Lockheed Martin (NYSE:LMT) and the Chicago, Illinois-based Boeing (NYSE:BA) are set to lose billions of dollars in business opportunities this year in space-launch contracts.
Billions of dollars are up for grabs in the next few months. However, United Launch Alliance (ULA) that was formed by these two businesses on December 1st, 2006 is not able to compete on price. Only last week, SpaceX of Elon Musk beat the alliance to win a million satellite launch contract that was worth $96.5 million.
ULA was awarded a contract some time back to place GPS III global positioning satellites in orbit for the US Air Force because SpaceX did not have the certification and was thus not allowed to place their bid. However, SpaceX bounced back by winning the latest contract. The United Launch Alliance was not allowed to bid because they did not have the engines. It won’t be the last time the ULA will lose out to SpaceX and possibly even other bidders.
Many More Contracts Coming Up
Over the next year, the Air Force has plans of awarding 13 more contracts for rights to lift intelligence-gathering and defense payloads into orbit. These contracts will be for a SBIRS GEO 5 missile warning satellite, four other GPS III launches, a multi-payload launch called STP-3, one AFSPC 9 mission, and six classified missions for the National Reconnaissance Office.
According to Claire Leon, Air Force Space and Missile Systems Director of the Launch Enterprise Directorate, “technical ability, the ability to launch satellites on schedule, and with acceptable risk criteria”, will all be considered while awarding the contracts. Of course, price will also be an important decider, and the United Launch Alliance is set to lose out on this count.
ULA first contract was for an $11 billion block of satellite launch services that covered 36 launches. The average launch cost at $305.6 million, which was close to four times the $82.7 million SpaceX charged for their first GPS III contract. Even if SpeceX made their bid low to get a foot in the door of lucrative Air Force business, but $305.6 million was still way more than most recent $96.5 million bid of SpaceX.
A $2 Billion Revenue Loss for the United Launch Alliance
The United Launch Alliance and SpaceX will face head-on competition in at least 10 of the 13 contracts. To win at least a few, the ULA will have to bring down their prices by at least $200 million for each launch, which means a revenue loss of $2 billion.