And as the White House pledges to push for a Space Force as a sixth military branch and the first new service since the Air Force was created in 1947, a group of government contractors sees a chance to profit.
Byron Callan, a prominent defense stock analyst with Capital Alpha Partners, said Lockheed Martin, Northrop Grumman and Harris Corporation may be particularly well-positioned to benefit from Trump’s Space Force.
The new service could line their pockets for years to come, assuming Congress embraces the idea.
“Because [the Space Force] will be a smaller service with fewer resources, it may be more dependent on industry for technical advice and policy input,” said Loren Thompson, a consultant with the nonprofit Lexington Institute, which receives funding from defense contractors. It “would likely be more of a creature of industry than if the Air Force were kept intact.”
Throughout the history of human space travel, NASA has tended to get most of the glory. But the Defense Department has been focused on the stars since before Sputnik caused a national panic in 1957 — and led to what is now known as the Defense Advanced Research Projects Agency, or DARPA, the Pentagon’s research arm.
Today, DARPA is working on a few programs that could ultimately fit under the mantle of a Space Force. Last year, it selected Boeing for its “Experimental Spaceplane,” or XS-1, program, which is meant to develop a spaceplane capable of flying 10 times in 10 days.
Boeing’s vehicle, known as the Phantom Express, would be designed to fuel up and go, taking off quickly, like a commercial airliner. That is particularly appealing to the Pentagon, which wants to be able to put satellites into orbit quickly if, for example, officials learn that an adversary is preparing to launch a missile or deploy a fleet of ships to sea.
And with information-age technologies penetrating further into military operations, even the Army’s ground forces rely on support from beyond Earth’s atmosphere. The Global Positioning System (GPS) that numerous military systems rely on for geolocation is made possible by bus-sized satellites built primarily by Lockheed Martin and Boeing. Those satellites are hurled into space by firms like Elon Musk’s SpaceX and the United Launch Alliance (ULA), a joint venture of Lockheed Martin and Boeing.
Concerned that adversaries could jam or interfere with those satellites, the U.S. military has worked to make them more resilient. On Tuesday afternoon, the Air Force announced that it awarded Lockheed Martin a $2.9 billion contract for just three satellites designed to be survivable against counter-space weaponry, handing the company an initial $80 million to cover development costs.
Alongside such large and expensive systems, defense officials are planning to launch swarms of smaller satellites into orbit, which they think will be harder to destroy or disable. DARPA is developing robots that could fly from satellite to satellite in space, refueling, repairing damage or updating the satellites with new capabilities as we do with our smartphones’ operating systems.
The prospect that GPS communications could be knocked out through an attack on U.S. satellites has become so worrisome that the U.S. Navy recently added celestial navigation back into its required coursework for officers. Boeing is working on autonomous drones that can navigate without the help of GPS.
“The U.S. military is dependent on space across the full spectrum of conflict, from counterterrorism operations in Yemen to a major war with a near-peer adversary like Russia or China,” said Todd Harrison, a military analyst with the Center for Strategic and International Studies. “Other countries have taken note of the advantages space provides to the U.S. military and are developing and proliferating counter-space weapons to negate our advantage in space.”
Another top Pentagon priority is developing a hypersonic missile, one capable of traveling at five times the speed of sound, or more. In his speech at the Pentagon on his need for a Space Force, Vice President Pence said that both Russia and China are “investing heavily’ in the technology and that “China claimed to have made its first successful test of a hypersonic vehicle just last week.”
On Monday the Air Force announced it is awarding a $480 million contract to Lockheed Martin to develop a hypersonic strike weapon, a project that builds on a similar contract worth almost $1 billion awarded in April. Boeing also said it was investing in a British company that is working on hypersonic propulsion systems.
For the time being, the federal space market is considered a niche business with tremendous overhead costs, available only to a handful of gigantic companies with the scale to compete.
An analysis by Bloomberg Government found that the Defense Department spends about $4 billion a year on space vehicles, launches, services and associated support. Most of that money is spent through contracts with three large companies: Boeing and Lockheed’s United Launch Alliance; Lockheed Martin individually; and a California-based nonprofit research center called the Aerospace Corporation. Elon Musk’s SpaceX was the fourth-largest recipient of Defense Department space funding, Bloomberg Government found.
