Lockheed Martin’s space profits to decline in 2019 because of ULA


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Capitalism in space: Lockheed Martin is projecting a decline in its space profits in 2019 because of a decline in income coming from its ULA partnership with Boeing.

In the previous quarterly earnings call in October, Bruce Tanner, Lockheed Martin’s chief financial officer, warned those earnings could be down as much as $150 million in 2019 compared to 2018. Tanner said then that both the number of [ULA] launches and the mix of vehicles contributed to that decline.

“We have more, for instance, Delta 4 launches in 2018 than we expect to have in 2019,” he said in the prior call. “Those are obviously the most profitable launch vehicles in all of ULA’s portfolio.”

In the latest earnings call, Tanner said the decline would not be as large as previously projected, estimating it to be closer $100 million. Part of the change has to do with improved performance at ULA, he said, but a bigger factor was a delay of a Delta 4 Heavy launch from late 2018 to earlier this month, shifting the profit realized from it to 2019. [emphasis mine]

The highlighted language illustrates why they are losing sales. The Delta family of rockets might bring ULA the most income, but that is because it is also its most expensive rocket to build and launch, and is also the one for which it charges the most.

Back in 2016 ULA announced that it planned to retire Delta, but it has not yet done so, probably because the company earns so much with each launch. Whether they eventually retire it or not doesn’t really matter, however, because its high cost will have it with time go the way of the horse regardless. Other cheaper rockets, such as the Falcon Heavy, are getting the business instead.

In fact, this competitive process probably explains entirely the drop in earnings expected in 2019.

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One comment

  • mkent

    Back in 2016 ULA announced that it planned to retire Delta, but it has not yet done so, probably because the company earns so much with each launch.

    No, it has not done so because Delta IV is still flying out its manifest. Delta IV Medium has two flights left: 1) WGS-10 in March (the last WGS satellite in the constellation), and 2) GPS 3-1 in October (which is years behind schedule).

    Other cheaper rockets, such as the Falcon Heavy, are getting the business instead.

    No, Falcon Heavy has not yet stolen any business from Delta IV. Commercially, Falcon Heavy competes with Ariane V and Atlas V, both of which are doing well in their respective markets. On the military side, Delta IV Heavy has launches scheduled out to 2023 — launches that SpaceX didn’t even contest. After that, Delta IV Heavy will be replaced with Vulcan.

    There’s only one launch that Falcon Heavy might possibly take from Delta IV Heavy: the WFIRST launch currently penciled in for August of 2024. WFIRST is being designed for a Delta IV Heavy launch, but the launch contract has not been let. I suspect that contract will slip so far out that it will end up being competed by Falcon Heavy and Vulcan, and Delta IV will be retired by then.

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