WASHINGTON — United Launch Alliance has ruled the military market since its creation in 2006 as a 50-50 joint venture between Lockheed Martin and Boeing.
The rise of SpaceX is threatening that dominance, which explains why ULA is stepping up efforts to market its Atlas 5 launch vehicle to commercial customers. The company announced this week that it has taken over responsibility for the marketing and sales of Atlas 5 from Lockheed Martin Commercial Launch Services.
“ULA no longer has a monopoly in national security space launches and near-term demand for such launches is expected to soften, so commercial payloads have become more important to the bottom line,” said industry consultant Loren Thompson of the Lexington Institute. “Without at least two commercial launches per year going into the next decade, ULA will be hard pressed to remain profitable,” Thompson told SpaceNews.
Commercial missions accounted for one to three ULA launches over the past four years. Orbital ATK used Atlas 5 from 2015 to 2017 for NASA resupply missions to the International Space Station while rebuilding its Antares rocket with new first stage engines following an explosive launch failure in 2014. Now that the Antares has new engines, Orbital ATK is back to relying on its own vehicle, and may soon turn into a ULA competitor with its defense-focused “next generation launch” system that it is currently developing for the Air Force.
The only way ULA can stay competitive is by increasing its workload, and that requires growing its commercial business, said Marco Caceres, an industry analyst at the Teal Group.
“In the last five years they have not been competitive,” he said. When it comes to price, the Atlas 5 is “nowhere close to being competitive against SpaceX’s Falcon 9,” Caceres added. “Falcon 9 beats everyone on price, including the Russians.”
The rise of SpaceX has disrupted the launch industry at large, and ULA is feeling the pressure perhaps more than any other company in the sector, Caceres said. “As long as they had the monopoly on the U.S. government launch market, there was no financial need to try to win commercial contracts that in the end were not going to be very profitable. Their world changed when SpaceX came along.”
Tory Bruno, ULA’s president and CEO, said in a statement that the company has “undergone a tremendous transformation over the last two years.” With a leaner operation, “we are well positioned to offer Atlas 5 launch services to our current and potential commercial customers,” he said.
Thompson said reducing costs has been a “key concern” of Bruno. “ULA probably can’t match SpaceX on costs, but with a streamlined management structure and new launch technology, it can get close,” said Thompson, whose think tank is funded by major defense firms like Lockheed Martin and Boeing. “Some commercial customers are willing to pay a premium for ULA’s high reliability,” he said.
ULA says Atlas 5 has flown 75 successful missions. “The value of a launch is a lot more than its price tag,” Bruno stated. Customers also value getting spacecraft to orbit earlier and “schedule certainty.”
Tom Tshudy, ULA’s vice president and general counsel, will lead the new global commercial sales organization. Before joining ULA, Tshudy served as senior vice president and general counsel for International Launch Services.
Caceres does not believe ULA can compete on cost. SpaceX charges $62 million for Falcon 9 launches whereas Atlas 5 launches can cost more than twice that much. ULA’s Delta rockets are even more expensive than Atlas 5.
The key for ULA will be to market Atlas 5 more aggressively based on its record of being extremely reliable, said Caceres. The pitch would be something like, “You’re getting a Cadillac. It’s more expensive but the service and the reliability that you get justifies the price.”
Some top telecom satellite operators would gladly pay Atlas 5 prices if they can get their satellites launched on schedule, Caceres said. “If they have a satellite ready to go up, the last thing they want is to let it sit on the launch pad or at a warehouse.”
Satellite broadband providers in particular have swapped rockets to save time. EchoStar in 2016 switched from European launch provider Arianespace’s Ariane 5 to the Atlas 5 when its Jupiter-2 high-throughput satellite outgrew its designated space in an Ariane 5 dual launch. Opting for Atlas 5 allowed a 2016 launch, whereas Ariane 5 would have required waiting until at least 2017. ViaSat made a schedule-driven switch in February 2016, transferring its heavyweight ViaSat-2 satellite from SpaceX’s Falcon Heavy to an Ariane 5.
Schedule certainty, though improving, has been a weakness of SpaceX — one that ULA hopes to benefit from. In addition to ViaSat, British satellite operator Inmarsat switched a mission from Falcon Heavy to Ariane 5 in December 2016. The reason was encroaching service deadlines from regulators that required getting the S-band European Aviation Network satellite in orbit sooner rather than later.
“Responsiveness is important” to commercial providers, said Charity Weeden, president of Lquinox Consulting. Also working in favor of ULA is the international growth of the space business as more countries move to launch satellites.
The lunar market also presents “exciting opportunities,” she said. ULA has agreements with Astrobotic and Bigelow Aerospace for lunar missions. “Not many launch providers are preparing for that market,” said Weeden.
Northern Sky Research analyst Carolyn Belle said ULA faces circumstances similar to what Boeing and Lockheed Martin saw in the early 2000s. “There wasn’t enough commercial demand for two companies and two vehicles to be healthy from a commercial standpoint,” she said. That led to the creation of the joint venture.
A slump in the demand for defense missions — as many military constellations reach or near completion — complicates the outlook for ULA, Belle said. Not only is SpaceX vying for military work but there would also be a third launch competitor if Orbital ATK goes forward with its next generation launch. In this environment, Belle said, “commercial missions only become more important.”
In the commercial sector, large geostationary satellite orders have been below normal for the past three years. The satellite manufacturing sector woes are now expanding to launch providers, Belle said. The low number of orders is “finally catching up to the launch market.”