Wednesday, April 1, 2015

Lockheed's bid for relevance

Lockheed and Boeing are the grand dames of American aerospace, having long gobbled up their competitors. Both firms have grown comfortable in the lack of competition, and have even eliminated each other as competitors in the space launch business by forming the United Launch Alliance partnership to operate their Delta and Atlas rockets. Their business model is one of government cost-plus contracts with limited competition and a sprawling collection of sub-contractors.

Into this landscape came SpaceX a few years ago, and they have eschewed cost-plus contracts for fixed price offerings with the price listed on their website (a first in space launch), sprawling webs of sub-contractors for vertical integration, and stable technology states for constantly improving systems. Together these innovations have to date reduced the cost of reaching orbit by nearly 2/3rds, and near-term innovations like the Falcon Heavy and reusable rockets threaten to lower costs even further. These cost reductions have allowed SpaceX to capture significant portions of the private satellite launch business and also large contracts from NASA.

I suspect that when SpaceX first came onto the scene the executives at Lockheed and Boeing were skeptical they would succeed and probably figured they could just wait for SpaceX to go bankrupt and then go back to business any normal. Any disruption to their business would likely be temporary.

However likely SpaceX's failure was ten years ago though, it is now very unlikely to fail in the near term. The Falcon 9 is a proven system, and SpaceX doesn't even need the Falcon Heavy or reusable rockets to continue to dominate the launch market. And since the Falcon Heavy is just three of the Falcon 9's proven launch cores strapped together, odds of its success are good. Even the heavy lift launch market is under threat from SpaceX.

So what should Lockheed and Boeing do? The fact is that their rockets cannot compete with the Falcon rockets as the Falcon rockets exist today. If the Falcon rockets become reusable and lower prices another order of magnitude, it's well and truly game over.

This background understanding is necessary to evaluate the announcement from Lockheed about their Jupiter spacecraft and Exoliner cargo vessel. This project, and its announcement, is Lockheed conceding that SpaceX has succeeded in changing space business and that there's no going back. Consider the following:

  • Lockheed is developing Jupiter and Exoliner with its own capital. They didn't wait for a NASA or DOD contract to pay them to do it.
  • The Jupiter spacecraft is designed for deep space missions, which competes directly with the Orion spacecraft under development with NASA.
  • Lockheed is talking about going to the Moon, which is not on NASA's agenda at all. This marketing is obviously directed at foreign governments and private initiatives. 
  • Lockheed is marketing the (relatively) low cost of its system. SpaceX's choice to advertise and sell on price has infected Lockheed. 
  • Jupiter is refuelable in orbit. This is entirely new technology that no one (not even SpaceX) has announced support for.
Each of these changes individually is huge. Together they reflect the tectonic shifts going on in the space business these days. After 70 years of government programs, space is becoming a "normal" technology business, with competing, innovative firms lowering costs and improving quality while selling their wares to all comers.

The abilities of the Jupiter craft in particular are fascinating and suggest where Lockheed sees the future of the space business. Lockheed has designed Jupiter as a generic "train engine" for Earth orbit, Cislunar space, and beyond. They no doubt are seeing the Bigelow modules that are coming and have thought to themselves "Those things will need help getting around in orbit, or to the Moon". They've seen the future of multiple space stations, asteroid mining, Lunar ice mining, and who knows whatever other things cheap Falcon rockets will put into orbit, and asked themselves "We can't compete on launch any time soon, so where can we compete?" Their answer, at the moment, is moving things around in space once the launch part is over with. It's a great answer, and will improve the odds that Lockheed plays a meaningful part in our solar future.

Now for a bit of speculation on future announcements. The Jupiter craft is refuelable in orbit. At the moment Lockheed is just talking about it being refueled whenever it docks with a launching rocket to pick up new cargo. This will work, but it's not the best method. Lockheed has to be thinking about building fuel stations in orbit. These fuel stations could then be refilled by any third party on a lowest-cost bid. Even SpaceX could get into the game of launching fuel to the on-orbit stations, and eventually the asteroid and Lunar prospecting companies could compete for this business. Lockheed then wouldn't just own all the trucks moving cargo around in orbit, but the gas stations too. It would be a good business to be in, as satellites, space stations, and space craft of all kinds will (barring some breakthrough in physics) always need fuel to operate in space.

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