Canada’s F-35 Deal Balloons to C$27.7 Billion, With Only 16 Jets Locked In

An auditor general’s report and a new opening toward a rival sixth-generation fighter have unsettled Canada’s largest-ever defense purchase. Ottawa is contractually committed to just 16 of the 88 jets.

OTTAWA, Ontario — Canada’s F-35 fighter program has swelled to 27.7 billion Canadian dollars from an original 19 billion Canadian dollars, while the government remains financially locked into just 16 of the 88 jets it originally sought, the country’s auditor general found.

Prime Minister Mark Carney ordered a formal review of the F-35 deal in March 2025 amid rising trade tensions and tariff threats from the U.S. administration. The Lockheed Martin-built F-35 relies on a closed software architecture controlled entirely by the United States, a dependency that has stirred sovereignty concerns in Ottawa. Weighing membership in the Global Combat Air Program — the British-Italian-Japanese sixth-generation fighter effort — or a mixed fleet with Saab’s Gripen E gives Canada negotiating leverage and the promise of stronger domestic industrial offsets, including a Saab pledge of 12,600 jobs tied to the Gripen E.

“We believe that we didn’t get enough when it comes to the F-35. The industrial benefits are not enough. There needs to be more jobs created out of the F-35 contract. That’s clear to me and clear to this government,” Mélanie Joly, Canada’s minister of innovation, science and industry, told reporters on Parliament Hill in November 2025.

Carney has defended the money already spent to hold Canada’s place in the F-35 production line. “Yes, the government is paying a small amount in order to have options,” he told the House of Commons in February 2026. “That’s useful for our defense and to have options in our negotiations with the Americans.”

Not everyone agrees the review makes sense. Philippe Lagassé, an associate professor of international affairs at Carleton University, has argued that reconsidering the F-35 delays critical modernization, saying the Royal Canadian Air Force is out of time to replace its aging CF-18s and cannot wait for untested sixth-generation replacements.

Auditor General Karen Hogan detailed the scope of the overrun in a report released June 10, 2025. “We found that an important part of the increase in the department’s updated cost estimates of CA$27.7 billion was caused by global factors, specifically: rising inflation; fluctuations in foreign exchange rates, and heightened global demand for munitions,” Hogan wrote.

Hogan’s report also found that the Joint Strike Fighter Program Office assessed Canada’s infrastructure readiness in June 2024 and issued a “red” rating. “In June 2024, the Joint Strike Fighter Program Office conducted an assessment of the interim operations plan to determine how ready National Defence was to support the first aircraft arrival in Cold Lake in December 2028. The overall rating for this assessment was ‘RED,’ meaning that significant issues remained unresolved and required senior leadership action,” she wrote.

Beyond the headline figure, the report found an additional 5.5 billion Canadian dollars is needed for munitions and secure infrastructure. Separately, a November 2023 Parliamentary Budget Officer estimate put the F-35 program’s full 45-year lifecycle cost at 73.9 billion Canadian dollars. Only 40% of the Royal Canadian Air Force’s fighter jets are deemed combat-ready, and just 58% of personnel are available for rapid deployment, the findings show. Infrastructure delays at Canadian Forces Base Cold Lake in Alberta and Canadian Forces Base Bagotville in Quebec pushed the readiness target from 2028 to 2031; early Canadian F-35s will train at Luke Air Force Base in Arizona in the meantime. Defense Minister David McGuinty acknowledged the audit and said the department would implement annual cost reviews while continuing procurement.

On July 21, 2026, during the Farnborough International Airshow, Canada became the first country granted observer status in the Global Combat Air Program, announced in London by defense ministers from Canada, Britain, Italy and Japan. Known informally as Tempest, the sixth-generation stealth fighter is being developed by Britain, Italy and Japan for service entry in 2035. It’s led by the Edgewing consortium — BAE Systems of the U.K., Italy’s Leonardo and Japan Aircraft Industrial Enhancement Co., a consortium led by Mitsubishi Heavy Industries — awarded a 4.6 billion pound ($6.1 billion) contract on July 3, 2026, funding the next 18 months of concept and design work. The program was formed in December 2022.

Unlike the F-35’s closed, U.S.-controlled software, GCAP is being designed with an open-systems architecture that would let operators control their own sensors, software and artificial intelligence integration without needing Pentagon approval, sidestepping the restrictions that come with U.S. Foreign Military Sales.

“It’s taking it even further in terms of stealth technology — which is about remaining, undetected and then being able to operate in the airspace with more freedom to manoeuvre,” Lt. Gen. Jamie Speiser-Blanchet, commander of the Royal Canadian Air Force, said July 21, 2026.

A BAE Systems spokesperson said operators would be able to rapidly adapt the aircraft to perform new functions, and that mission-dependent “role fit” additions could include low-observable conformal fuel tanks, weapons dispensers, air-launched drone dispensers, large modular sensors, long-range oblique photography systems and laser directed-energy weapons.

