Company News

UPDATE 3-Canada to buy 65 F-35 jet fighters in C$9 bln deal

* First planes to be delivered in 2016

* Opposition says will freeze deal if it takes power

* Stories of huge maintenance contract untrue, says Ottawa (Adds industry, opposition reaction)

OTTAWA, July 16 (Reuters) - Canada will buy 65 new fighter jets from Lockheed Martin Corp LMT.N for C$9 billion ($8.6 billion), one of the biggest arms deals in the nation's history, Defence Minister Peter MacKay said on Friday.

The first Joint Strike Fighter should be delivered in 2016. The F-35s will replace Canada’s CF-18s, which are due to reach the end of their working lives in about 2020.

MacKay brushed off criticism from opposition legislators who say the planes are too expensive and who question why Lockheed Martin received a sole-source contract.

“This is the best aircraft we can provide our men and women in uniform ... This is one of the largest defense procurement projects in Canadian history,” MacKay told a news conference.

The C$9 billion also covers weapons, training and equipment. MacKay said media reports of a separate C$7 billion 20-year maintenance deal were wrong and said an agreement would be concluded once the jets started going into production.

The Joint Strike Fighter program is being funded by the United States, Canada, Turkey, Britain, Italy, Norway, Denmark, Australia and the Netherlands. Canada, which was involved from the start, says it has already spent C$168 million.

The JSF is set to be the world’s costliest arms acquisition program. The United States alone is scheduled to buy 2,443 of the planes for more than $300 billion.

Industry Minister Tony Clement said Canadian companies would be able to bid for business for all the planes, not just the ones Ottawa will buy.

Don Boitson, vice-president and general manager at Magellan Aerospace Corp MAL.TO, said the deal should be worth more than C$1 billion to his firm over the life of the program.

“The announcement today gives Canadian companies like ourselves and the other 85 (firms) the opportunity to produce parts, and we have been and will continue for all 3,000 aircraft that are currently on order,” he told Reuters.

The opposition Liberal Party promises to freeze the deal if it takes power. But polls show it trails the ruling Conservatives and would have little chance of winning an election now.

In a statement, the left-leaning New Democrats said “there needs to be accountability and some justification for spending this amount of money and we have not seen that”.

MacKay dismissed the criticism, saying Lockheed Martin had won an open competition in 2001 to supply the JSF -- a time when Canada’s previous Liberal government was in power and already helping to fund the project.

“I am questioning the hypocrisy which seems to soar higher than this aircraft in now criticizing purchasing the very plane that the previous government signaled ... very early on, that they were going to do,” he said.

But a former top Canadian defense official involved in the decision to help fund the JSF said Ottawa’s development role did not automatically mean Canada had to buy the plane.

“If you sole-source, everybody loses,” said Alan Williams, estimating Conservatives had effectively sole-sourced almost C$40 billion worth of defense contracts in recent years.

“We’re supposed to buy a product that best meets the military’s needs. How do you know that without doing a rigorous comparison? ... Just because we took part in a program does not mean that it’s the best one for us,” he told Reuters.

$1=$1.05 Canadian Additional reporting by Susan Taylor and John McCrank; editing by Rob Wilson