Orbital ATK bearish on commercial satellites, bullish on military, waiting on NASA
March 9, 2017
Key takeaways from Orbital’s March 8 conference call:
— Commercial satellite market slump in 2016 to continue in 2017.
— U.S. Air Force to decide by early 2018 on Orbital’s proposed heavy-lift rocket
— Satellite in-orbit servicing business seen as $100 million in annual revenue.
— NASA, U.S. military space business offsetting commercial drop-off
WASHINGTON — Satellite and rocket manufacturer Orbital ATK on March 8 said the sag in the global commercial telecommunications satellite market — just 14 orders in 2016 by Orbital’s count — is likely to continue through 2017 but that the company’s civil and military government satellite work is taking up the slack.
Dulles, Virginia-based Orbital said it had booked, in late 2016, its first two orders under NASA’s Commercial Resupply Services-2 (CRS-2) program to deliver supplies to the International Space Station. What happens beyond these first two missions remains to be seen.
“We expect more clarity and hopefully more orders under CRS-2 this year,” Orbital ATK Chief Executive David W. Thompson said in a conference call with investors. “We are assuming about two missions per year from 2020 and beyond but we don’t have clear visibility just yet.”
CRS-2 for NASA: How many, and when?
Orbital and SpaceX are under contract to NASA to deliver supplies to the space station. SpaceX has not announced how many CRS-2 missions it has booked with NASA.
Orbital is expected to launch six more missions under its $1.9-billion CRS-1 contract, a services arrangement that is based on the amount of kilograms delivered to the space station. The first of these is scheduled for launch later this month, with two more set for this year, two in 2018 and a last one in 2019.
The CRS-2 launches will start in 2019.
Orbital and the U.S. Air Force are in the second of what was envisioned, but not committed, as a five-year development program for a new medium-to-heavy lift launch vehicle.
Thompson said a “go/no go” decision by the Air Force is expected late this year ore in early 2018 on whether to proceed to full development of the rocket, which has a modular design tailored to U.S. government and the commercial market as well.
The rocket is one of two major space-development programs that Orbital estimates will generate about $100 million each in annual revenue starting around 2020 or 2021.
The second is Orbitals Mission Extension Vehicle, designed to travel to geostationary orbit, where most telecommunications satellites operate, to refuel aging but otherwise healthy spacecraft.
Satellite in-orbit servicing starts with 2018 launch
Orbital is under contract to satellite fleet operator Intelsat to conduct the first missions. The first is scheduled for launch in 2018. Orbital expects to build four more MEVs in 2020-2021 pending results of the first mission with Intelsat.
Satellite manufacturers agree that 2016 was a bad year for commercial orders — 14 by Orbital’s count, 14 according to Boeing, with the precise number depending on how one defines “commercial.”
Orbital won one order, for fleet operator Eutelsat, which it divided with Airbus Defense and Space. Orbital will provide the payload.
Thompson said 2017 look not much better given the pressure that commercial fleet operators are under to drop the price of their bandwidth. Commercial satellite revenue has always been unstable, but in Orbital’s case it generated up to $500 million in revenue in peak years, and $200 million in poor years.
“We are pretty close to the bottom,” Thompson said.
Plant and personnel move between commercial and government
Like most of its competitors in the commercial satellite market, Orbital can fall back on government orders to compensate for the drop in commercial business. It is this two-legged business model that MDA Corp. of Canada is adopting in transforming itself from a Canadian company into a U.S.-centered, security-approved company.
Thompson said Orbital’s plant and equipment and engineering work force can move easily between commercial and government orders.
“Things are pretty interchangeable,” he said. “The same engineering team, the same manufacturing and technical experts and the sam facilities are used whether the mix is weighted towards commercial satellites… or toward government satellites — as it was last year and probably will continue to be.”
Peter B. de Selding