European turmoil threatens to increase the cost of each F-35 for all partner nations

The F-35 Lightning II program continues to be over budget and behind schedule from what was originally intended. To keep the costs for the development and production of the F-35 down, the aircraft were sold to multiple countries around the world. The problem for many partner countries is that the aircraft have become much more expensive than originally planned resulting in some countries reconsidering the number of aircraft ordered.
Another issue for the F-35 program in United States and abroad is that each time the number of ordered aircraft are reduced, the price goes up for everyone. The Department of Defense has stated that it is relying on international sales of the F-35 over the next five years in order to keep the cost of the program stable. Frank Kendall, acquisition executive for the Pentagon, has said that if those international sales don't materialize the price of the jet will go up for the U.S. and partner nations.
“There are some foreign sales that we do assume take place in the future years defense plan (FYDP) and that does affect what we think we can get for the money in our budget in our FYDP,” Kendall said after a speech at a defense industry conference in Arlington, Va. “So if it changes, that would change that result.”
Earlier in the week, there were rumors that Italy was considering a reduction in the number of fighters it had planned purchase. There've been other concerns about reductions in purchases across Europe as the European economy slumps. Other partners in Europe include Norway, Denmark, the Netherlands, and the UK. 
Today, Italy confirmed its reduction in planned F-35 purchases official with the announcement that it was cutting back on the purchase of the F-35 from 131 units to 90 units. The reduction was required according to Italy due to a 28% cut mandated in its Defense Ministry spending for 2012. The reduced defense spending in Italy will impact other military purchases the country had planned as well.
The rising cost of the program isn't entirely due to changes from European nations. The United States has also reduced the number of aircraft it plans to purchase during certain points of the cycle. The 2013 Pentagon budget that went to Congress this week had $9.2 billion allotted to purchase 29 F-35 aircraft. The budget saw 13 aircraft slashed from the original purchase plan in 2013.
The Department of Defense also removed 179 aircraft from purchase plans between 2013 and 2017. The reasoning for the removal of those 179 aircraft from the budget is to allow the repair of issues discovered during flight-testing. Problems discovered in flight-testing with the F-35 are expected since the Pentagon is buying the aircraft under a concurrency plan. Under the concurrency plan, aircraft are built and purchased, as they are flight-tested. That means that any problems discovered during flight-testing have to be applied to aircraft already purchased.
“There is some money in the budget for concurrency,” Kendall said. “If we exceed that amount, then it will probably have to come out of production.”

Sources: Defense News, (2)

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