Canada's $9 Billion Fighter Jets

http://www.cbc.ca/canada/story/2010/07/16/canada-jets.html
http://www.cbc.ca/canada/story/2010/07/16/f-f35-faq.html
http://www.airforce.forces.gc.ca/v2/equip/f35II/index-eng.asp

Summary:

On July 16, 2010, the Government of Canada announced it is acquiring the fifth generation Joint Strike Fighter F-35 Lightning II aircraft for the replacement of the CF-18 Hornet aircraft fleet. It was the biggest military equipment purchase in the Canadian history. Department of National Defense need the new generation of aircraft to protect the safety and security of the Canadians. Each of the F-35 fighter jet cost $138.5 million dollars and it is around four times more expensive than the present CF- 18 fighter jets.

Countries such as the U.S., Britain, Canada, Italy, Netherlands, Turkey, Australia, Norway and Denmark made financial contribution to this program. Canada is one of the major partners out of nine in the Joint Strike Fighter program which have invested about $168 million on the program. The Canadian Air Force decide to get the first plane in service by 2016 and all 65 F-35 Lightning II will be in service before 2020. Lockheed Martin as the manufacture company of this JSF jet is expected to produce 3100 F-35 aircraft in the next 25 years. Canada is planning to spend $9 billion dollars on the replacement but this amount will be doubled when the maintenance contract is added. It is forecasted to spend at least $18 billion in this program.

The replacement program not only benefits the performance of the Canadian Air Force but also benefits the Canada aerospace industry because all the aircraft maintenances are done in Canada mainland which will generate a lot of job opportunities for Canadians.


Connection:

         The Department of National Defense approved to acquire 65 F-35 fighter jets to replace the aging CF-18 fleet. The Department will spend $9 billion dollars on the purchase and will possibly spend another $9 billion dollars on maintenance.

 They invest those funds to accomplish its goals. This purchase is considered as investing activities but in this case, the government is not looking for profit but instead their goal is to ensure safety and security of the Canadians. The fighter jets are invested as long term investments because each of the plane has its life expectancy which are usually long enough to survive another 25 years. The government will not replace the fleet again in the short term because each replacement program cost massively and the government cannot afford to replace regularly in a short period of time. All the plane that the air force are acquiring, is a type of equipment purchase which goes under the investing activities.

Usually a company gets their money by selling shares to shareholders. It lets the company to temporary use the money to invest on something so that the profit can cover the expense and also repay the shareholders. In this case, $9 Billion dollars are not a small number and the government cannot cover the cost by selling bonds to Canadians. The government has to take portion of the money from taxes that were collected in the past. Basically, the DND are approved to purchase fighter jets with the government funding. The funding is from government which eventually was the tax payers’ money. This is how most of the governmental departments get their fund from. A secondary funding would be from bonds which are similar to selling shares.

Reflection:

            Canada is known for a peacekeeping country which always supports her allies and the developing countries. However, the government decided to spend a large amount of money on fighter jet that cannot support the ground force during the peacekeeping mission. The Air Force always focuses on the response time during crisis but Canada would not response better to an unpredictable emergency such as 9-11 even Canada acquires a fleet of F-35. Since Canada is a peacekeeping country, the DND should consider purchasing heavy lifted helicopter, Large Transport Aircraft or some multi-role fighter jet instead of a heavy F-35 Lightning II that are not capable to fight other fighting jet. The purchase is totally unnecessary because Canada is in a position of peacekeeping and not in war state. With that much money, Canada can acquire more aircraft which can benefits the current Afghan mission.

            The aviation manufacture of F-35 Lockheed Martin awarded the contracts without any competitors which gives advantage for Lockheed Martin to bargain with Canada in future negotiation and maintenance costs. Instead of putting all the eggs in one basket, Canada can split the risk by buying aviation equipment from other manufacture company such as the Boeing or Eurofighter jet. However, the DND focuses on investing everything on single equipment.

            Nine billion dollars could possibly fund in other area such as education, health care or support the low income population. It is correct to spend money in military equipment so that the homeland security is well protected but the military expenses and the other basic welfare expense should be balance. The government spent so much money on something that is not necessary which made this as issues. Parties in the house of common suggested spending money on military but the DND should spend on the right equipment. Or else the investment may be useless.