What began as a straightforward plan to buy American stealth fighters has morphed into a high-risk gambit that pits Ottawa against Washington, Lockheed Martin and decades of defence habit. Sweden, of all countries, has seized the opening with an offer that could reshape Canada’s aerospace sector for a generation.
Canada puts a €27bn fighter jet deal on the line
Canada has agreed in principle to acquire 88 F‑35 Lightning II stealth fighters, a programme valued at around €27.7bn. The aircraft are meant to replace the ageing CF‑18 Hornets and give Ottawa a modern, NATO‑standard combat fleet for Arctic patrols and international missions.
Now the government is signalling it may walk away from part of that deal unless the United States and prime contractor Lockheed Martin sharply increase industrial benefits for Canadian firms.
Ottawa is using the threat of cancelling F‑35 orders as leverage to demand more jobs, technology transfer and long-term production work at home.
Industry minister Mélanie Joly has taken the lead, arguing that the current package of offsets and contracts tied to the F‑35 falls short of expectations. She wants deeper access for Canadian companies into the global supply chain, more high-value engineering roles and clearer guarantees on intellectual property.
The shift comes as Canada is ramping up defence spending in response to Russia’s war in Ukraine, Chinese military pressure in the Pacific and growing concern over Arctic security. That context gives Ottawa more political cover to push hard for domestic gains.
Sweden’s Saab steps in with a made‑in‑Canada Gripen plan
The timing has been ideal for Sweden’s Saab, whose Gripen E fighter lost earlier rounds of the Canadian competition. The company has re-emerged with a dramatically sweetened proposal built around local production.
Saab is offering its latest‑generation Gripen E, a lighter, single‑engine jet that is less stealthy than the F‑35 but cheaper to operate and easier to maintain. The key selling point is not the aircraft itself, but where and how it would be built.
Saab says it is ready to assemble every Gripen for Canada on Canadian soil, with full access to the underlying technology.
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Jobs, factories and tech transfer on the table
Under Saab’s pitch, Canada would receive:
- A final assembly line for the Gripen E in Canada
- A dedicated maintenance, repair and upgrade facility
- Access to key software and systems, not just black‑box equipment
- An estimated 12,600 direct and indirect jobs in the country
That package directly targets long-standing Canadian frustrations with US defence deals, which often limit local industry to lower‑tier work and offer little say over critical software or weapons integration.
For Saab, the prize would be immense: a major NATO customer, long-term production orders and a foothold in North America. For Canada, it would be the closest thing to rebuilding a national fighter industry since the cancellation of the Avro Arrow in the 1950s.
Carney’s political stance: sovereignty over dependence
Prime minister Mark Carney, elected on a platform that stressed independence from Donald Trump’s America, views the F‑35 issue through a sovereignty lens. Buying a near‑entire fleet from US suppliers plays badly with voters who worry about over‑reliance on Washington.
Carney has floated the idea of a mixed fleet, with a core of F‑35s for high‑end missions and a complement of Gripens for routine patrols and training. That would allow Canada to preserve interoperability with the US military while still claiming meaningful domestic production.
In Carney’s rhetoric, fighter jets are not just weapons systems; they are symbols of how much control Canada truly has over its own security.
That framing puts extra pressure on US negotiators. Any appearance of Washington bullying Ottawa into sticking with the original F‑35 package risks a domestic backlash and could strengthen the pro‑Saab camp.
A military caught between strategy and logistics
Behind the political theatre, Canada’s air force faces an uncomfortably practical dilemma. Sixteen F‑35s have already been ordered, with deliveries scheduled from 2026 onwards. Backing out now would likely incur heavy penalties and delay the replacement of the CF‑18s.
Running both F‑35 and Gripen fleets in parallel presents its own headaches. Each type would need its own training pipeline, simulators, spare parts, weapons integration and maintenance crews. That is a major undertaking for an air force that already struggles with pilot retention and technical staffing.
Senior officers are quietly wary of doubling complexity at a time when operational demands in the Arctic and within NATO are rising. While Saab’s industrial package is attractive, many in uniform see the F‑35’s stealth and sensor fusion as indispensable for future coalition operations.
