July 26, 2011 / 11:39 PM / 8 years ago

UPDATE 1-Australia may reconsider F-35 order after cost blowout, delays

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CANBERRA, July 27 (Reuters) - Australia may reconsider a A$16 billion ($17.5 billion) plan to buy 100 of Lockheed Martin Corp’s F-35 Joint Strike Fighters because of delivery delays and cost overruns, the government said on Wednesday.

Repeated delays and ballooning costs in the F-35 programme are now starting to rub against already generous delivery and cost limits set by the government and military planners, Australian Defence Minister Stephen Smith said.

“We are running close up to those schedules, particularly on delivery. So I’ve made the point very clear that we are now monitoring very closely the delivery timetable and we are also monitoring very closely the cost,” Smith told Australian radio after meeting defence officials in Washington.

Australia, which is helping develop the F-35, has committed to buying 14 of the stealth aircraft and had initially planned for first deliveries in 2011. That has now been pushed back to 2014 and even that date may be in jeopardy.

Australia recently took delivery of the first of 24 F/A-18F Super Hornet multi-role fighter aircraft manufactured by Boeing to replace ageing strike bombers. Smith said Canberra could consider buying more of these in place of the F-35.

“That’s an obvious option. But we need to take this step by step. It’s early days,” he said. “We need to continue to monitor the situation very carefully and closely.”

Smith said he had raised his concerns with U.S. Vice Admiral David Venlet, executive officer for the F-35 Lightning II Program, and would make decisions after the U.S. completed an extensive risk assessment on the troubled project.

Australia’s Defence Ministry had voiced concerns this year that further delays could create a hole in defences, and media reports at the time indicated the government was looking for alternatives.

Australia has already begun a multi-billion-dollar upgrade of its military that includes new air defence destroyers, two large amphibious assault ships, helicopters, tanks, long-range cruise missiles and 12 new long-range missile submarines costing $25 billion.

Lockheed is developing three F-35 versions for the United States and eight international partners at a projected cost of more than $382 billion for 2,443 aircraft over the next two decades. It is the most expensive U.S. arms purchase.

The cost of each aircraft has rocketed from $69 million to $103 million apiece, with design and development flaws plaguing planners and worrying lawmakers. (Reporting by Rob Taylor in CANBERRA and Balazs Koranyi in SYDNEY; Editing by Mark Bendeich)

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