Britain’s Ministry of Defence welcomed Canada’s move, saying observer status doesn’t yet grant Canada decision-making authority but provides privileged technological access and a path toward deeper collaboration.

GCAP isn’t Canada’s only leverage point. Saab has offered a full-value industrial offset for its Gripen E fighter, pledging to build a domestic final-assembly line that would create 12,600 Canadian jobs — an offer Saab CEO Micael Johansson has said is contingent on Canada selecting the Gripen E and its companion GlobalEye surveillance aircraft over the F-35.

Ottawa named L3Harris MAS of Mirabel, Quebec, as its strategic partner for a CF-35A airframe maintenance depot in November 2024. Lockheed Martin and L3Harris formalized a framework for the depot on April 21, 2026. “Depot-level sustainment means Canada’s aerospace workforce will perform the same advanced maintenance currently done in only a handful of locations worldwide,” said Jason Lambert, president of intelligence, surveillance and reconnaissance at L3Harris. Chauncey McIntosh, vice president and general manager of Lockheed Martin’s F-35 program, said the partnership “delivers on Canada’s requirement to develop in-country sustainment capability and to operate and maintain the Canadian F-35 fleet independently.”

More than 110 Canadian companies are already embedded in the F-35’s global supply chain, and every F-35 built worldwide contains 3.2 million Canadian dollars in Canadian-made parts, according to the findings. Canceling the remaining jets could put up to 3,000 high-skill jobs at risk.

The Gripen E, a 4.5-generation fighter, doesn’t match the F-35’s stealth profile or its AN/APG-81 active electronically scanned array radar, but it carries its own Raven ES-05 radar, mounted on a rotating mechanism that swings the antenna to widen its field of view to roughly 100 degrees on either side of the aircraft’s centerline. The Gripen E can also reach Mach 2.0, against the F-35A’s Mach 1.6 top speed. It is far cheaper to fly, at a published $8,000 to $12,000 per flight hour in U.S. dollars. The Government Accountability Office has put the F-35A’s cost per flight hour at roughly $33,000 to $42,000.

Tom Lawson, a former chief of the defense staff, has cautioned that a mixed fleet would create severe logistical complications, warning that any alternative to the F-35 would leave the air force facing decades of operational difficulty.

The stakes extend beyond the fighter jets themselves. Canada’s 2022 NORAD modernization plan, reaffirmed in the 2024 defense policy “Our North, Strong and Free,” commits 38.6 billion Canadian dollars over 20 years to modernize the North American Aerospace Defense Command, or NORAD, the binational command Canada shares with the United States, including 15.68 billion Canadian dollars for infrastructure upgrades at forward operating locations in Inuvik, Yellowknife, Iqaluit and Goose Bay — bases being adapted to support the F-35.

Gen. Gregory Guillot, commander of NORAD, told the Senate Armed Services Committee in March 2026 that fifth-generation stealth fighters like the F-35 aren’t needed to defend North America’s borders, testimony that has bolstered arguments in Canada for cheaper alternatives.

The financial pressure intensified at the NATO summit in The Hague in June 2025, where member states pledged to raise defense and security spending to 5% of gross domestic product by 2035 — a threshold Carney has said could cost Canada as much as 150 billion Canadian dollars a year. “If we are moving to the higher and higher levels of defence spending because that’s necessary then we will have to make considerations about what less the federal government can do, in certain cases, and how we’re going to pay for it,” Carney said at the summit. He said then that he expected the F-35 review to be finished “by the end of the summer,” adding, “We’ll take all the time necessary.” The review was still incomplete more than a year later.

Pete Hoekstra, the U.S. ambassador to Canada, has warned repeatedly since 2025 that Canada’s ongoing review is complicating broader trade negotiations between the two countries. Andrew Latham, a professor of international relations at Macalester College and a senior fellow at Defense Priorities, has argued the review amounts to political theater, since funding already committed for long-lead components has effectively locked Canada into the F-35 program.

Canada’s air force still flies aging McDonnell Douglas CF-18 Hornets, first procured during the Cold War, with a phase-out scheduled for the end of 2032. In a 2021 Defence Department evaluation obtained by Radio-Canada and made public in November 2025, the F-35 scored 57.1 of 60 points, or 95%, on military capability. The Gripen scored 19.8 points, or 33%. To preserve its place in the production line during the ongoing review, Canada approved preliminary funding for long-lead materials covering 14 additional jets beyond its first 16. The F-35 first flew Dec. 15, 2006; the Gripen E first flew June 15, 2017.

“We’re out of runway. There’s no more flexibility here,” Lagassé said April 4, 2025.

Canada first joined the Joint Strike Fighter project in 1997, and a Conservative government announced its intent to buy 65 F-35s in 2010.