AIRSHOW-US lifts F-35 grounding but skips British air show

* Some operating restrictions still in place

* Mandatory inspections required every three hours

* F-35 absence at Farnborough event seen as "black eye" (Adds Pentagon explanation, share price)

By Andrea Shalal

FARNBOROUGH, England, July 15 (Reuters) - U.S. military officials have approved limited flights of Lockheed Martin's F-35 fighter jets after a nearly month-long grounding, but scrapped plans for the new U.S. warplane's much-anticipated international debut in Britain.

The F-35, the world's most expensive weapons project with a price tag of about $400 billion, has been largely grounded since the massive failure of a Pratt & Whitney engine on a U.S. Air Force F-35 plane at a Florida air base on June 23.

Pentagon spokesman Rear Admiral John Kirby said on Tuesday U.S. Air Force and Navy officials had granted the radar-evading jet a limited flight clearance that required engine inspections every three hours and various flight restrictions.

Later in the day, Kirby told reporters the jet would not be heading to the Farnborough air show.

"I can confirm that the Department of Defense in concert with our partners in the UK has decided not to send Marine Corps and UK F-35B aircraft across the Atlantic to participate in the Farnborough air show," Kirby said.

"While we're disappointed that we're not going to be able to participate in the air show, we remain fully committed to the program itself and look forward to future opportunities to showcase its capabilities to allies and to partners."

The jet's failure to appear at a big military air show in Britain last week and its absence from the Farnborough event in southern England have been a blow for U.S. officials and their international partners, who were hoping to highlight the jet's advanced capabilities before potential buyers.

Global orders for the F-35 are expected to exceed 3,000, with Italy, Turkey, Australia and Norway among the U.S. allies planning to purchase the plane.

"It's a black eye and a PR nightmare, but it's not going to change the outcome," said aerospace analyst Richard Aboulafia with the Virginia-based Teal Group.

He said the jet's absence from the British show, which began on Monday, was unlikely to affect buying decisions by foreign military forces but could prompt Canada and Denmark to opt for a competition instead of an outright F-35 purchase.

The reactions of Lockheed and Pratt & Whitney were muted.

"While we were looking forward to the F-35 demonstration at Farnborough, we understand and support the DoD and UK Ministry of Defense's decision," spokeswoman Laura Siebert said.

Pratt said it respected the decision, and had worked closely with the military to resume F-35 flights.

SAFETY IS PRIORITY

Kirby said that restrictions on the plane's return to flight included limiting its speed to 0.9 Mach and 18 degrees of angle of attack. The front fan section of each engine must be inspected after three hours of flight time.

"That was a pretty significant limitation in terms of being able to fly them across the Atlantic," he said.

The decision was sure to disappoint top executives from the biggest contractors involved in the F-35 program, who had traveled to Britain for the plane's foreign debut. Billboards all over London had heralded the F-35's grand debut for months.

The planes had been slated to follow a route relatively close to the U.S. and Canadian coast, up past Greenland before heading to Europe, rather than a direct flight across the Atlantic Ocean, according to sources familiar with the plans.

But inspections after every three hours would have expanded the travel time far beyond the seven hours initially planned.

The decision to lift the grounding order was made at a high-level meeting on Monday and reflected growing evidence the engine failure was a one-off event and not due to a systemic or fundamental design flaw, sources familiar with the matter said.

Kirby said the engine issue did not appear to be a systemic issue, and the Pentagon expected to restore the jet's full operational capability in the near future.

Pentagon acquisition chief Frank Kendall told reporters on Monday that no similar problems had been found on any of the other 98 engines in service and underscored that the program was still in the development stage, when technical problems are meant to be found and fixed.

Lockheed shares closed 81 cents higher at $162.62 on the New York Stock Exchange, while shares in United Technologies Corp (Xetra: 852759 - news) , the parent of Pratt, were down 4 cents at $114.84.

Byron Callan, aerospace analyst with Capital Alpha Securities, said investors appeared nonplussed by the engine issue since senior U.S. defense officials were not flagging a fundamental problem or delay in the program. (Additional reporting by Missy Ryan in Washington; Editing by Mark Potter and Jane Baird)