With little growth in commercial markets, strong government spending continued to be the major driver of revenue growth for the world’s largest space manufacturing and services firms in 2004.
The commercial market “is still a buyer’s market,” said Joanne Maguire, vice president and deputy at Lockheed Martin Space Systems, in Sunnydale, Calif. “On the launch side, it is still a very tough market … Overall, it should be flat for the short term and up slightly over the long term.”
Maguire said the civil side of the space business, particularly NASA, is promising, even though much is still unclear because of the shift to a new administrator who is still formulating his approach to fulfilling the agency’s mandates to finish the space station, return the shuttle to flight status and get moving with Moon and Mars exploration.
“It’s not yet clear how it is going to play out,” she said in a July 28 telephone interview. “Once we get a clear view, we intend to compete vigorously.” While some systems integration work that typically is done by industry prime contractors may shift to the NASA field centers, Maguire said industry sees lots of opportunities for NASA work. “Frankly, we don’t lose a lot of sleep” about the role the NASA field centers might play in future programs, she said.
This year’s Space News Top 50 list was topped again by Boeing and Lockheed Martin, by far the two largest space companies in the world. Northrop Grumman, which moved from fifth to third on this year’s list, has less than half the space-related revenue of Lockheed Martin, which posted $9.6 billion in space-related revenue in 2004. Los Angeles-based Northrop Grumman had $4.5 billion in space revenue for the year.
As is usually the case, mergers were a big factor that vaulted some companies to higher positions on the list. For example, ITT Industries of White Plains, N.Y., jumped from 26th to 14th due to its acquisition in August 2004 of Kodak’s imaging business. Similarly, Northrop Grumman vaulted into third place on the strength of its 2003 acquisition of TRW’s space business.
Alexis Livanos, a Northrop Grumman corporate vice president and president of Northrop Grumman Space Technology of Redondo Beach, Calif., said the acquisition has given the company the confidence to bid as a prime contractor in major competitions for such things as unmanned aerial vehicles; NASA’s planned shuttle replacement, the Crew Exploration Vehicle; and the U.S. Defense Department’s Space Radar .
“We believe the combination of all the parts of [the two companies’ space businesses] puts us in a strong position in the space business in the future,” Livanos said.
Hans Peter Ring, chief financial officer at EADS, the only European company in the top 5 and a company that in recent years has grown tremendously through mergers and joint ventures , also was upbeat. Ring said July 27 that the company’s Space division “is firmly on course to reach its profitability targets in 2005.”
EADS of Amsterdam, The Netherlands, has said its money-losing Space division, which includes Ariane 5 rocket components and Astrium satellites, has shed sufficient staff and reduced other costs to be profitable this year. One of EADS’s challenges, Ring said, is to “ensure the long-term profitability of our space business.”
EADS Space Transportation is prime contractor for Ariane 5 launch vehicles and is managing a 30-rocket order from the Arianespace commercial launch consortium. EADS also expects Europe’s Galileo satellite navigation project to provide steady revenues in the coming years. Ring said it is too early to determine revenue and profitability targets for EADS’s Galileo work.
Three European companies on this year’s list — Alcatel Space, Alenia Spazio and Telespazio — recently merged into two companies: Alcatel Alenia Space and Telespazio Holdings. In addition, Germany’s OHB-System has acquired Man Technologie, also of Germany.
While many executives are bullish on future government business, there are challenges as well.
Livanos of Northrop Grumman, prime contractor for NASA’s James Webb Space Telescope, said the company is determined to help rein in the cost of the project, which is $1 billion over budget. Livanos said Northrop Grumman’s portion of that overrun is about 10 percent and that the company “is working to bring down the cost of the program and make it affordable.”
Livanos said a delay in the telescope’s launch is one possibility and that the company’s goal is to lower the observatory’s costs without sacrificing its scientific capabilities.
On the military side, Maguire acknowledged that Congress is putting considerable pressure on the U.S. Air Force to get its space acquisition programs under control, and that the cost overruns and other problems of recent years have put the brakes on new starts.
The acquisition reforms set in place over the last couple of years are beginning to take hold , she said, but cautioned that a lot of work is needed to convince Congress that industry and the Air Force have the problems under control.
“Credibility is fragile at this point,” Maguire said. “We have to execute what we have in hand or there will be no consensus to move out smartly on new programs. Still, on the other hand, everyone acknowledges that the need for these [military] space systems is still true.”
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