After
three decades in the strategic missile and space-launch business, there
is one experience United Launch Alliance President & CEO Tory Bruno
still hasn’t had: he has never lost a rocket. During the years he was
involved in overseeing Lockheed Martin’s Trident II submarine-launched
ballistic
missile — the backbone of the U.S. nuclear deterrent — it achieved a perfect record of over 100 flawless launches. Today, as head of ULA, he presides over a launch provider that never lost a payload in ten years of operation.
Elon Musk no doubt wishes that SpaceX could say that. Musk has made life hard for Bruno by offering the government cut-rate prices on launch services, forcing ULA to drastically reorganize what had been a consistently profitable enterprise. But Musk has lost two Falcon 9 launch vehicles in the last two years, so at this point NASA must be asking itself whether it really wants to put astronauts atop one, and the Air Force probably is concerned about the critically important national-security satellites it is expecting SpaceX to place in orbit.
I sat down with Bruno on October 12 to discuss the future of the space-launch sector, and found him surprisingly positive about his chief competitor. He says Musk has brought “excitement” back to the space sector, and made ULA rethink its cost structure. As a result, he has cut his supply chain costs by 36%, and cut cycle times in half. Bruno also is humble about his own perfect track record in presiding over so many successful launches, saying that everybody in the space business eventually suffers a loss. It’s a uniquely challenging business.
Maybe so, but you could argue that ULA made it look too easy in the
years when the Boeing-Lockheed Martin joint venture was the only
certified launch provider for national-security satellites. The Air
Force, which leads military space missions, has adopted a competitive
model now that SpaceX also is certified that focuses almost exclusively
on price as a determinant of who gets to launch spacecraft like GPS III.
With some national-security satellites costing the better part of a
billion dollars, you’d think risk and reliability would bulk larger in
the selection criteria.
SpaceX can’t challenge ULA in orbiting the heaviest military birds to the highest orbits, because it lacks the technology to get there. The military has eight different reference orbits for its various constellations of missile-warning, weather, communications and spy satellites, and the Air Force says SpaceX can only reach four of them. Musk has proposed strapping together three Falcon 9 launch vehicles to reach the remaining orbits — the first stage would have a staggering 27 engines — but at this point his “Falcon Heavy” is running years late in achieving initial launch. It isn’t clear how the Air Force would go about certifying such a behemoth as suitable for military launches.
missile — the backbone of the U.S. nuclear deterrent — it achieved a perfect record of over 100 flawless launches. Today, as head of ULA, he presides over a launch provider that never lost a payload in ten years of operation.
Elon Musk no doubt wishes that SpaceX could say that. Musk has made life hard for Bruno by offering the government cut-rate prices on launch services, forcing ULA to drastically reorganize what had been a consistently profitable enterprise. But Musk has lost two Falcon 9 launch vehicles in the last two years, so at this point NASA must be asking itself whether it really wants to put astronauts atop one, and the Air Force probably is concerned about the critically important national-security satellites it is expecting SpaceX to place in orbit.
I sat down with Bruno on October 12 to discuss the future of the space-launch sector, and found him surprisingly positive about his chief competitor. He says Musk has brought “excitement” back to the space sector, and made ULA rethink its cost structure. As a result, he has cut his supply chain costs by 36%, and cut cycle times in half. Bruno also is humble about his own perfect track record in presiding over so many successful launches, saying that everybody in the space business eventually suffers a loss. It’s a uniquely challenging business.
A United Launch Alliance Atlas V launch
vehicle carries a payload into orbit. ULA has never lost a launch
vehicle since it was established ten year ago. (U.S. Air Force photo by
George Roberts)
SpaceX can’t challenge ULA in orbiting the heaviest military birds to the highest orbits, because it lacks the technology to get there. The military has eight different reference orbits for its various constellations of missile-warning, weather, communications and spy satellites, and the Air Force says SpaceX can only reach four of them. Musk has proposed strapping together three Falcon 9 launch vehicles to reach the remaining orbits — the first stage would have a staggering 27 engines — but at this point his “Falcon Heavy” is running years late in achieving initial launch. It isn’t clear how the Air Force would go about certifying such a behemoth as suitable for military launches.
For now, CEO Bruno is focused mainly on cutting costs in areas where other companies can compete — not just in the military market, but for civil and commercial missions too. Launch providers typically need ten or more missions per year to remain viable, and military demand may shrink to half that level in the near future. Even if it wasn’t facing competition from SpaceX for the low end of the military market, ULA would have to grow in civil (meaning NASA) and commercial markets to remain profitable. It seems to be making steady progress in that direction.
For instance, the price of a baseline launch on its workhorse Atlas V launch vehicle has been cut by nearly a third, and will continue falling in the future. In 2017, ULA will begin offering launches on its next-generation Vulcan launch vehicle built in partnership with Jeff Bezos’ Blue Origin, and Bruno expects some of those missions will cost less than $100 million compared with almost $200 million for Atlas launches a few years back. Vulcan isn’t ready for prime-time yet, but Bezos has invested lavishly in engineering and test facilities for its methane-powered engines.
This all suits the government just fine, because it was looking for a way of cutting launch costs, so having the likes of Bezos and Musk engaged in the launch sector has the potential to greatly reduce costs. For Bruno, though, the main challenge is navigating the ups and downs of demand cycles in three different market segments. Today, ULA gets about 60% of its revenues from national-security launches, with the remainder split almost evenly between civil and commercial work. Looking out to 2020, though, Bruno sees national-security missions falling to 42% of revenues, with NASA and commercial launches providing the rest.
The civil space agency bulks large in this strategy, because competition on the commercial side is so fierce from both domestic and foreign providers of launch services. The vast majority of NASA launches going forward will involve getting astronauts and supplies to the International Space Station, and ULA has made major inroads in securing business for both types of mission. It also has good prospects for launching NASA’s science satellites. Bruno figures he only needs two of the 20-30 commercial missions launched each year to balance the books as long as NASA and military demand projections hold up.
The military is counting on ULA to secure more business in other launch markets to make its new price-driven competitive model work. As Bruno put it to me, “This is a transition from a business model the Air Force had before aimed at avoiding crises to a model where price dominates in a competitive environment; but there isn’t enough military demand to sustain the new approach, so the Air Force model depends on our success in other markets.” In other words, ULA has to do more business with NASA and commercial customers otherwise the Air Force competitive model will break down.
Time will tell whether SpaceX can make its own contribution to the success of this new business model, but Bruno isn’t waiting to transform his organization. He describes current corporate plans as “a decade of change in three years.” The part of this change he most dislikes is cutting a workforce of highly skilled employees at the company’s engineering center in Centennial, Colorado and its manufacturing facility in Decatur, Alabama. So far, 70% of the departures have been voluntary, and they have been mainly in Centennial where the job market is stronger. He is bringing outsourced parts work into the Decatur plant to preserve jobs there.
No doubt about it, Tory Bruno has a plan for navigating the changes in his markets while remaining profitable. Given the relative fragility of his competitors in the government space, United Launch Alliance will likely remain the leading provider of launch services to both the defense department and NASA. The larger question is whether the government fully grasps all the risks associated in purchasing launch services from the lowest priced, technically acceptable offeror. This would not be the first time it has over-estimated the reliability of market forces.
source - forbes.com
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