Lockheed Martin has emerged as the victor of the Peruvian Air Force’s competition to modernize their fleet with a new fighter aircraft. The intensive, year and a half-long process pitted America’s largest defense contractor against European rivals Dassault Aviation of France and Saab of Sweden, which had offered the Rafale and Gripen, respectively. The final two weeks of April were a tumultuous affair for the parties involved, with the Peruvian President unsuccessfully attempting to prevent the Prime Minister and Cabinet from awarding the contract. After several days of uncertainty caused by conflicting reports of both the F-16’s selection and the deferral of the procurement until a new government is sworn in this summer, a trio of statements from the Peruvian Government, the United States Government, and Lockheed Martin confirmed the F-16’s winning bid.
From the outset of the process, it was understood that the American bid would be offered via the US Government’s Foreign Military Sales (FMS) program. This was confirmed when the Defense Security Cooperation Agency announced in September that a possible sale to Peru of 12 F-16C/D Block 70s, plus associated equipment & services had been approved by the State Department and formally submitted to Congress for review. The value of the sale was estimated as $3.42 billion; $1.81 billion for Major Defense Equipment such as the aircraft themselves, including radars, engines & weapons; and $1.61 billion in other equipment and services. These estimates are purposefully high, and do not reflect the actual value of the Letter of Offer & Acceptance (LOA) contract that could be signed between the US Government and any possible FMS customer. For example, Slovakia was approved for 14 F-16s, plus associated equipment & services at an estimated cost of $2.91 billion but the value of the signed LOA was $1.8 billion. Still, the estimated $3.42 billion was very close to Peru’s budgetary ceiling for their fighter procurement program, which included a requirement for 24 aircraft, not 12. This may have not left enough funding to procure a second lot of 12 aircraft.
At some point between then and April, trilateral negotiations between the governments of Peru, the United States and Lockheed Martin resulted in a drastically revised bid. On their April 23 earnings call, Lockheed Martin President & Chief Executive Officer Jim Taiclet disclosed that Peru’s F-16 acquisition was actually a Direct Commercial Sale (DCS), worth $1.5 billion, for “12 Block 70 F-16 fighters, with an opportunity for a second squadron of an additional 12 aircraft.” DCS are contracts between the customer and the prime contractor, rather than the FMS program, in which the US Government acts as an intermediary. The execution of this arms sale case as a DCS is a significant surprise, as the F-16 is on the new Government-to-Government Only List (G2G), and fighter aircraft were included on the old FMS Only List as well. The last F-16 Direct Commercial Sale was signed 26 years ago, when the United Arab Emirates acquired the aircraft. Defense Security Cooperation Agency policy does not detail a waiver process for defense articles on the G2G Only List to be offered via DCS but does state that DCS export licenses for such articles are not automatically prohibited if the sale is in support of a USG authorized G2G program. The initial FMS case approval included both AIM-9X Sidewinder and AIM-120C8 AMRAAM air to air missiles, which Peru cannot procure commercially via their contract with Lockheed Martin, as they are produced by Raytheon. It is highly likely that Peru will procure these munitions through the already approved FMS case, which would seemingly provide the legal justification for this rare exception to the G2G Only rule for F-16 sales.
Defense Archives reached out to the US Air Force regarding the sale and was told that “U.S. defense sales may involve a combination of government-to-government and commercial arrangements depending on the requirements of the partner nation and the nature of the equipment, training, sustainment, and support involved. All such cases are reviewed and executed in accordance with U.S. law, policy, and technology security requirements.”
Lockheed Martin was also contacted for comment on the structure of the sale and received the following statement from a spokesperson: “F-16 Block 70’s for Peru is a hybrid Foreign Military Sales (FMS) – Direct Commercial Sale (DCS) program. This agreement will modernize Peru’s air defense capabilities with the purchase of 12 advanced Block 70 F-16 fighter jets via a DCS between Peru and Lockheed Martin. In addition to the DCS, Peru will also procure components sold government-to-government via the FMS system. This hybrid approach showcases the flexibility of the U.S. government and industry to meet the defense needs of our allies and partners.” Exactly which components those would be is unknown but could include Multifunctional Information Distribution System-Joint Tactical Radio Systems, Infrared Search and Track systems and electronic warfare systems.
On the question of whether this hybrid format was a one-off situation, or a new model that could be offered to other international customers, the spokesperson added that “Lockheed Martin and our F-16 program has a long history of supporting customer requirements through a variety of acquisition and contracting approaches, depending on the needs of the customer and the respective government-to-government frameworks involved. We will continue to work with our customers to understand their requirements and provide the best solutions to meet their national security objectives.”
Many US customers prefer purchasing via the Direct Commercial Sales program, which prompted the Trump Administration to implement the new G2G Only List, which is considerably more specific than its FMS Only List predecessor. For years the DCS & FMS programs were growing in concert, but last fiscal year FMS experienced a decline, while DCS continued to grow. The G2G Only List reform, and this F-16 sale will likely establish that divergence as a new trend this fiscal year.
US Ambassador to Peru, Bernie Navarro told local media that the first 12 jets would be delivered in 2029 or 2030. Excluding Peru, the current order backlog for newly produced F-16C/D Block 70/72s is approximately 110 aircraft, including 24 for Morocco, 66 for Taiwan, 12 for Jordan and an additional 8 for Bulgaria. In 2025 Lockheed Martin’s Greenville, South Carolina facility produced 16 of the aircraft, compared to a target of approximately two dozen. On the earnings call, Chief Financial Officer Evan Scott explained that F-16 deliveries had been delayed due to some issues experienced during flight tests of aircraft in the Taiwan and Morocco production run, which have a new configuration. This created some necessary rework, but Scott advised that since then there had been a successful flight test and that the program was back on track, with the delivery of the first aircraft of the production lot planned for as soon as that week. Lockheed Martin hopes to eventually produce up to 48 new F-16s per year at their Greenville facility and will need to increase production to 28-37 aircraft annually starting this year to deliver Peru’s order on time.
At last year’s AFA Warfare Symposium in March 2025, Mike Shoemaker, Vice President of Integrated Fighter Group at Lockheed Martin told Defense Archives that they were tracking potential sales of an additional 300 F-16s on top of their current order backlog. Included in that group is Peru, which is now on contract, and several countries that have received formal approval to procure aircraft via the FMS program but have not yet signed a Letter of Offer & Acceptance. Among them are Turkey, approved for 40; the Philippines, with two separate approved cases, one for 12 & one for 20; and Slovakia, which is approved to procure an additional 4 aircraft. The balance of potential sales is from other possible customers who have not progressed to the formal approval stage. Opening the F-16 up to the DCS program provides those customers with another avenue to pursue a possible procurement. One other potential customer is the US Air Force, which ceased procuring F-16 long ago, and has not sought to buy any newly produced Block 70/72 aircraft. With the Air Force’s fighter fleet in bad need of recapitalization though, suffering from attrition as airframes age out of service, if the Air Force wants to grow the fleet, a third production line will be needed to supplement the F-35 and F-15EX programs.