Profile: Refocusing on Commercial

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  Space News Business

Profile: Refocusing on Commercial

By PETER B. de SELDING
Space News Staff Writer
posted: 17 April 2007
11:24 am ET


David Markham,

President, Lockheed Martin Commercial Launch Services


One of David Markham’s main tasks in the coming months will be to remind commercial satellite owners that the “C” in Lockheed Martin Commercial Launch Services (LMCLS) still exists despite the late-2006 merger of the rocket-manufacturing businesses of Lockheed Martin and Boeing into United Launch Alliance (ULA).

The creation of ULA, to serve the U.S. government market, and the sale last October of Lockheed Martin’s interests in International Launch Services — which markets Russia’s Proton rocket commercially — has created some confusion in the market about whether Lockheed Martin will be going after commercial business.

The size and pricing environment of the commercial launch market does not have the same appeal to ULA as the market offered by the U.S. government. But Denver-based LMCLS views its Atlas 5 rocket, which on March 8 improved its launch success record to nine for nine, as something that retains its appeal for launching the larger telecommunications satellites.

The company signed its first contract earlier this year when Inmarsat of London converted an existing option into a firm order.

Markham discussed the company’s commercial posture with Space News staff writer Peter B. de Selding.


Commercial-launch prices are rising and there is even concern of a shortage of commercial launch capacity in 2007-2008. How are you positioned?

It’s true that prices are rising as a function of manufacturing costs, which are so sensitive to today’s lower build and launch rates. We are offering one or two Atlas 5 vehicles per year, on average, for commercial launches for 2009 and beyond. As of today, there is not a business case that would necessitate ULA increasing Atlas production beyond the current rate for the addressable commercial market.

ULA’s build rate today is about six Atlas vehicles per year from the East Coast, but infrastructure capacity exists to expand to meet any new market demands. If there are spacecraft manufacturing delays, there exists the possibility of a launch slot on a replacement basis.

Is there anything in the legal statutes that created ULA that would prohibit you from making commercial offers?

Nothing at all. Both Lockheed Martin and Boeing retained rights to their respective launch vehicles for potential commercial customers.

How can you explain the price differential between what the U.S. government pays for a launch and what prospective commercial customers are being asked to pay?

There is no significant difference in prices when all ordering factors and service levels are balanced. LMCLS and ULA carefully review contracts and ensure that the same underlying estimating basis is consistently applied.

Risks, quantity, mission complexity, ordering point and financial terms all affect the final price to either government or commercial customers.

Does your relationship with the U.S. Defense Department mean government launches have priority over commercial customers?

ULA applies the same manifesting policies that have been in effect for more than 20 years. These policies demonstrate the consistent application of launch priority based on launch slot availability at the time of purchase for both government and commercial customers.

Embedded in these policies is a “force majeure” clause that would come into effect at a time of national emergency and would require a commercial customer to stand down in favor of a government launch. The U.S. government, and specifically the U.S. Department of Defense, have been quite supportive of ULA and LMCLS initiatives to ensure the continued support of the commercial market.

Do you have the flexibility to switch vehicle assignments between commercial and government customers?

Absolutely. The vehicles are reconfigurable and we have done this in the past. Certainly vehicles are identified by the customer they are intended to launch, but the government in the past has been flexible on this issue depending on the nature of the mission affected. There is, for example, a criticality to some of our government missions in 2008 and 2009.

How long before a launch can the vehicle be reconfigured if there’s a change in manifest?

About six months before the scheduled launch.

Do you have enough common core elements for Atlas 5 to meet commercial and government demand?

ULA is better placed to discuss its government inventory position. But our current commercial orders have available inventory and production-schedule position so that the potential for new customers’ orders exists within ULA’s inventory and manufacturing forecasts.

Inmarsat
recently converted an Atlas 5 option into a firm contract for the 6,000-kilogram Inmarsat 4 F3, which is ready. When can you launch it?

Inmarsat is contracted for an Atlas launch in 2009. We have alerted ULA to Inmarsat’s desire for an earlier launch date. However, previously contracted missions currently consume the 2008 manifest. All customers can purchase the opportunity to be ready in a stand-by mode to utilize a launch slot position if another customer suffers a delay.

What is your manifest for 2009?

Currently, ULA has three government missions and some openings for commercial launches. Government planning for launches does not go beyond 2009 for the moment.

Insurance rates have been drifting downward with expanded capacity being made available by underwriters, who have reported profits for the past three years. How do you see premiums for Atlas launches?

Rates have come down a bit but the fact is they have not come down nearly enough given the record of the Atlas rocket — 100 percent success since this version was introduced in 2002.

This is something that really bothers me — the inability of the insurance industry to differentiate between launcher risks to any appreciable extent. People who invest in quality ought to benefit from that investment through lower insurance rates, and we don’t see that happening in any substantial way.