The agreement between Lockheed Martin (NYSE: LMT) and CAE (TSX:CAE) was reached Monday at the Paris Air Show and announced as associate defence minister Kerry-Lynne Findlay was telling the House of Commons that no decision has been made on replacing the existing fleet of CF-18s.
It immediately caught the interest of defence analysts, who say the U.S. giant is moving to hedge its bets as the decision on whether there will be a full-blown competition gets closer.
The memorandum between the two defence contractors would see CAE deliver training system support and services in Canada.
"Canadian industry has played an integral part in the development and production of the F-35 for more than a decade,"Steve O'Bryan, a Lockheed Martin vice-president, said in a written statement.
"Canada's industrial contribution to this program has truly just begun. The new alliance we established today is indicative of the long-term role Canadian industry will hold in the global sustainment of the F-35 fleet for the next 30 years and beyond, and directly supports the evolution of training systems, one of the key industrial capabilities recently promoted by the government of Canada."
The government has the multi-billion-dollar F-35 program on hold while it looks at alternative jets following a scathing report on the planned purchase by auditor general Michael Ferguson.
Ferguson's report, released in April of last year, accused the National Defence and Public Works departments of failing to do their homework on the stealth purchase, and understating the eventual cost.
The Conservative government has taken pains to emphasize that it is looking at other aircraft as part of its options analysis of what should replace the CF-18s. That review, which is expected to drag on into the fall, has asked potential rivals of the F-35 about capabilities and pricing.
That's what makes Monday's agreement, which sets up a framework between the two companies, so curious.
Asked in the House of Commons about published reports that the F-35 is incompatible with the air force's current air-to-air refuelling tanker, Findlay underlined the analysis was still ongoing and that there would be a solution to the refuelling issue "no matter which fighter is chosen."
Retired colonel Paul Maillet, who helped shepherd the CF-18s into service, said the deal likely represents Lockheed Martin's confidence the program will get back on track, but could help "sweeten the pot" if there is a full-on competition.
If the Harper government goes out for bids, it would be under a traditional framework and the rivals would have to demonstrate how Canadian industry would benefit.
Having the country's leading maker of flight simulators locked down would be an advantage, said Maillet.
"All partners would be doing this, looking for Canadian partners, and in some way or another, this is going to make (Lockheed Martin's) bid better," he said.
Gene Colabatistto, who heads the military products, training and services division at CAE, noted the two companies have already collaborated on simulators for the air force's new Hercules transports.
"CAE and Lockheed Martin have a long-standing and successful relationship on other platforms such as the C-130, and we look forward to extending our collaboration should the government of Canada select the F-35," Colabatistto said in a statement.