SpaceX Surges, and United Launch Alliance Announces Mass Layoffs

By Markets Fool.com


SpaceX landed a rocket on a ship at sea. Now what will they do for an encore? Image source: SpaceX.

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Four months after landing its first space rocket on land, and just a couple of weeks after landing its first rocket on water, SpaceX has momentum -- but is running out of "first" things to do. But what the company may soon lack in quality, it aims to make up in quantity.

With the wind at its back and its long quest to land a rocket safely on its drone barge now complete, SpaceX will now turn its attention to upping the tempo on space launches, potentially putting a payload in orbit as often as once every two weeks. Specifically, according to SpaceX COO Gwynne Shotwell, SpaceX plans to put no fewer than 18 payloads into space by the end of 2016 -- then accelerate that tempo to 24 launches in 2017.

And even then, SpaceX won't be finished. Long-term, Shotwell has laid out a path to increasing the number of rocket launches by 30% to 50% per year. At that rate, SpaceX could be launching a rocket a week by 2020.

Meanwhile, over at archrival United Launch Alliance (the joint venture formed by Boeing and Lockheed Martin in 2005), they're ramping down operations -- and laying off workers.

A study in contrast
Last week, ULA announced plans to lay off as many as 375 employees this year, then lay off perhaps 500 more workers in 2017. The reason, quite simply, is cost.

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Flying a combination of Atlas V rockets built by Lockheed Martin and Delta IVs manufactured by Boeing, ULA has so far been unable to match the low prices SpaceX offers on its launches. In a recent presentation at the University of Colorado, (ex-)ULA executive Brett Tobey lamented the fact that ULA's cost structure prevented the company from quoting prices lower than $125 million on its space launches, and admitted that when all costs are factored in, the company usually has to charge something closer to $200 million.

In contrast, SpaceX's published price list advertises rocket launches for as little as $61.2 million.

To better compete with its rival, ULA is thinning out its payroll and streamlining its product offerings. In addition to the 875 layoffs contemplated (about 25% of the workforce), ULA has announced plans to retire first the Delta IV from its fleet, and then eventually remove the Atlas V as well. Going forward, the company sees its new Vulcan rocket (still in development) as the future. According to CEO Tory Bruno, if the company can "simplify the product offering," it should be able to cut costs, and conceivably reduce prices to as little as $99 million a launch.

A study in math
Now here's the problem: Admittedly, $99 million is a whole lot cheaper than $125 million (or $200 million!). But it's still a long mile from the $61.2 million that SpaceX is charging for a similar service. And $99 million is going to look similarly expensive when weighed against the likely $77 million cost of an Ariane 6 rocket launch byAirbus joint venture Airbus Safran Launchers, once that rocket begins operations in 2020.

Ariane even says it will be able to offer a 2-in-1 rocket launch option on its new Ariane 64 heavy lift rocket, which could result in per-payload costs as low as $62 million per launch -- but let's not even go there, because ULA's got troubles enough as it is. Similarly, let's not mention the fact that SpaceX is floating the idea of cutting its own rocket launch costs by 30% when utilizing "used," reusable rockets.

The simple fact of the matter is that right now, today, SpaceX is already offering prices far below the best prices that ULA hopes to be able to offer eventually.

Why do I get the feeling that ULA's next memo to employees is going to read: "Layoffs will continue until morale improves"?

The article SpaceX Surges, and United Launch Alliance Announces Mass Layoffs originally appeared on Fool.com.

Rich Smithdoes not own shares of, nor is he short, any company named above. You can find him onMotley Fool CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 315 out of more than 75,000 rated members.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.