ARLINGTON, Virginia: Lockheed Martin has reached an initial agreement with the U.S. Department of Defense to produce and sustain at least 850 F-35 Lightning II fighter jets over the next decade.

The agreement calls for Lockheed to maintain annual production at 156 aircraft and self-fund at least US$7 billion in initiatives supporting the F-35 program, the Defense Department said on October 22.

The agreement does not constitute an order but is counted as a prearranged long-term contract.

"If granted multi-year authority in the coming months, the F-35 Joint Program Office and Lockheed Martin will work to finalize contract terms, pricing and schedules through a formal contract award," the company said.

The agreement also covers international orders for the F-35, along with initial spares and modification kits.

The F-35 uses stealth technology that helps it evade enemy detection and is considered the world's most advanced fighter jet. The program is central to Lockheed's aeronautics division, which accounts for nearly 40% of its quarterly revenue.

"We have fundamentally changed how we stabilize the American defense industrial base to produce at speed and scale," Under Secretary of Defense Michael Duffey said.

"This agreement with Lockheed Martin proves it. By aligning financial incentives with actual performance, we are ensuring our warfighters are equipped with the lethal capabilities they need to fight and win."

Lockheed and its peers across the U.S. have benefited from increased global defense spending as geopolitical conflicts remain unabated.

The company estimates the agreement will support 317,000 U.S. jobs and generate nearly $79 billion in annual economic activity over the next decade.

Lockheed also expects the arrangement to lower production costs and ease supply-chain constraints from raw materials to finished parts.