Independent analysts were skeptical that the Space Force would give companies such as Lockheed and Boeing much of a bump in business, however, unless its creation comes with a significant increase in defense spending. The Pentagon is expected to outline its plans in greater detail next year as part of its 2020 budget request, Deputy Defense Secretary Pat Shanahan told the Associated Press.
The force could actually become a liability for contractors if the Pentagon’s other activities are defunded to make room for more bureaucratic overhead, they said, or if a future Congress decides to cut defense spending.
“From a business perspective I don’t think [the Space Force] changes a whole lot,” said Rob Levinson, senior defense analyst with Bloomberg Government. “It’s a different office they have to go to, but these companies are basically going to be doing the same thing.”
Capital Alpha partners analyst Byron Callan described the Space force as “far from an automatic win” for space companies. “They’re all diversified enough that you don’t know what else is going to get curtailed — that they’re counting on — to pay for this,” he said.
And the prospect of resources being diverted from the Army, Navy and Air Force has military contractors spooked.
“Space should be prioritized…but at what cost?” said Wes Hallman, senior vice president for policy at the National Defense Industrial Association. “The challenge with the Space Force is that you worry about creating a few more bureaucratic layers. That won’t be good for the warfighter or for industry.”
President Trump’s comments at a recent news conference suggests Lockheed and Boeing’s United Launch Alliance could be in trouble if the White House gets its way: “I don’t like when Boeing and Lockheed get together because the pricing only goes up,” Trump said, later adding “we’re going to have to talk about that, your joining those two companies.”
Trump’s public admonishments to those companies have seldom translated to policy, however. When he tweeted a month before his inauguration that Boeing’s contract to build the Air Force One presidential plane should be canceled, it wasn’t. Months later, when he criticized the price of Lockheed’s F-35 Joint Strike Fighter and suggested it should be replaced with a competing plane, the government ended up awarding a contract that was roughly in line with what it had already planned.
Geopolitical tensions are also creating new risk for space companies. Russian lawmakers are reportedly weighing whether to cut off sales of the RD-180 rocket engine — which NASA and the Defense Department use on the Atlas V rocket — in response to U.S. sanctions. A United Launch Alliance spokesman said the company has enough inventory in the U.S. to meet its current mission needs.
Space companies contacted by The Washington Post mainly said they would continue to support the government’s work in space regardless of how the new service was structured. In other words, if a new Space Force were to supplant the space-based activities of another service like the Air Force, as some officials fear, the Lockheeds and Boeings of the world would simply follow the money.
“Lockheed Martin has played a central role in both commercial and national security space for decades, and we look forward to contributing to this critical effort through the National Space Council and other means,” said Lockheed Martin spokeswoman Maureen Schumann.
Boeing concurred: “We will continue to deliver for our partners in government as they stand up a Space Command and consider the path forward for implementing the Space Force,” spokesman Dan Curran said in an email.
Northrop Grumman offered something closer to a full-throated endorsement: “We are encouraged by the increased focus on the Space domain and its importance to our national security,” spokesman Tim Paynter said in an email. “Given our deep expertise, legacy and capabilities related to Space, we look forward to supporting the nation’s future needs in this critical area.”
Northrop took an aggressive step into the space business last year when it bought a Virginia-based company called Orbital ATK, giving it a broad suite of space-based capabilities including bus-sized communications satellites and experimental robotic spacecraft. Florida-based government contractor Harris Corporation edged further into the industry this year through an unspecified classified contract win, chief executive Bill Brown said in a recent earnings call.
Others have pointed out that more than just military might is at stake. With commercial industries like trucking and shipping increasingly reliant on GPS for navigation, securing space could have broader implications for the U.S. economy.
“We’re pleased that the White House is focusing on America’s reliance on space, and on the growing threats from Russia and China,” Aerospace Industries Association president and chief executive Eric Fanning said in an email. “As Congress reacts to the Pentagon’s report, we need to be careful not to create increased bureaucracy and complexity that might actually slow us down. We also need to recognize that it’s not just our military, but every aspect of our economy that relies on security in space.”