United Launch Alliance worth more than $2 billion
Reports appearing in The Wall Street Journal, The Verge, Reuters, Universe Today and elsewhere have stated that rocket engine manufacturer Aerojet Rocketdyne has posted an offer to buy United Launch Alliance for $2 billion. If that amount appears to be too low, it is because a cursory review of how much some of the company’s current contracts bring to the firm annually – match or exceed the one-time $2 billion amount.
To gain an answer from those who would be directly involved in any such negotiations, SpaceFlight Insider reached out to ULA, Lockheed Martin, and Boeing. As of this writing, all three have either declined comment – or have stated that they did not what to make a statement on “rumors or speculation”.
While the wording on some of the headlines might attract a lot of attention, the fact is that just one contract that ULA has recently negotiated is worth an estimated $938 million – alone. According to a report appearing in Reuters, this was just a modification of an already existing contract with the United States Air Force.
ULA has been undergoing a period of transition, which has helped fuel speculations about the company’s future. Photo Credit: Mike Deep / SpaceFlight Insider
In May 2014, Mike Gruss with Space News covered the pricing amounts that ULA disclosed that “[t]he value of the block buy contract, which covers 36 launch vehicle cores and was concluded in June 2013, is $11 billion, according to ULA spokeswoman Jessica Rye.”
According to the Space News report, the unclassified portion of the U.S. Department of Defense’s Evolved Expendable Launch Vehicle (EELV) program for 2014 was estimated at $1.4 billion. How much of this was for launch services provided by ULA’s Atlas V and Delta IV boosters was not clear.
By using the aforementioned $11 billion as the most general of guides, it is important to review factors which might cause that amount, in and of itself, to be significantly decreased.
Perhaps the most visible factor in this regard is NewSpace rival Space Exploration Technologies, more commonly known as “SpaceX”.
SpaceX has seen success via the v1.0 and v1.1 versions of its Falcon 9 booster (with plans to launch the v1.2 version set to possibly take place by the end of 2015).
According to the report on Space News, ULA, on average, charges $225 million per launch. Another article, penned by long-time space reporter Bill Harwood, appearing on SpaceFlight Now says that SpaceX CEO and Founder Elon Musk has stated that a Falcon 9 launch costs under $100 million.
Musk’s comments came in March of last year (2014), more than a year before one of his firm’s Falcon 9s exploded in the skies above Florida. That accident resulted in the loss of the launch vehicle, the Dragon spacecraft it was carrying, and more than 4,000 lbs (1,814 kg) of cargo, flight hardware and other items bound for the International Space Station.
That flight was the seventh planned operational mission under the $1.6 billion Commercial Resupply Services contract that SpaceX has with NASA.
After the loss, NASA and the United States Air Force – who had recently provided a green light in terms of having the Falcon 9 fly missions under the lucrative Evolved Expendable Launch Vehicle (EELV) program – would continue to stand by SpaceX and Falcon 9.
In terms of boosters, the Universe Today report correctly notes that ULA’s Atlas V family of launch vehicles has a 100 percent success rate – something that the Falcon 9 can no longer claim. However, one failure does not erase the many successes and innovations SpaceX has encountered in the five years that the Falcon 9 has been in service. During that time, the two primary versions of the booster have been launched a total of 19 times for a flight rate of less than four times a year.
For their part, ULA flies at the rate of about once a month, and – in some cases – more. In 2014, ULA carried out 13 flights with 12 currently on the 2015 manifest. At present, on average, ULA conducts three times more launches than SpaceX.
Moreover, the company has worked to respond to SpaceX’s efforts to be included in the EELV program as well as the firm’s attempts to have the first stage of the Falcon 9 be recoverable.
ULA’s new Vulcan launch system is currently being developed to incorporate elements of both the Atlas V and Delta IV family of boosters. The new rocket is also eschewing the use of the controversial Russian-made RD-180 rocket engines. According to a recently issued statement, ULA is currently working to use Blue Origin’s BE-4 liquid oxygen / methane-fueled rocket engine in its first stage.
According to ULA, the Delta IV and Atlas V families will be phased out; the firm hopes to fly the first Vulcan rocket as early as 2019. The reason is that SpaceX’s booster has made the Delta 4 Medium, with its single Common Booster, too expensive. Perhaps the most important key to the question of competitive launch costs is what has been stated in terms of how much the flights on this new booster would cost.
BE-3 engine test. ULA is currently considering rocket engines produced by Aerojet Rocketdyne and Blue Origin for use on the company’s new Vulcan Next Generation Launch System. Photo Credit: Blue Origin
A report written by SpaceFlight Now’s Stephen Clark has ULA’s current CEO and President, Tory Bruno, stating that the booster will cost about half what the launch of an Atlas V currently does. With the per-mission “goal” for Vulcan being around $100 million. For those costs to be possible, the Vulcan rocket must fly at least ten missions per year.
