WASHINGTON — In one fell swoop, Aerojet Rocketdyne could reshape the landscape for military space launches if its reported $2 billion bid for United Launch Alliance (ULA) goes through.
The proposed acquisition, first reported by Reuters, would accomplish two things: First, it would establish Aerojet Rocketdyne as a fully integrated space launch company, capable of providing both the launch platform and the vehicle. As such, it could provide a cost-competitive alternative for the US Air Force to SpaceX, which was certified this year for military launches under the Air Force's Evolved Expendable Launch Vehicle (EELV) program using its Falcon 9.
While ULA and SpaceX compete, ULA only produces the launch vehicles, not the engines. SpaceX provides both.
Second, ULA, a joint venture between Boeing and Lockheed Martin, is overseeing the push to replace the Russian-made RD-180 as the engine for military space launches. ULA was viewed as favoring the BE-4 engine produced by Blue Origin. But if Aerojet assumes control of ULA, it is highly likely that it will favor its own AR-1 engine.
Marco Caceres, a space analyst with the Teal Group, said the possible acquisition of ULA by Aerojet Rocketdyne would benefit both the Air Force and American taxpayers by creating viable competition for SpaceX. This would create downward pressure on price and help increase the reliability for launches that typically cost hundreds of millions of dollars, with total program costs well over $1 billion when the military payload is included.
The acquisition would also solidify Aerojet's position as a maker of rocket engines, which faced an uncertain future with the phasing out of the Delta IV family of launch vehicles.
"This is a really smart strategic move for Aerojet from the standpoint of remaining a primary maker of liquid fuel engines. If they had let Blue Origin get their foot in the door by providing the engine for the Vulcan [ULA's next generation space launch system] and gotten a major US government subsidy for that, you would potentially be allowing the creation of a major competitor," Caceres said.
"In one fell swoop, not only do they become a major launch service provider, but they get to remain the pre-eminent maker of heavy lift engines. To a certain extent, it's kind of checkmate, because Blue Origin was seen as a potential threat to their business."
Bill Osgrove, a space industry analyst at Forecast International, said it was difficult to anticipate whether government regulators would view the proposed deal favorably.
"The Air Force has a really strong relationship with ULA and its parent companies Lockheed and Boeing, so on the one hand I could see them denying it and wanting to continue to work with ULA in its current structure," he said. "On the other hand, I can see them seeing this new arrangement as a counterweight to SpaceX and playing them off of each other and getting market competition that way."
One former Pentagon official expressed confusion about the business case for such a move and seemed less convinced that an integrated Aerojet would emerge as SpaceX's chief rival.
"It makes me scratch my head a little bit, to tell you the truth," the official said. "I can certainly understand why Aerojet would want to do this and close out competitors on the engine front, and then they would have soup to nuts on the launch vehicle — but the $2 billion, where does that come from? And how do they become cost competitive in what looks to be likely an Atlas-only environment?"
However, as long as there are two viable launch competitors out there, the Air Force is unlikely to be impacted.
"From an Air Force perspective, it's about the cost, but it's also about adherence to national space policy, which says you need two means for access to space," the former official noted. "So it looks like for certain SpaceX would be one. So who would the second player be? It's not clear that Aerojet buying ULA would make them a cost-competitive second player."
Notably, two days after reports of the potential sale, ULA reaffirmed its relationship with Blue Origin, announcing an expanded production agreement for the company, owned by Amazon founder Jeff Bezos, to provide BE-4 engines for ULA's Vulcan launch system.
The next day, Aerojet announced it had hired Jim Simpson, Boeing's vice president of Business Development and Strategy for Network and Space Systems, to be its senior vice president for strategy and business development.
Through company spokesmen, ULA, Aerojet, Lockheed Martin and Boeing all declined to comment on the reports of an Aerojet offer. Regarding ULA's Blue Origins announcement, a Boeing spokesman said the company is committed to ULA and its business, as well as space exploration overall.
"ULA continues to be the most reliable and effective way to ensure access to space for a wide range of US government customers. In addition, we continue to work on launch technology, reusable space vehicles, satellite capabilities and of course our new Starliner CST-100 Space Transportation system," the spokesman said. "Boeing has been a leader in space since the very beginning and our space businesses, including ULA, are important and strategic elements in our portfolio."
In response to a Defense News reporter's queries on Twitter, ULA CEO Tory Bruno declined to comment on reports of Aerojet's bid. He did add that he sees "a very bright future for ULA and for the future of space."
Aaron Mehta contributed to this report.