Boeing, Lockheed JV and Bezos' Blue Origin in Space Venture
United Launch Alliance (:ULA) — a Lockheed Martin Corp. (LMT) and The Boeing Co. (BA) partnership – has teamed up with Blue Origin LLC, founded by Amazon.com Inc.'s (AMZN) Jeff Bezos, to build a new rocket engine named BE-4. The agreement is for a four-year development process with testing slated for 2016 and flight in 2019.
The BE-4 is now under testing at Blue Origin's West Texas facilities. The U.S. made rocket engine will cost much less than the Russian-built RD-180 that is currently in use to power ULA's heavy-lift Atlas 5 rockets. Although ULA already has a two-year supply of Russian engines with an additional 11 to be delivered by 2014 end and 2015, the BE-4 will be a standby just in case the RD-180 engine supply gets disrupted.
Given the mounting tensions between the U.S. and Russia over Crimea, the latest move by the U.S. to end the nation's sole reliance on Russia has taken on a fresh urgency.
The increased diplomatic conflicts have also erupted tensions which are now not only confined to the making of engines but also involve international spaceflight. Since the retirement of the space shuttle fleet in Jul 2011, NASA has relied upon the Russian space agency for the transportation of its astronauts to International Space Station or ISS at a cost of up to $71 million per seat on Russian Soyuz capsules.
Recently, Boeing received a $4.2 billion contract from NASA while Elon Musk's Space Exploration Technologies Corp., or SpaceX, has been awarded a $2.6 billion contract for the transportation of U.S. crews to and from the ISS. The space taxi is slated to transport its first astronaut to the orbiting laboratory by 2017. NASA’s selection of two contractors will prompt competition, cut overall technical risk and keep a lid on prices.
Built by ULA, Boeing's CST-100 spaceship would launch aboard Atlas 5 rockets, which rely on the RD-180 engine. SpaceX has plans to upgrade its Dragon freighter to carry astronauts. Both the contractors will retain ownership of their vehicles and can use those commercially, including the ferrying of private tourists.
Competition is gradually brewing up on space programs. For a long time ULA was the sole rocket launch provider for most of the U.S. military and spy satellites. SpaceX now has plans for Air Force certification for its Falcon 9 rocket. Moreover, it is set to deliver its own heavy-lift rocket to compete with ULA's Atlas 5 in 2015.
The U.S. has in recent times stepped up its space program and the defense contractors specializing in space systems see a lot of opportunity here in the wake of dwindling offers from other core defense areas.
Boeing carries a Zacks Rank #2 (Buy). Investors interested in the aerospace and defense industry may also consider Air Industries Group (AIRI), carrying a Zacks Rank #1 (Strong Buy).
Read the Full Research Report on BA
Read the Full Research Report on LMT
Read the Full Research Report on AMZN
Read the Full Research Report on AIRI
Zacks Investment Research
