cancel several major military exercises, including Bright Star, a regular exercise conducted with allies in the Middle East.
It said it also faced the possibility of a short-term furlough of 180,000 civilian contractors, an unprecedented action that would delay testing of new weapons systems, which in turn would raise program costs and delay programs.
The service said more than 30 weapons systems would face reduced maintenance, affecting nearly all fighter jets, transport planes and bombers in the Air Force fleet.
In addition, it said military communications worldwide could be affected because of a 75 percent cut in sustainment of the Defense Satellite Communications System.
Work at a number of ground radar sites would also be reduced to eight hours a day from 24, cutting the military's ability to monitor enemy missile launches and maintain surveillance of satellite and other objects in space.
Representative Mike Turner, chairman of the House Armed Services subcommittee on tactical air and land forces, said the Air Force's draft presentation was "highly troubling."
"Sequestration will affect mission readiness and our deployed personnel around the globe. Civilian furloughs will delay systems testing - ultimately increasing end costs to the taxpayer and the amount of time it takes to deliver equipment to our warfighters," Turner said in a statement.
The service said it had already implemented a hiring freeze for all permanent and temporary employees, which would cut its ability to provide trained workers for intelligence analysis, management of nuclear weapons and completion of more audits.
It said it was also laying off 3,200 employees who worked in non-mission critical areas such as inspections, conferences and training, and was reviewing plans for demonstration flights at the Paris Air Show and other international events.
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