As a shrinking number of prime contractors in the space industry chase fewer new business opportunities, the relationship between the world’s two largest players dominates the landscape. It is an intense rivalry that is nonetheless punctuated at times by close cooperation.
These two companies, Boeing and Lockheed Martin, compete head-to-head on nearly every major U.S. government space contract and vie for commercial business as well, through affiliate companies in the case of launch services. They have been embroiled in a lawsuit and a government investigation related to Boeing’s theft of proprietary Lockheed Martin documents during their competition for the first round of launches under the U.S. Air Force’s Evolved Expendable Launch Vehicle (EELV) program. At the same time, they jointly own a nearly $2 billion-a-year business operating the space shuttle for NASA and now hope to create a similar joint venture to merge their respective EELV rocket programs.
As much as any time in the last decade, Chicago-based Boeing and Lockheed Martin of Bethesda, Md., dominate our annual list of the world’s Top 50 Space Industry Manufacturing and Services Companies . Nearly mirror image in size and space-related capabilities, they were separated at the top of this year’s survey by a mere $94 million, with Boeing bringing in $9.1 billion in 2005 space-related revenue and Lockheed Martin $9.006 billion.
Each had nearly double the space-related revenue of Los Angeles-based Northrop Grumman Corp., which ranked third on the list with about $4.858 billion , and nearly three times that of the large European aerospace conglomerate EADS, which had $3.198 billion.
Boeing and Northrop Grumman have teamed to compete against Lockheed Martin for NASA’s Crew Exploration Vehicle (CEV) contract — a deal that is expected to be worth billions of dollars over the the next decade. The CEV is NASA’s designated replacement for the space shuttle and the baseline vehicle for future manned exploration of the Moon.
“Clearly it is the most important near-term piece of new business for our space exploration business,” said Roger A. Krone, president of Network and Space Systems for Boeing Integrated Defense Systems.
Joanne Maguire, executive vice president of Lockheed Martin Space Systems Company, said the CEV decision will be the key to whether Lockheed Martin will see any major growth in its civil space business over the next year.
Maguire said she will be closely watching the fate of the proposal by U.S. Sens. Barbara Mikulski (D-Md.) and Kay Bailey Hutchison (R0-Texas) to add $1 billion in emergency funding to NASA’s budget to offset the agency’s expenses recovering from the Columbia disaster. “I think the notion of putting a supplemental in is a great way to give NASA the leeway” to fix the shuttle without “completely undermining the agency’s whole budgetary structure.”
In contrast to the CEV competition, Boeing hopes to team with Lockheed Martin to create United Launch Alliance (ULA), a joint venture that would sell Lockheed Martin’s Atlas and Boeing’s Delta launch vehicles to U.S. government customers.
The companies have been awaiting government approval of ULA for months. In an interview July 28, Krone said he is “very, very optimistic,” the companies and the U.S. Federal Trade Commission and the U.S. Department of Defense will reach an agreement in principle on ULA soon.
ULA would be similar to United Space Alliance , a large Lockheed Martin-Boeing joint venture that operates the space shuttle for NASA. The revenue figures listed for Boeing and Lockheed Martin do not include United Space Alliance, which is treated as a separate company that is large enough to rate the No. 6 spot on the Space News Top 50. United Space Alliance had $1.981 billion in revenue in 2005, a slight drop from $2.016 billion in 2004.
In a July 27 interview, United Space Alliance spokesman Jeff Carr said the company’s 2004 revenue reflected a one-time spike in NASA spending related to efforts to get the space shuttle back to flight status following the destruction of Columbia during its re-entry from orbit Feb. 1, 2003.
Carr said that while the near-term future of the company is solid through the next couple of years as NASA works to complete assembly of the international space station, things get murky as NASA prepares to retire the shuttle fleet in 2010 and field the CEV a few years later. He noted that United Space Alliance is on both the Lockheed Martin and Boeing-Northrop Grumman CEV teams.
While the revenue picture for Boeing and Lockheed Martin was nearly identical, they got there by very different routes.
Boeing’s 2005 space revenue is $1.2 billion lower than it was in 2004. Krone said the drop is largely the result of two major divestitures in 2005: the sale of its Rocketdyne propulsion business to Pratt & Whitney and the sale of Electron Dynamics Devices to L-3 Communications.
By contrast, Lockheed Martin’s space-related revenue was more than $400 million higher in 2005 than in 2004. The company won a National Reconnaissance Office contract for an undisclosed amount related to the restructuring of the Future Imagery Architecture spy satellite program, which also resulted in work being taken away from prime contractor Boeing.
Looking ahead, Krone said he does not anticipate selling any additional assets, but is on the lookout for companies to buy. He emphasized in particular that Spectralab, Boeing’s solar array manufacturer, is not for sale. “They are part of our strategy of holding on to critical value added capabilities.”
He said the company would be especially interested in second- or third-tier subcontractors who build sensors that would add to Boeing’s capabilities. “Just like solar arrays are a critical component, we are looking for other key components.”