What’s at stake financially
The headline numbers reveal why both sides are digging in. Lockheed Martin and the Canadian government initially touted significant long-term gains tied to the F‑35 programme:
| Scenario | Jobs advertised | Estimated GDP impact | Delivery timeline |
| 88 F‑35 (full Lockheed deal) | 150,000+ | €16.9bn | 2026–2039 |
| 16 F‑35 + 72 Gripen | 12,600 (Saab figure) | Unknown | From 2026, then uncertain |
| 100% Gripen | 12,600 | Lower than F‑35 scenario | After 2030 |
Crucially, those F‑35‑linked jobs and GDP gains depend on Canada sticking to the full order. Any reduction in jet numbers could see work packages reassigned to firms in other partner nations, from the US to the UK and Italy.
US under pressure as allies question defence industrial ties
For Washington, the Canadian standoff arrives at a sensitive moment. The US is urging NATO allies to spend more on defence and standardise equipment, especially high-end assets like the F‑35. At the same time, partners are increasingly demanding a bigger share of the manufacturing value.
If Canada forces concessions, other F‑35 customers may ask for similar treatment. That could unsettle the finely balanced industrial structure of the programme, which spreads work across multiple allied economies in exchange for early buy‑in.
Ottawa’s message is blunt: allies should not just buy American; they want to build and own a piece of the technology as well.
The US also has to think about the signal sent to rival suppliers. A visible rift between Washington and Ottawa could encourage European manufacturers, from Sweden’s Saab to France’s Dassault and the UK‑Germany‑Spain Tempest initiative, to pitch more aggressively in NATO markets.
Decision pushed to 2026 as lobbying intensifies
The Carney government was expected to lock in its final fighter strategy by autumn 2025. That timeline has slipped, with a revised decision date sometime in 2026. The delay reflects the intensity of the behind‑the‑scenes lobbying campaign.
Lockheed Martin points out that around 110 Canadian companies are already contributing components and services to the global F‑35 fleet. Executives argue that Canada risks losing those contracts if it signals reduced commitment.
Joly, on the other hand, is pressing for more than subcontracting. She wants research centres, high‑end engineering roles and a stronger grip on intellectual property that could support a broader aerospace ecosystem over decades.
What a mixed F‑35 / Gripen fleet could look like
If Canada does pursue a hybrid approach, the division of labour between jets would likely be stark. F‑35s would take on missions requiring stealth and advanced sensors: penetrating air defences, coordinating coalition strikes and high‑risk Arctic surveillance.
Gripens could handle sovereignty patrols over Canadian territory, quick reaction alerts, training and lower‑intensity deployments. Their lower operating cost and shorter runway requirements might fit well with remote northern bases.
Such a model exists elsewhere. Brazil, for instance, is building Gripens locally with deep industrial participation, while still collaborating closely with the US on other systems. That example is often cited in Ottawa as proof that a mid‑sized power can secure advanced jets without giving up domestic aerospace ambitions.
Key concepts behind the political fight
Two technical ideas sit at the heart of the argument and often get lost in the political noise.
Industrial offsets: These are side deals attached to big defence purchases, where the supplier promises contracts, investment or technology transfer in the buyer’s country. Offsets can mean anything from local assembly lines to joint research labs. Canada wants a higher‑value mix, leaning towards engineering and design rather than simple parts manufacturing.
Technology transfer: Beyond just building jets, governments increasingly seek access to the software, source code and design data that let them upgrade or adapt aircraft without foreign permission. Saab’s offer is attractive here because Sweden typically takes a more open approach than the US to sharing technical details.
The risk is clear: deeper access means greater responsibility for cybersecurity, export controls and long-term sustainment. Canada would need to invest heavily in skills and infrastructure to handle that level of autonomy.
Scenarios for Canada’s aerospace future
Three broad paths are now under discussion inside government and industry circles.
First, Ottawa could keep the full F‑35 order but extract incremental concessions: more Canadian work packages, some extra research funding, maybe a role in future upgrades. That would please the air force and preserve NATO interoperability, while giving ministers a political win.
Second, Canada could trim F‑35 numbers and add Gripens, betting that the industrial payoff offsets the complexity of running two fleets. This path would create new aerospace capacity but demands careful planning to avoid spiralling support costs.
Third, a bold break with the US model remains on the table: cancelling most or all F‑35s in favour of a locally built Gripen force. That scenario is the most attractive to those who dream of rebuilding a sovereign fighter industry, and the most alarming to those focused on alliance politics and near‑term readiness.
Each choice carries trade‑offs between sovereignty, cost, military capability and alliance cohesion. The fact that Sweden, a relatively small player, can put the United States on the defensive in a G7 country shows how sharply the global defence market is shifting toward shared production and shared power.