Vast Potential from the Next Phase of Space Exploration

The last 10 days have rocked and shocked the space business.

First, on April 24, Elon Musk, CEO of Space Exploration Technologies (SpaceX) emailed journalists in Washington, D.C., that he had a surprise to announce the next day at a press conference. And what a surprise — Musk challenged the cozy arrangement between the Air Force and United Launch Alliance, an oligopoly between Lockheed Martin and Boeing that launches all of America’s national security satellites.

Musk denounced the noncompetitive contract United Launch had just won for 36 launches and proceeded to sue the government. “What we feel is that this is not right — that the national security launches should be put up for competition and they should not be awarded on a sole-source, uncompeted basis,” Musk said.

He noted that United’s rockets cost more than any others in the world. And he wants a chance to bid lower. “It just seems odd that if our vehicle is good enough for NASA in supporting a $100 billion space station and it’s good enough for launching NASA science satellites, for launching complex commercial geostationary satellites and really every satellite imaginable, there’s no reasonable basis for it not being capable of launching something quite simple like a GPS satellite,” Musk argued. The suit was filed three days later, on April 28.

Then on the morning of April 30, Orbital Sciences and Alliant Techsystems Inc. announceda merger of equals, a remarkably complementary blending of two smaller space companies into a giant one. Alliant will split into two companies — space and ammunition. Orbital’s CEO will run the new space company, and Alliant’s CEO will go with the ammunition company. The timing probably couldn’t be better because …

Later that same day, the federal claims court in which Musk had filed his suit against the Air Force ruled that United Launch Alliance could no longer purchase rocket engines from a Russian company. (You can read the court’s decision here.)

One of the truly unpredictable outcomes of Vladimir Putin’s shenanigans in Crimea and Ukraine is the possible collapse of one of Russia’s highest-tech industries — rocket engines. The Russians make some of the best. And rocket engines are where the rubber meets the road in space launches. Good engine design and fabrication is the highest form of rocket science.

American rocket companies, including United Launch’s Atlas V and Orbital Sciences’ new Antares rocket uses Russian engines. Before Crimea, no one seemed to care. Now Congress is asking why, and a federal court has issued an injunction against United Launch to keep it from buying more RD-180 engines made by NPO Energomash, a company owned by the Russian government.

On March 16, President Barack Obama ordered that Russia’s defense minister, who controls Energomash, be “blocked” from doing business in the United States as part of America’s sanctions on Russians involved in the Crimea invasion.

Americans and Russians are so tied up in space that it may be impossible to separate them.

Russians and Americans have been cooperating admirably on the International Space Station for 13 years. And these days, no one can get to or from the International Space Station unless they fly on a Russian Soyuz spacecraft, for which we pay the Russians $70 million per person per trip. (By the way, that means that if the Russians want to invade the space station and take over, no one can stop them.)

Congress totally screwed up our control over the space station system by refusing to keep the space shuttle flying and by year after year after year cutting NASA’s budget, forcing Americans to outsource rocketry. When NASA officials warned Congress of the consequences, Congress cut the NASA budget even more.

I think Orbital’s price has fallen after the euphoria of the merger partly because it is so difficult to value the shares until Alliant spins off its ammunition company. I also think Orbital is feeling some uncertainty about what will power its Antares rocket if U.S. companies are forbidden to buy Russian engines.

One thing that might be good for the new company formed by Orbital and Alliant (to be called Orbital ATK Inc.) is Alliant’s ability to design and build rocket engines. Its second-stage Castor 30 engine on Antares is solid-fuel. The first-stage Aerojet/Russian engine provides far more thrust than the Castor 30, but the Castor engine might be adaptable to the first stage of the Antares.

Alliant may be able to help Orbital build an all-U.S. rocket that can compete with SpaceX, but Orbital has said over and over that it wants Antares to serve a middle-sized satellite market, which is not SpaceX’s strategy. The Air Force, which supplies about a third of Orbital’s revenues at the moment for various defense-related launches, has said it wants to launch more satellites that are smaller, in the sweet spot for Orbital.

So far, Orbital has refused to engage SpaceX head-to-head on human spaceflight. SpaceX plans to convert its cargo-carrying Dragon spacecraft that resupplies the space station into a manned vehicle by 2017. Orbital’s new size and its long history of being a cheaper competitor to the Boeings and Lockheeds of the world may make it a far better competitor to SpaceX than most space pundits have allowed.

SpaceX’s trump card, however, is its growing success recovering and reusing rockets and spacecraft. The Dragon is designed to fly back to Earth from the space station and be recovered at sea. Orbital’s Cygnus spacecraft for resupplying the space station is designed to burn up in the atmosphere after delivery. SpaceX recently experimented with recovering the first stage of its Falcon rocket that resupplies the space station. Watch the SpaceX Falcon9R (R for recoverable) first stage takeoff and land itself, here:

The Falcon 9 Reusable (F9R) rocket is about the size of a 12-story building.

Musk foresees reusable rockets that can be launched, recovered, refueled and launched again, all in the same day. Such a system would reduce the costs of placing satellites in orbit to the point that every space company, from Orbital ATK to Lockheed to Boeing to Ariane, would be forced to do the same.

It will be a year before the dust settles on the ATK merger, and no one should forget that Orbital and ATK are now in play until the deal closes. There are other companies out there that might be interested in Orbital’s economics. Boeing, for example, wants to be the leading company in space exploration and sees space as a natural extension of its jet aircraft business. Boeing may need a company like Orbital to guide it into a new world of competition against a leaner and better company like SpaceX. Orbital, by contrast, could benefit from a company like Boeing that can afford to invest in expensive new technologies like engines and recoverable rockets.

Space, as I’ve written about previously here, here and here, is the next big tech boom. Stay tuned.


Stephen Petranek
for The Daily Reckoning

Ed. Note: Spaceflight technology is something most people think is too “far out” to invest in or expect to accelerate in the coming years. But the mainstream is slowly realizing that’s wrong. If you’ve been following our FREE Tomorrow in Review email edition, which you can sign up for right here, you may have invested in our favorite space company before its shares recently blasted off… Fortunately, there’s more to come. Make sure you don’t miss out on the next great investment opportunity. Click here now to get Tomorrow in Review sent straight to your email inbox for FREE, every single weekday.

You May Also Be Interested In:

Stephen Petranek

Stephen Petranek’s career of over 40 years in the publishing world is marked by numerous prizes and awards for excellent writing on science, nature, technology, politics, economics and more. He has been editor-in-chief of the Miami Herald’s prestigious Sunday magazine, Tropic, and has covered a wide range of topics for Time Inc.’s Life magazine. His...

View More By Stephen Petranek