F-35 jet combat ready next year despite engine fix: Lockheed

OSLO (Reuters) - Lockheed Martin expects the cost of the F-35 fighter jet to drop to its target level by 2019 and still sees the first version of the aircraft combat ready by mid-2015, despite an engine failure which still needs a fix, the firm said on Thursday.

A decision by South Korea on Wednesday to order 40 F-35s for around $7 billion further lowers the program's cost and Lockheed sees the per-unit cost down to $80-$85 million by 2019 from the current rate of around $115 million, Jeff Babione, Lockheed's deputy manager for the F-35 program told reporters in Oslo.

Lockheed, engine maker Pratt & Whitney, a unit of United Technologies Corp , and other suppliers are investing heavily to drive down the program's projected $400 billion cost, making it more affordable for cash-strapped governments looking to buy over 3,100 aircraft over the NEXT (NXT.LO)decades.

"The cost reduction will come with the increase in orders," Babione told Reuters on the sidelines of a press conference.

"We anticipate that there's a market out there for 4,000 airplanes ... and the biggest risk to cost is if we don't get the orders we showed. That will significantly erode our ability to take advantage of economic order quantities and reduce cost."

The F-35 program was set back earlier this year when the Pentagon grounded its entire fleet after a June 23 fire on an Air Force F-35A jet, an all new aircraft with advanced stealth capabilities, improved manuverability and advanced sensors.

Lockheed is still investigating the issue and expects to determine the root cause this month or early October, and sees a fix implemented on aircraft already in service in early 2015, Chris Flynn, a Pratt & Whitney vice-president for the F-35 engine program said.

"We understand what fundamentally happened ... and we have tremendous confidences in the timeline," Flynn said. "We think it's a fairly straightforward fix."

U.S. officials downplayed a report released this week by the U.S. Government Accountability Office (GAO), which said it would cost the U.S. government $19.9 billion a year to operate and maintain its fleet of F-35s in 2035, compared with about $11 billion a year in fiscal 2010 for the four warplanes it will replace.

"Many of the assumptions made by GAO in extrapolating costs over the life of the F-35 program did not reflect ongoing process improvements, or failed to account for learning and feedback that will improve efficiency of F-35 sustainment operations in the coming years," the F-35 program said in statement.

Though no longer grounded, the fleet of over 100 F-35s already delivered flies under restrictions, pending the engine fix.

Lockheed added it was also confident that the U.S. Marine Corps would declare the first version of the jet combat ready by mid-2015 and said that beside the engine issue, the integration of the communication systems and the subtle changes to flight controls were its main issues.

(Additional reporting by Andrea Shalal in Washington; Editing by Mark Potter)