F-35 fighter jets perform in an air show at the graduation ceremony of Israeli pilots at the Hatzerim air force base in the Negev desert near the southern Israeli city of Beersheva, on December 22, 2021. AFP via Getty Images / MENAHEM KAHANA
Defense Business Brief: Foreign arms sales plummet; F-35 deliveries rise; Leidos to sponsor NASCAR driver; and more.
Happy New Year! It’s been a relatively slow week in Washington, as back-to-back snowstorms have closed schools and prevented the few federal workers who are still showing up in person for work from physically being in the office. Omicron is surging and a number of industry officials I spoke with this week say their companies are putting tighter restrictions on in-person work.
While many of us were taking a much-needed break from the stange daily grind, two key new items happened. First, President Biden signed the fiscal 2022 National Defense Authorization Act, the annual must-pass defense policy bill. While the NDAA authorized $770 billion, that cash isn’t available until Congress passes an appropriations bill, which it still hasn’t done. And Politico reported that the Biden administration’s fiscal 2023 Pentagon budget request would be delayed until March, one month later than the typical early February submission to Congress.
Second, the State Department released its annual arms export totals, which showed a 21 percent decline year over year. Foriegn military sales (FMS) totaled $34.8 billion and direct commercial sales (DCS) of military equipment totaled $103.4 billion. In fiscal 2020, arms exports totaled $175 billion, according to the State Department.
Why it matters: “We're surprised by the magnitude of the drop, which suggests FMS/DCS sales will be a headwind for large-cap defense primes with FMS exposure,” Cowen & Company analyst Roman Schweizer wrote in a Dec. 23 note to investors. Schweizer notes that the Biden administration is approving far fewer foreign military sales each month. Over the past year, the Biden administration has approved an average of $2.5 billion in arms sales per month compared to an average of $6 billion per month during the Trump administration.
While on the subject of foreign arms sales, Israel signed an agreement to buy 12 Sikorsky CH-53K heavy-lift helicopters and two Boeing KC-46 refueling tankers. Boeing also received a $470 million contract to upgrade Japan’s F-15 fighter jets.
Also of note, Lockheed Martin delivered 142 F-35 stealth fighters in 2021, the company said. That’s up from the 120 jets it delivered in 2020, a number well below the 141-aircraft goal due to the supply chain issues related to the pandemic.
Next week: The Surface Navy Association will hold its annual conference in Arlington, Virginia, beginning Tuesday. The event has frequently been a forum where top Navy brass preview items in the forthcoming budget proposal. In-person attendees must be fully vaccinated and masks are required.
Leidos said it would sponsor NASCAR driver Bubba Wallace and the No. 23 Toyota Camry stock car from 23XI Racing. The race team is owned by former NBA star Michael Jordan and NASCAR driver Denny Hamlin. Leidos sponsored Wallace, who has been an outspoken voice on racial justice issues, when he drove in the lower Xfinity series.
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