SEOUL South Korea will buy 40 Lockheed Martin Corp (LMT.N) F-35 stealth fighter jets, the country's military chiefs decided on Friday, with the first delivery expected in 2018, settling a drawn-out process to beef up the country's defenses.
A Joint Chiefs of Staff meeting agreed that South Korea would be best served by buying warplanes with the most advanced stealth technology and electronic warfare capability.
The meeting of top brass modified required capabilities for a stronger deterrence against rival North Korea. The two Koreas remain technically at war since the 1950-53 conflict ended in a truce rather than a peace treaty.
Their decision will be put to a committee chaired by the defense minister for final approval.
"What fits into modified requirement operational capabilities is limited to that model," said defense ministry spokesman Kim Min-seok when asked if the military would choose the F-35 given the revised requirements.
Lockheed Martin welcomed the news and said it remained committed to a package of technology transfers and other projects to satisfy Korea's offset requirements, despite a cut in the number of jets to be ordered. <ID:L5N0J71DJ>
The offset package includes a new military communications satellite, support for South Korean efforts to develop a new KF-X fighter jet, and a cyber warfare training centre.
"We put a bunch of projects on the table and we're not backing away," Randy Howard, Lockheed's South Korea F-35 campaign director, told Reuters in a telephone interview. "I'm confident we can find a way to preserve the projects that have been offered."
Friday's decision sets in motion South Korea's single biggest defense procurement.
South Korea was initially expected to give the greenlight to Boeing Co's (BA.N) F-15, as the aircraft was the only one among three fighter jets in the race to fall within Seoul's budget. Under South Korean law, only bids on or under budget are considered.
But in September, South Korea decided to re-examine the terms of the 8.3 trillion Korean won ($7.81 billion) tender to buy 60 fighter jets after rejecting Boeing's bid.
At the time, South Korea mentioned its need for an advanced, radar-evading jet, later mirrored by the Air Force asking for enhanced technological requirements for the jets and bolstering Lockheed's chances with the F-35.
Boeing said in a statement it remained confident its F-15, "with its superior speed, range and payload, combined with cost and schedule certainty, is what Korea needs to meet its defense needs and address the growing fighter gap".
Officials with the third bidder, Europe's Eurofighter EAD.PA was not immediately available for comment.
South Korea's shift toward the F-35 has been influenced by Japan's decision to order the stealth fighter and China's development of indigenous stealth fighters.
There were concerns in South Korea that not acquiring a stealth fighter would result in a major capability gap between its neighbors.
"One of the biggest reasons this program was first envisioned was to strengthen the air force's power as nearby nations announced their plans to adopt stealth fighter jets," said Kim Jong-ha, dean of the Graduate School of National Defense & Strategy at Hannam University.
The remaining 20 fighter jets to be acquired by South Korea will be open to various models, defense ministry spokesman Kim said, and are expected to be delivered from 2023.
Given the renewed process, the military and the finance ministry will redesign the budget size, officials said.
"We expect to firm up the total budget size after discussions with the related ministry," said Oh Tae-shik, a senior official at the country's arms procurement agency.
Analysts say that as the delivery for a further 20 warplanes is still a decade away, South Korea will likely seek an even more advanced jet than the F-35.
($1 = 1062.8750 Korean won)
(Additional reporting by Andrea Shalal-Esa in DUBAI; Editing by Jeremy Laurence and Matt Driskill)