by Shaun McDougall, Military Markets Analyst, Forecast International.
Canada’s Liberal Party has ended nearly a decade of rule under Prime Minister Stephen Harper and his Conservatives, a change that does not bode well for Lockheed Martin’s F-35 Joint Strike Fighter. The Liberals, led by Justin Trudeau, won a majority government with 184 seats in Parliament, meaning they will not have to form a coalition with the leftist New Democratic Party, which won 44 seats. The Conservatives held on to 99 seats, while the Bloc Quebecois took 10 seats and the Green Party just one. In the previous election in 2011, when the Conservatives formed a majority, the NDP actually beat out the Liberals to become the official opposition party for the first time ever. The latest election represents a shift to the center, carrying with it a number of significant defense policy changes.
Trudeau has vowed to scrap the F-35 acquisition program, which has come under fire from critics due to high costs. The Canadian Forces wanted to buy 65 F-35s to replace the fleet of CF-18 Hornets. The replacement program had already been put on hold in 2012 so alternative options could be assessed, but Harper’s government had stood behind the F-35 throughout.
Trudeau’s opposing views could not be clearer in the Liberal election platform: “We will not buy the F-35 stealth fighter-bomber. We will immediately launch an open and transparent competition to replace the CF-18 fighter aircraft. The primary mission of our fighter aircraft should remain the defense of North America, not stealth first-strike capability. We will reduce the procurement budget for replacing the CF-18s and will instead purchase one of the many lower-priced options that better match Canada’s defense needs.”
Savings from dropping the F-35 would be diverted into the shipbuilding industry to “ensure that the Royal Canadian Navy is able to operate as a true blue water maritime force.” The Conservatives launched the National Shipbuilding Procurement Strategy in 2010 to replace a wide range of combat and auxiliary vessels for the Royal Canadian Navy and Coast Guard, but many of these programs are running significantly behind schedule. For example, the Navy now finds itself with just a single destroyer and no supply vessels, with new ships still years away from being built.
The Liberal victory represents the worst political outcome for the F-35. The Conservatives favored the aircraft, and NDP leadership was not opposed to the F-35 taking part in a renewed fighter competition. Trudeau, however, appears ready to write the F-35 out of a competition entirely. There is often a large gap between campaign promises and outcomes, so the F-35 may not be completely out of the picture yet. An F-35 lifeline would depend upon Air Force leadership convincing Ottawa that the advanced capabilities of a fifth-generation fighter are worth a second look, but military officials face an uphill battle.
Trudeau has said the government stands to save “tens of billions” of dollars by buying a cheaper aircraft, but it is not clear how he reached this figure. Unit costs of the F-35 continue to drop as low-rate initial production proceeds and production ramps up. While a single jet now costs well over $100 million, including the engine, Lockheed hopes to bring that figure down to around $80 million by 2019. The U.S. Department of Defense put the average unit cost of an F-35A at $76.8 million (FY12 dollars) over the life of the program. That figure equates to around $79.6 million today.
The most likely alternative to the F-35A is the F/A-18E/F Super Hornet, the successor to the CF-18 currently flown by the Royal Canadian Air Force. The Super Hornet has a flyaway unit cost of around $60.9 million in FY13 dollars, now about $62.2 million after inflation. Keeping in mind that unit costs can vary significantly based on the timing and rate of procurement, buying the Super Hornet instead of the F-35A could save well over $1 billion in flyaway costs alone. Since Canada already flies F-18 series aircraft, the Super Hornet also carries potential savings in the areas of training, infrastructure, and logistics. There are also other savings to consider, such as the fact that the drogue system utilized by Canada’s CC-150T tankers would have to be modified to work with F-35s. Whether these savings amount to “tens of billions” of dollars over the life of a new aircraft is difficult to determine.
The Conservative government has already collected data on the Super Hornet during its assessment of alternatives, in addition to data on the Dassault Rafale and Eurofighter Typhoon. Saab pulled its Gripen out of the market analysis phase but could still take part in a competition. The new Liberal government will have to act fast if it wishes to hold a competition to replace the CF-18 fighters, as production of the Super Hornet is winding down. The U.S. Congress has recommended adding a number of Super Hornets to the Navy’s FY16 budget, which could add a small cushion to that timeline. Because of delays in fielding a replacement, the Canadian government last year announced a new CF-18 upgrade effort to keep the fleet flying through 2025. The upgrade effort will likely not be disrupted by the new Liberal approach to replacing the CF-18, as the process of holding a competition, selecting a winner and awarding a contract, and producing a new aircraft will take years.
On a broader scale, Trudeau has said he plans to maintain current defense spending levels, including planned increases. Canada’s defense budget has been subject to multiple cuts in recent years due to deficit reduction efforts, which has made it difficult for the government to live up to old promises to boost spending. Another troubling issue is the fact that the Department of National Defence regularly fails to spend its entire budget, even after cuts. Trudeau also plans to reassess the Canada First defense strategy, originally released in 2008. The strategy, drafted before the government began slashing expenditures to control the deficit, is in significant need of an update.
A new Liberal strategy will likely focus inward on homeland defense, rather than on developing capabilities to engage abroad. Trudeau’s stance on the F-35 is one clear indication of this philosophy. He does not see Canada taking the lead on the front lines of major conflicts, particularly ones involving an advanced adversary where Canada would be able to utilize the full potential of a next-generation fighter. Why buy the costly F-35 when you can rely on American F-35s and F-22s to clear the path for you? Trudeau has also promised to end combat operations against the Islamic State of Iraq and Syria. CF-18s began flying sorties against ISIS in Iraq in November 2014 and in Syria in April 2015. The new leader wants the Canadian Forces to focus on training and advising, as well as providing humanitarian assistance.
Thus far, Trudeau has made clear he supports buying an affordable fighter aircraft to protect the homeland and building a strong Navy fleet to protect Canada’s vast shores and waterways. This naturally bodes well for shipbuilding programs, including the Joint Support Ship and future surface combatant. The government may also ensure that the Navy receives all six of the planned Arctic Offshore Patrol Ships, even though the contract only guarantees delivery of five ships if costs go up. In addition, a number of other long-delayed programs could use a jolt of energy, including a new fixed-wing search-and-rescue aircraft and a new medium-size unmanned aerial vehicle. Both of these efforts have dragged on for over a decade. Only time will tell the fate of these efforts as the Liberal government drafts a new defense strategy and solidifies its priorities.
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