Still Digging Out, BSS Aims for Profitability in 2005

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  Space News Business

Still Digging Out, BSS Aims for Profitability in 2005

By WARREN FERSTER
Space News Staff Writer
posted: 26 January 2005
10:51 am ET


HONOLULU — Boeing Satellite Systems of El Segundo, Calif., wants to secure U.S. Air Force funding this year so it can start ordering long-lead components for additional Wideband Gapfiller military communications satellites.

The firm is building three Wideband Gapfiller satellites under an Air Force contract that includes options for three more. With construction winding down on the first three satellites, the longer the Air Force waits to exercise the options, the more difficult it will be to restart the production line, said Dave Ryan, president of Boeing Satellite Systems.

The Wideband Gapfiller program already faces a production gap of one to two years, and Boeing is seeking a relatively small sum, a few million dollars in 2005, to begin ordering hardware for additional satellites, Ryan said in an interview during the annual Pacific Telecommunications Conference here. “2006 is when we need to start ramping up,” he said.

The Air Force’s decision on whether to buy additional Wideband Gapfiller satellites likely will depend in part on developments this year on the service’s Transformational Satellite (T-Sat) program, a futuristic system that would employ laser-optical technology to dramatically increase the amount of bandwidth available to the military. Plans call for launching the first T-Sat satellite in 2013, but that date could get pushed back if the Air Force, as expected, is forced to siphon money from the program to cover cost growth on its Advanced Extremely High Frequency satellite system.

Boeing is leading one of two teams competing to build the T-Sat system; the other is led by Lockheed Martin Space Systems of Sunnyvale, Calif. A significant delay to T-Sat would strengthen the case for additional Wideband Gapfiller satellites.

Meanwhile, the cancellation last year of the U.S. National Reconnaissance Office counterpart to T-Sat, known as ORCA, or Optical Relay Communications Architecture, likely will mean additional business for Boeing Satellite Systems as the prime contractor on NRO Relay, the legacy system.

After struggling for the past several years due primarily to problems with complex satellite construction programs, including Wideband Gapfiller, Boeing Satellite Systems hopes to return to profitability in 2005, Ryan said. The satellite maker has been a source of frustration for Boeing Co. Chief Executive Officer Harry Stonecipher, who at one point considered shutting down the operation.

The firm’s prospects for profitability in 2005 were buoyed by a billion-dollar order from El Segundo-based DirecTV Group for three large satellites for high definition television broadcasting. Boeing also in 2004 was on the winning team, led by Lockheed Martin, to build the Mobile Objective User System communications satellites for the U.S. Navy. Boeing is building digital equipment for the satellites’ payload as well as legacy UHF payloads.

Boeing Satellite Systems has “10 satellites that we’re working on completing in the next 12-to-14 months,” Ryan said. These include the Wideband Gapfiller satellites and a number of commercial systems. But the firm still faces the possible termination for default on one of those satellites, NSS-8 being built for New Skies Satellites of The Hague, Netherlands. That program is behind schedule and suffered a setback last year when Boeing was forced to replace defective components on the spacecraft.

“That’s all behind us,” Ryan said of the component issue, adding that the satellite will be ready for environmental testing soon. He declined comment on the status of the contract with New Skies or when Boeing would be able to deliver the spacecraft, which is on the 2005 manifest of launch services provider Sea Launch of Long Beach, Calif.

Ryan said improving Boeing Satellite Systems’ manufacturing processes is one of the keys to nursing the operation back to health. He noted that the company recently received a Capability Maturity Model Integration Level 5 certification, an internationally recognized standard for software development processes.