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Lockheed sees deal soon with Pentagon for 160 more F-35 combat jets

(Adds further details)

By Andrea Shalal

RAF FAIRFORD, England, July 7 (Reuters) - Lockheed Martin (Swiss: LMT.SW - news) Corp said on Thursday it expected to reach an agreement soon with the U.S (Other OTC: UBGXF - news) . Defense Department about contracts for the next 160 F-35 radar-evading fighter jets, two long-awaited deals valued at around $15 billion.

Jeff Babione, Lockheed's F-35 programme manager, told reporters he was "very, very encouraged" by the discussions about the ninth and 10th contracts, which are being conducted in tandem, and expected to finalise a deal with the Pentagon soon.

Babione said the price of the F-35A conventional takeoff and landing version of the multi-role jet would drop to under $100 million per plane in the 10th low-rate production batch. That includes an engine built by Pratt & Whitney, a unit of United Technologies Corp.

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"I know it's going to be less, it's just how much less," he said. He said Lockheed was still working to drive the price of the jets down to around $85 million by 2019.

Six of the F-35 Lightning IIs will fly this week at the Royal International Air Tattoo near Fairford, England, the world's largest military airshow, along with a U.S. Air Force F-22 Raptor, also built by Lockheed, the Pentagon's largest supplier.

The F-35 had been due to make its international premiere at the same air show two years ago, but those plans were scrapped after an engine failure grounded the overall F-35 fleet.

Two F-35s made their premier appearance at an international air show in the Netherlands last month after carrying out a series of tests that officials said showed that the new stealthy jets were no noisier than previous jets.

Babione said the program had come a long way in the past two years, with more than 180 F-35s now flying and the U.S. Air Force poised to declare an initial squadron ready for combat between August and December.

A year ago the U.S. Marine Corps declared as ready for combat its first squadron of F-35Bs, the short take-off and vertical landing version. It plans to deploy that first squadron to a U.S. air base in Iwakuni, Japan early next year.

Babione said Lockheed was ready to invest an additional $60 million to $100 million in new technologies or changes that can further lower the cost of the jets under a program called Blueprint for Affordability.

The first phase of that program involved investments of $170 million by Lockheed and primary development partners Northrop Grumman Corp and BAE Systems Plc (Other OTC: BAESF - news) .

(Reporting by Andrea Shalal; Editing by Susan Fenton, Greg Mahlich)