Every launch system used under the EELV program must first go through certification, which requires the booster to perform several (in SpaceX’s case, three) test flights. SpaceFlight Now states that this means that it could be as long as 2023 before Vulcan is approved to carry DoD payloads aloft.
In the end, looking through the launch manifests between now and 2023, if one also includes the other servicing agreements, the flights conducted on behalf of NASA, commercial customers, and the DoD, the $2 billion price tag appears to be too low for a company formed from elements of Lockheed Martin and Boeing (in 2006).
While the dynamic has changed since SpaceX’s emergence, the Hawthorne, California-based firm has just been handed a setback, one that it will recover from. However, considering all that the company is trying to do in terms of flying the uncrewed versions of its Dragon spacecraft, to develop and field a crewed variant of the spacecraft as well as the heavy version of the Falcon launch system and the recoverable first stage? It is likely that the costs for flights on the Falcon 9 and Falcon Heavy could increase.
With ULA’s efforts to reduce cost and to incorporate its own innovations to innovate, competition will likely cause a two-company system (with the possibility of more companies entering that dynamic) to be formed.
Another note of consideration is that the RS-68A engines employed on the first stage of the Delta IV boosters are produced by Aerojet Rocketdyne. As is the AJ26 engine, which was used in Orbital ATK’s Antares booster, was also manufactured by Aerojet Rocketdyne. Since before the Orb-3 accident that took place in October of last year, Orbital ATK has been working to move to the RD-181 rocket engine.
Aerojet Rocketdyne produces the RL-10 series of upper stage rocket engines, the RS-25, which will be employed on the first flights of NASA’s Space Launch System, and the AJ-60A solid rocket boosters, which are now used on certain versions of the Atlas V and could be used on Vulcan. However with the upcoming retirement of the Delta IV Medium, and the loss of AJ26, Aerojet Rocketdyne is looking to lose some business.
With so many of the parties in this situation declining comment, and considering the amount offered, as well as the possible state of Aerojet Rocketdyne, the price might be correct; however, it seems reversing the roles of buyer and potential seller would appear to make more sense – especially when one considers that the supposed value can be matched in what ULA makes in about a year.
The Wall Street Journal article refers to “people” as the source of the information, The Verge cites The Wall Street Journal, the Reuters story refers to sources who have stated Aerojet Rocketdyne’s Warren Lichtenstein approached ULA President Tory Bruno as well as Boeing and Lockheed Martin officials about the bid early last month (August).
This article was edited at 4:38 p.m. EDT. The word “will” was replaced with “could” when referring to the AJ-60A rocket engines future use on Vulcan.
Jason Rhian
Jason Rhian spent several years honing his skills with internships at NASA, the National Space Society and other organizations. He has provided content for outlets such as: Aviation Week & Space Technology, Space.com, The Mars Society and Universe Today.
“…the AJ-60A solid rocket boosters, which are now used on certain versions of the Atlas V and will be used on Vulcan.”
Source? From what I’ve read, ULA put out an RFP and no official statements have been released.
If you look at BA and LMT earnings reports, it looks like ULA provides about $500Million in pure profit to the parent companies every year. A quick and dirty valuation is Net Present Value (NPV). Assuming aggressive depreciation of 15% (like they do for computer chips, might not be applicable to launch services) that yields a 10 Year NPV of $2.6Billion. I would say that is the floor for ULA’s worth. $4Billion seems more reasonable to make it worth BA and LMT’s time.
Doesn’t most of the money mentioned in this article go to Boeing and Lockheed-Martin? ULA only markets the Atlas & Delta, it doesn’t manufacture them. I found the article misleading at best; it easily could have been written by the ULA PR department. With the uncertainty hanging over the Russian RD-180 engines, Aerojet Rocketdyne might pick up ULA for much less in a few years.
I think you have it switched. Who do you think manufacturers atlas and delta if not ULA?
Atlas V is manufactured by Lockheed Martin. Delta IV is manufactured by Boeing. Both are marketed by ULA.
Nope. Hasn’t been true for about nine years. ULA has it’s own manufacturing facilities and they manufacture both Atlas and Delta.
Brett is correct. ULA manufactures both launch vehicles.
it seems to me that ULA management could retain control and still cash out ULA’s value by selling to a Leveraged ESOP as a argue here (employee stock ownership plan)
yellowdragonblog.com/2015/05/21/funding-vulcan-by-selling-49-of-ula-to-a-leveraged-esop/
Barry,
First off, ULA is it’s own, separate company these days. Secondly, after reading the post, it just seemed to compare what ULA brings in, albeit estimated, annually and how that doesn’t match the amount offered. I’m not sure how anyone could take away that this was written by ULA’s PR department, but I guess some folks will say anything to smear others.
Keep it classy pal.
S. Williams