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High Risks and Federal Cutbacks Keep Space Businesses in Earth's Orbit

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By Dana Hedgpeth and Kendra Marr
Washington Post Staff Writers
Tuesday, July 21, 2009

Forty years after the crew of Apollo 11 landed on the moon, the business of space has yet to experience the renaissance many once thought possible.

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"It's 2009, and we thought we'd be going to the moon on PanAm by now," said John Pike, an analyst who follows the industry at the think tank GlobalSecurity.org. "We thought the number of rockets that would be launched each year would be more and more and it would get cheaper and cheaper, but it didn't happen that way."

Instead, analysts estimate that the space industry has grown by only 25 percent since the late 1970s and early 1980s. It is now estimated to be worth about $50 billion -- about one-third of that in spending for NASA, one-third for Defense Department programs and the rest in private, commercial areas.

Unlike cars and computer chips, which have become better, faster and cheaper to make over the years, "rockets are no better today than what they were with Sputnik," Pike said, referring to the Soviet Union's spacecraft missions that started in the 1950s.

Largely because of the high risks -- and costs -- involved in developing and launching a rocket, the industry remains dominated by defense companies with deep pockets such as Bethesda-based Lockheed Martin and aerospace giant Boeing of Chicago. (Lockheed's space division alone accounts for $8 billion a year in revenue, mostly from NASA and the military, and employs 18,000 people across the country.)

Even private entrepreneurs, most of them multibillionaires, tend to rely on NASA contracts to develop new products, said Marco A. Caceres, a senior analyst and director of space studies at the Teal Group, a Fairfax industry consultant.

"Space is much more expensive to do and much more technically difficult than any other industry," he said. "Nobody's been able to figure out what can you do in space that will allow you to make a lot of money. In the aircraft and railroad business, it became obvious that transporting cargo made you money, but in the case of space it is just not that easy."

It has not helped that over time the government has curbed its appetite for spending.

At the height of the Apollo era, NASA received 4 percent of the federal budget. Today, it is less than 1 percent, according to the Aerospace Industries Association.

The funding crunch contributed to the rapid consolidation of the industry over the years. At one time, Douglas Aircraft, McDonnell Aircraft, North American Aviation and Rockwell International were all players in the space program. Now all four companies have merged into aerospace titan Boeing.

"There just wasn't the budget to go compete for programs, go win and be prime contractor on part of the space program," said Pat Schondel, Boeing's vice president of space exploration. "It made sense for companies to go join together."

The space workforce has also contracted. In 1969, NASA employed 218,345 people, including contractors. In 2008, the agency employed 169,113 workers.


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