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Lockheed sees next U.S. F-35 fighter contract early this summer

By Andrea Shalal

WASHINGTON (Reuters) - Lockheed Martin Corp expects to sign a contract with the U.S. government early this summer for 43 more F-35 fighter jets, but the deal is unlikely to match price reductions seen on the last few contracts, a top company executive said Monday.

Chief Financial Officer Bruce Tanner said the company had driven the price of the jets lower by 4 percent to 5 percent in each of the previous three contracts, but savings of that magnitude were unlikely on the eighth batch of jets, given the lack of large quantity increases in the order.

"I'm not sure we will get to that level, but I do expect we'll have a reduction from the previous lot on an aircraft-to-aircraft basis," Tanner told Reuters in an interview during the company's annual "media day."

Lockheed submitted a proposal for the next lot of F-35 jets in December. The company finalized a contract valued at $7.8 billion in September for 71 more F-35s, including a sixth batch of 36 jets, and a seventh batch of 35 aircraft.

In April, the Pentagon's F-35 program chief, Air Force Lieutenant General Chris Bogdan, said he hoped to sign contracts with both Lockheed and engine maker Pratt & Whitney, a unit of United Technologies Corp, by the end of May.

Orlando Carvalho, executive vice president of Lockheed's aeronautics division, said the two sides could sign a deal before the end of June, ahead of the jet's international premier at two air shows in Britain in July.

"I think we're closing on a final settlement, but we still have a little ways to go. Let's hope by the end of the month we have it done," he told Reuters.

Lorraine Martin, Lockheed's F-35 program manager, told reporters the two sides were now "trading really productive offers to get to closure."

F-35 program spokesman Joe DellaVedova declined to comment on the timing of a possible contract, or the expected cost reductions. He said negotiations were continuing with both Lockheed and Pratt.

Carvalho said Lockheed was hopeful that Canada would select the F-35 to replace its aging fleet of CF-18 fighters.

Reuters last week reported that Canada was poised to buy 65 F-35 fighter jets after an 18-month review concluded Ottawa should skip a fresh competition and proceed with the C$9 billion deal to buy F-35s.

One source familiar with the process said an independent team of evaluators was expected to discuss the Canadian government's process and methodology at a news conference on Wednesday, but would not give its own recommendation. A second source said no public report would be released, if the event took place.

Carvalho said Lockheed would finish development by the end of the year of the 2B software needed for the Marine Corps version of the jet, which is due to start combat operations in mid-2015.

(Additional reporting by Randall Palmer in Ottawa Editing by David Gregorio and Mohammad Zargham)

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