SEOUL (Reuters) - A task force formed by South Korea's defence ministry to re-examine its fighter jet requirements is likely to reaffirm the need for a stealthy fifth generation fighter, giving a boost to Lockheed Martin Corp's (LMT.N) F-35 programme, according to several industry sources familiar with the tender.
The task force was formed last month after a separate committee rejected the Defense Acquisition Program Administration's recommendation to buy the Boeing (BA.N) F-15, which was the only fighter among the three in the tender to fall within Seoul's budget.
The F-35 scored the highest in a technical evaluation, according to the sources, and is believed to be favoured by senior government and air force officials.
After opposition from several high-profile South Koreans, including a handful of ex-Air Force chiefs, to the selection of the F-15, the committee led by South Korea's defence minister decided that it would re-examine the terms of the tender.
The task force, including representatives of the South Korean Joints Chiefs of Staff and senior Air Force officials, is now taking another look at South Korea's requirements.
Within the next few weeks, it is expected to reaffirm that South Korea needs a fighter with the stealth capabilities of the F-35, said a source with knowledge of the process. The sources asked not be named because they were not authorised to speak to the media.
With the South Korean government unlikely to increase the budget, the task force is expected to recommend that the country prioritise aircraft capability and use the same budget to buy fewer aircraft, one of the sources, with knowledge of the South Korean government's considerations, said.
Seoul originally planned to buy 60 fighters, but that could come down to around 40, with options for more, according to a second industry source.
The task force is also likely recommend that there is no need to assess the capability of the aircraft again, given that the results of DAPA's two-year evaluation are still valid, according to one of the sources.
A final contract could be signed by the third quarter of 2014 after the negotiations over the offset requirements, one source said. South Korea has not asked for an assembly line to be built in the country, and instead wants the winner of the competition to help with the development of its KF-X light fighter programme.
That will allow South Korea to get initial delivery of the F-35 by its original target of 2017 if it is chosen, given that the U.S. government and Lockheed need a three-year lead time from orders to the first deliveries.
KEEPING UP WITH ITS NEIGHBOURS
South Korea's shift toward the F-35 has also been influenced by Japan's decision to order the stealth fighter, and China's development of indigenous stealth fighters. There are concerns within South Korea that not acquiring a stealth fighter would result in a major capability gap vis-a-vis its neighbours.
A spokesman for South Korea's defense ministry said the only matter decided was that Seoul would buy a next generation fighter jet - the number of jets, the model and the total cost had not been determined.
Boeing has said that while it was disappointed with the delay, it "looks forward to working with the South Korean government" to meet its requirements.
David Scott, Lockheed Martin's director for F-35 International Customer Engagement, said on the sidelines of a defence industry event in Seoul this week that there were several possible paths forward for South Korea, which included either cutting the number of aircraft ordered or increasing the budget to accommodate all contenders.
"We don't know, nor have we ever been officially informed, of any path forward," he added.
Europe's Eurofighter also plans to bid again for the order, but the head of Europe's EADS EAD.PA acknowledged last month that the company faced a tough battle against its U.S. rivals.
(Additional reporting by Andrea Shalal-Esa in Washington; Editing by Jeremy Laurence)