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recently won contracts for a manned mission to the station. Earlier this year, SpaceX also won certifi cation to provide military launch services for the US Air Force. By operating more nimble organization structures, design- ing innovative new products, bringing production in-house and focusing on highly competitive commercial markets, new industry players like SpaceX have reduced develop- ment costs and put pressure on existing industry players. For instance, SpaceX’s certifi cation has effectively ended the monopoly on the US militaryspace launch market held by United Launch Alliance (ULA), a joint venture between Lockheed Martin and Boeing. By creating platforms that can effectively compete in the commercial market, SpaceX has been able to offer launch prices that government-dependent ULA has struggled to match. SpaceX has also led the way in developing reusable launch rockets, which promise further cuts in launch costs.


multiple companies and startups are developing increasingly small and inexpensive satellites that will require less powerful launch vehicles. As a result, new companies such as Virgin Galactic have begun developing such platforms.


The Future


The industry’s future performance will remain depen- dent on the defense market. While US defense spending is expected to remain constrained, it is anticipated to stabilize. The Pentagon will continue to invest in missile defense sys- tems, a new generation of stealthy and partially autonomous cruise missiles (i.e. LARSM) and new missiles for next- generation platforms such as the F-35. Continued defense investment, combined with growth in export sales, will lead industry revenue to increase at a projected annualized rate of 1.1% to $27.6 billion over the fi ve years to 2020. The rise of a new generation of space companies


promises to further disrupt an industry in which the top four


In response, ULA has begun to restructure in order to cut costs and prices. The company also announced that it will develop a more advanced and affordable Vulcan rocket, which itself is expected to have reusable rocket technol- ogy. Space launch competition and pressured government defense spending have also been among the primary reasons for why Orbital Sciences and Alliant Techsystems merged earlier in the year to form Orbital ATK. SpaceX’s disruptive presence has also induced more industry participation. ULA’s new Vulcan rocket is likely to be powered by engines being developed by Blue Origin, a start- up created by Amazon’s Jeff Bezos. (ULA’s reliance on Rus- sian RD-180 engines has become a liability after Congress banned their use after 2019.) Along with Sir Richard Bran- son’s Virgin Galactic and others, Blue Origin is also develop- ing spacecraft for the nascent space tourism industry. Finally,


companies account for 73.8% of revenue, reducing prices for customers and encouraging innovation. However, the risks involved in entering this industry have recently become ap- parent for both operators and clients. In 2014, Virgin Galac- tic’s SpaceShipTwo spacecraft broke up in midair, creating doubt in the nascent space tourism industry. Moreover, within the past year, both Orbital ATK’s and SpaceX’s rockets exploded on missions to resupply the ISS. This has jeopar- dized NASA’s resupply of the ISS and has also exposed the dangers of using newcomers at the expense of established companies with long track records of reliable service. The Pentagon in particular, will follow these accidents as it de- termines if SpaceX is reliable enough to launch billion dollar national security payloads.


All fi nancial fi gures and growth rates are infl ation adjusted.


25 — Aerospace & Defense Manufacturing 2015


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