U.S. President Joe Biden is reportedly seeking an 18% reduction in the Pentagon's purchase of F-35 jets next year, according to two sources. This comes as a response to Congress' limit on the upcoming defense budget, forcing the administration to identify areas for cost savings. The order for Lockheed Martin's stealth fighter jets is expected to fall below 70, a decrease from the anticipated order of 83. This represents an estimated spending reduction of $1.6 billion on jets. Lockheed Martin, which derives about a quarter of its revenue from the jet program, could be significantly affected by this decrease in F-35 orders. Despite this, the international demand for these jets, priced between $80 million and $120 million each depending on the model, remains robust.
.gif)
Following the news, Lockheed's shares experienced a 2.6% decline. In a statement, Lockheed expressed its eagerness to collaborate with the Biden administration and Congress on the 2025 fiscal year budget in the coming months. Biden's total defense and national security budget request is projected to be $895 billion, necessitating substantial cuts across various programs, delays to existing ones, and a slowdown in efforts to replenish weapon stocks depleted by conflicts in Ukraine and Israel. Budget discussions between Defense Secretary Lloyd Austin and the White House's Office of Management and Budget have largely concluded, but the final amount may change before the budget request is officially announced on March 11. The Pentagon's comptroller and the Joint Program office, which oversees the F-35 program, both declined to comment.
Last year, the Pentagon planned to purchase 83 F-35 fighter jets from Lockheed Martin for $9.8 billion. In the spring, the Pentagon estimated a need for about $880 billion in 2025 and a total national defense budget of $929 billion. However, a two-year budget agreement in mid-2023 capped the 2025 defense budget at 1% above the 2024 budget of $886 billion. Consequently, Biden's total 2025 national security budget will be $895 billion. The Pentagon's portion of the national defense budget is expected to be $850 billion, as per an industry executive and a former defense official.
The $30 billion reduction will also affect other programs. For instance, a part of the $2 billion allocated for missile defenses for Guam, seen as crucial for deterring China in the Pacific, is among the proposed cuts. Other potential reductions include upgrades to the homeland missile defense system in Alaska, known as Ground-Based Interceptors, and RTX Corp.'s SM3-1B missiles for Aegis ships. Programs facing delays include orders for an aircraft carrier made by Huntington Ingalls Industries Inc. and Virginia-class submarines made by Huntington and General Dynamics Corp. The Pentagon is also expected to cut costs by retiring older, more costly to operate weaponry like ships and planes. These cuts are not final and are likely to ignite debates on Capitol Hill, potentially leading to an increase in the national defense budget to over $900 billion for fiscal 2025. Defense spending constitutes about half of the U.S. discretionary budget, with the remainder allocated to transportation, education, diplomacy, and other departments. Entitlements like Social Security and the National Retirement Fund make up the non-discretionary portion of the budget. The 2024 budget, which includes $886 billion for national security, has yet to pass Congress. The U.S. government is currently operating under a continuing resolution, which maintains spending at 2023 levels until a 2024 budget is passed. The current continuing resolution, which keeps the government running, expires on March 1.