Canada will begin talks with Lockheed Martin Corp. to purchase 88 new F-35 warplanes, selecting the U.S. aerospace giant over a European rival to deliver fighter-jets as soon as 2025.

Procurement Minister Filomena Tassi and Defense Minister Anita Anand made the announcement Monday in Ottawa, noting the final purchase depends on satisfactory negotiation of a contract, hopefully be the end of this year.  

“At every step of the way bidders have had to prove their aircraft design can meet Canada’s unique requirements, including the ability to operate in our North,” Anand said.

The government chose Maryland-based Lockheed over Sweden’s Saab AB and Boeing Co. in a procurement process that kicked off in 2017. The contract is the most significant new investment in the Royal Canadian Air Force in more than 30 years.

The announcement comes as North Atlantic Treaty Organization countries launch an unprecedented campaign of sanctions to punish Russia over its invasion of Ukraine, with Canada deploying some of its armed forces personnel to Eastern Europe.

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Anita Arnand speaks at NATO headquarters in Brussels on March 16, 2022.

The Canadian government had previously ruled out Boeing, leaving just Lockheed and Saab as the two final bidders for a contract to replace the country’s fighter-jet fleet.

The F-35 had been the “clear favorite” to win the award, with an estimated value of US$17 billion to overhaul Canada’s aging fighter jet fleet, Sheila Kahyaoglu, an analyst with Jefferies LLC, said in a note to clients Monday. 

Lockheed Martin shares pared earlier losses, dipping 1.2 per cent to US$448.10 at 1:55 p.m. in New York. The world’s largest defense contractor had gained 27 per cent so far this year through the close of Friday’s trading session.

The Canadian jets could potentially add US$960 million to Lockheed’s sales a year, starting in 2025 and assuming a US$80 million asking price, Kahyaoglu estimated. The advanced fighter has gained new sales momentum overseas as geopolitical tensions have heightened in Europe, winning recent deals from Germany and Switzerland.

The win softens the blow for Lockheed in its home market, after the Pentagon asked for US$11 billion to buy 61 F-35 fighters in the Biden administration’s fiscal 2023 budget request. That’s down from the previously planned 94 fighter aircraft.