Saturday, May 30, 2015

Mother’s milk is drying up for space companies

Government contracts have been mother’s milk for space companies, but the milk has run low and those companies are crying from hunger.

United Launch Alliance (ULA) of Bethesda, MD, is feeling the hunger pangs. So is MacDonald, Dettwiler and Associates (MDA) of Richmond, BC. And it’s even worse for the little comrades in Russia.

In an article at Via Satellite, ULA eager to tap commercial market with Vulcan rocket, Salvatore “Tory” Bruno, president of ULA, said his company must find more commercial customers to survive. Not just to do OK—to survive.

ULA used to get 10 to 12 U.S. government contracts a year, but that number is dropping as the government cuts back on national security launches. To make matters worse for ULA, their main rival, SpaceX of Hawthorne, CA, has just been certified by the United States Air Force for national security launches. Going forward, Bruno thinks ULA might only get two or three government launches a year.

In Canada, MDA has repeatedly said they have to find customers outside of Canada because Canadian government business is drying up.

The irony is MDA bought an American company, Space Systems Loral (SSL), in 2012 to offset this problem. The U.S. government’s recent cutbacks on space contracts has left MDA, just like ULA, scrambling for more commercial business.

Government contracts haven’t dried up completely. Recently MDA got a contract from the Canadian Space Agency to continue providing maintenance for the Mobile Servicing System on the International Space Station.

Maintenance contracts, though, can’t keep a hungry space company satisfied for long. They need new projects. The only new Canadian government project on the horizon is the Polar Communication and Weather satellite (PCW) mission.

As outlined in a Commercial Space Blog article, Team Canada solution for PCW mission competing against U.S. bid, PCW consists of two communications satellites that will monitor the high Canadian Arctic. A consortium of three Canadian companies—Telesat, COM DEV, and MDA—is bidding on it. They’re facing stiff competition from American companies like Lockheed Martin of Bethesda, MD.

How critical is it for the consortium to get this contract? This is the only big Canadian government space project in the works right now. Nothing else is planned for the next few years.

So how do the Russians fit into the scenario? On the surface they don’t because the Russian government has been pumping money into their space industry for a few years now. Or so it seemed.

An article at the Moscow Times, Audit reveals $1.8 billion financial violations at Russia's space agency, outlines corruption in Roscosmos, the Russian space agency. Other officials, including the prime contractor for Russia’s new spaceport at Vostochny, have also been caught dipping their beaks in the milk. Russia’s president Vladimir Putin is pouring more money into Vostochny in an attempt to keep the work on schedule.

Yes, the money is flowing like salts through a goose, but you know what comes out of the goose. The Russian space industry isn’t getting the money and they’re in the same boat as their North American cousins. Unlike their cousins, though, the Russians are likely going to lose commercial market share because their rockets have been blowing up a lot lately.

The good news is that government spending is expected to grow. Euroconsult—moderate growth projected for government space programs (analysis/report) an article at Satnews, references a report released in July 2014 by Euroconsult, a global consulting firm. Euroconsult says the recent dip in government spending will recover as we enter a new growth cycle.

However, even with more money available, there’s no guarantee that governments will fund new space projects. And with a federal election coming this fall in Canada, who knows what will happen to funding for space projects here.

The day when a space company’s business plan could be built on a steady stream of government work alone is gone. You’d better be diversified if you want to be in the game for the long haul.

It’s enough to make a space company president spit up.