The Pentagon’s fleet of F-35 fighter jets may not receive the full, combat-ready version of the Technology Refresh-3 (TR-3) upgrade this year, according to Lockheed Martin executives. The TR-3 upgrade was originally scheduled for completion in April 2023, but software development issues have caused several delays. These setbacks led the Pentagon to halt acceptance of new F-35s for a year, a pause that concluded in July. The TR-3 upgrade is designed to provide the jets with the additional computing power needed for Block 4 improvements to sensors and weapons.
Lockheed Martin has ongoing work related to TR-3 concerning mission system integration and overall system stability. While the company anticipates achieving some milestones this year, Chief Financial Officer Jay Malave stated during the fourth-quarter earnings call that, for financial modeling, they expect these processes to extend into 2026. Previously, Lockheed executives had hoped that the complete TR-3 combat capability would be ready by spring 2024, but neither the F-35 Joint Program Office nor Lockheed could confirm a definitive delivery date.
Malave emphasized that the declaration of full combat capability ultimately lies with the customer, with ongoing coordination and collaboration expected. He expressed satisfaction with the team’s progress, stating that they are moving at a good pace with their supply chain partners to enhance mission system capability and system stability.
In the interim, the Pentagon will receive TR-3 jets equipped with a truncated version of the upgrade package until the full combat-capable version becomes available. Initially, the Pentagon withheld $5 million per jet from Lockheed until the complete upgrade was finalized, but this withholding has been reduced by $1.2 million per aircraft due to incremental progress from Lockheed.
In 2024, Lockheed delivered 110 jets, including new production and previously parked TR-3 jets. For the current year, the company plans to deliver between 170 and 190 jets, benefiting from the clearance of the backlog of parked jets, as stated by CEO Jim Taiclet. Lockheed also anticipates finalizing a contract for the next production lot of F-35s (Lot 18) in the first half of this year. The Pentagon awarded an $11.8 billion contract for Lot 18 in December, although final negotiations will occur under the new administration.
Taiclet expressed confidence in the production of 156 jets annually, citing the need to maintain an effective deterrent against adversaries like China and its J-20 fighter jet. He noted that the incoming administration possesses knowledgeable individuals who understand deterrence theory and would likely avoid creating vulnerabilities against major adversaries.
Additionally, during the earnings call, Lockheed reported $2 billion in losses in 2024 due to two classified programs. The company faced a $1.4 billion loss on a missile-and-fire control program and a $555 million loss on an aeronautics program for the year. For the missile program, Lockheed expects losses to continue in the coming years but anticipates profitability around 2028. The aeronautics program’s losses resulted from higher-than-expected engineering costs following a detailed program review.
