Image source: Arianspace.
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"Arianespace confirms its status as the most reliable launch services provider in the marketplace."-- Arianespace
I have to admit, when Arianespace made this boast last week -- just days after I penned a column ranking the success records of the big three space launchers United Launch Alliance (ULA), Arianespace, and SpaceX, in that order -- my eyebrows raised a bit.
At last count, United Launch Alliance -- the Boeing (NYSE: BA) and Lockheed Martin (NYSE: LMT) joint venture -- had successfully launched 111 rockets into orbit, in a row, without any of them blowing up in the process. Airbus-controlled(NASDAQOTH: EADSY)Arianespace, on the other hand, with an enviable record of 73 straight successful Ariane 5 rocket launches, looked like the second "most reliable launch services provider in the marketplace" -- not the first.
And yet, when you dig into the numbers, there does seem to be an argument to be made in Arianespace's favor. For one thing, Arianespace has been in business longer than ULA. (Prior to ULA's formation 10 years ago, Boeing and Lockheed operated as separate launch providers. Arianespace, which according to S&P Global Market Intelligence was established in 1979, thus had a head start on ULA -- and has operated without mishap for the last 13 years).
All of which got me thinking: Now that SpaceX has blown up another rocket, and is temporarily sidelined from the "most reliable" race, could it be true that Airbus' spaciest subsidiary is more reliable than United Launch Alliance? And if that is true, then when combined with the lower prices Ariane charges for launch services, could this be bad news for ULA's business -- and for Boeing and Lockheed's profits?
Digging into the numbers
Ariane's press release boasts an impressive number of "firsts" and "mosts." Of course, it's largely a marketing document, so let's put a few of its claims to the test, starting with...
Ariane: The biggest booster?
In August 2016, an Ariane 5 launcher boosted 10,735 kg into geostationary transfer orbit (GTO -- a much higher orbit than standard low earth orbit, or LEO), its largest payload ever. That was an impressive accomplishment -- because according to Ariane's own website, the Ariane 5 is only rated to carry 10 tons of cargo (10,000 kg) to GTO. 10,735 kg is also nearly two tons more than SpaceX saysits Falcon 9 rocket can lift.
And yet, according to ULA's website, ULA's Delta IVheavy rocket is capable of launching more than 13,800 kg to GTO. Meanwhile, SpaceX'supcoming Falcon Heavy rocket will boast a 22,200 kg maximum...
Ariane: Most prolific?
Ariane has launched seven rocketsso far this year, off a launch manifest of 11. That's a good start to the year.
At last report, though, ULA had already launched eight times-- and planned to conduct as many as 15Atlas V and Delta IV launches this year. SpaceX, too, notched eight successful launchesbefore its September "anomaly."
Ariane: Biggest backlog?
Shifting from boasts of what it has done, to what it plans to do in the future, Ariane notes that it "has won a total of eight new contracts in 2016," and now has "an order book worth 5.3 billion euros" ($5.9 billion) for future launches.
These are impressive stats. They may even be better than what United Launch Alliance can claim. Inquiringof the latter's total, I was informed that United Launch Alliance does not disclose the size of its order book because that information is "proprietary." SpaceX, on the other hand, is more than happy to tell investors how much business it has landed -- "over $10 billion in contracts," or nearly twice Ariane's tally.
Ariane: Where are the profits?
Left unmentioned in Ariane's press release is one fact that arguably matters most to investors (including, one imagines, Ariane's own majority shareholder, Airbus): Profits.
In its April report on financial results for fiscal 2015, Ariane reportedgenerating $1.6 billion. However, it earned only $4.5 million in profit on that revenue -- a fact that even Arianespace admitted meant it was operating at only "break-even." In contrast, ULA earned operating profits nearly 100 times as large last year -- $400 million. So what does this mean for investors in Boeing and Lockheed?
Ariane is a superb company, boasting an admirable record of success on multiple launch platforms, launch prices that beat ULA with a stick, and -- once the Ariane 6 is built -- a decent chance of competing against SpaceX on price. Ariane is not, however, the clear winner in the space race.
Indeed, the most surprising revelation to come out of this whole exercise is this: United Launch Alliance stacks up pretty well against Arianespace -- even in the areas where Ariane says it is establishing "performance records." And when it comes to profits, ULA stands head and shoulders above Ariane. Admittedly, this fact may itself be a factor of Ariane not charging as much on its launches as ULA does. But for investors, it's the bottom line that counts.
And that's where United Launch Alliance, and by extension, its Boeing and Lockheed Martin owners, clearly win the race.
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