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Lockheed's Trillion-Dollar Warplane

By Rich Smith – Updated Nov 11, 2016 at 6:09PM

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Lightning F-35 is big news -- and big numbers.

Did I say $440 billion? Make that a trillion -- 1,000,000,000 dollars that Lockheed Martin (NYSE:LMT) may reap from sales of its F-35 Lightning II warplane over the next 57 years.

Keying off reports that Singapore wants 100 of Lockheed's new fighter jets, and that Israel has upped its wish list to 100 as well, Reuters yesterday quoted an Air Force general making the following prediction: The F-35 is "on course to become a $1 trillion venture worldwide through 2065, when the last scheduled to be built would reach the end of its projected service life." (Little wonder that Boeing (NYSE:BA) fought so hard for this contract.)

Lies, damn lies, and trillion-dollar statistics
Of course, the general's assertion has to be taken with a few grains of salt. Firstly, we're looking 57 years into the future. Pricing a program that will run the better part of a century is, of necessity, an exercise in guesswork. Secondly, the "trillion-dollar" label is just a little too round, a little too convenient, to take at face value. I mean, what kinds of dollars are we talking about -- 2008 dollars? Inflation-emaciated 2065 dollars? Some compromise amalgamation of the two?

Still, the F-35 is a big deal, and means big business for Lockheed and manufacturing partners Northrop Grumman (NYSE:NOC), GE (NYSE:GE), and United Technologies (NYSE:UTX). Investors worried about future F-16 sales can take some comfort in Lockheed's trillion-dollar potential. Averaged out over the 57 years the F-35 could be in service, $1 trillion works out to about $17.5 billion per year. That's about 40% of what Lockheed booked last year -- all from a single product. It doesn't even factor in the billions Lockheed will earn from:

  • Continuing sales of the venerable F-16.
  • The potentially $1.2 billion TSA contract it won recently.
  • An even more potential victory in the contest to build the Army's new Humvee (Lockheed is bidding along with BAE Systems and Alcoa (NYSE:AA)).
  • And scores more ventures besides.

A trillion here, a trillion there ...
If all that fails to reassure you, consider one more factoid. In working up his trillion-dollar premise, the general in question calculated "what it costs to develop, buy, upgrade, sustain and fly more than 3,000 airplanes through their entire scheduled life cycle." That accounts for the 3,100 planes the U.S. and its eight partner nations (Britain, Italy, the Netherlands, Turkey, Canada, Australia, Denmark, and Norway) presently plan to buy.

But it leaves out potential purchases by the other 180-odd nations of the globe. At 100 planes a pop, it won't take a lot of taggers-on to vault the F-35 past the trillion-dollar mark.

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Stocks Mentioned

Lockheed Martin Stock Quote
Lockheed Martin
$485.19 (0.85%) $4.09
Alcoa Stock Quote
Boeing Stock Quote
$178.88 (2.03%) $3.56
General Electric Stock Quote
General Electric
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Raytheon Technologies Stock Quote
Raytheon Technologies
$98.72 (1.32%) $1.29
Northrop Grumman Stock Quote
Northrop Grumman
$533.29 (0.94%) $4.94

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