ROCKETS—Boeing Rockets Back to Life

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Company No Longer at Serious Risk of Losing $1.67 Billion Air Force Contract

After stumbling badly in early tests, Boeing Co. looks to be back on target in the development of its next-generation Delta IV rocket, potentially pulling a $1.67 billion Air Force contract back from the brink of being handed over to a chief competitor.

With the success of recent tests, Boeing now expects to be able to meet its target of a May 2002 satellite launch. The Air Force as recently as February threatened to give the contract a portion at first and then potentially all of it to Lockheed Martin Corp. if Boeing did not prove it could launch its much-anticipated rockets. Those rockets, being built at Boeing’s Rocketdyne facility in Canoga Park, are scheduled to loft 21 defense satellites into orbit from 2002 through 2006.

Losing even a portion of the contract would have been a blow to Boeing, which is refocusing its operations on satellites, as well as military aircraft and missiles, while placing less of an emphasis on its bread-and-butter commercial airlines manufacturing business.

In the wake of a drop in commercial aircraft sales from 66 percent of its overall revenues in 1999 to 61 percent last year the company recently stunned the defense industry by announcing it is relocating its Seattle headquarters to either Chicago, Denver or Dallas.

“It would have been devastating (to Boeing),” said Argus Research Co. analyst Kevin Tynan, referring to a loss of the Delta IV contract. “You can’t sneeze at ($1.67 billion). Losing part of that contract wouldn’t have meant the end of Boeing. But it would have hurt.”

A newly designed Common Booster Core in the RS-68 engine built at Rocketdyne passed a series of so-called hot-fire tests in the last two months, in which the CBC was ignited for 15 seconds, generating the equivalent of 14-million horsepower.

Testing took a nosedive last summer when the turbine blade in some of the 12 test engines at Edward Air Force Base and the John C. Stennis Space Center in Mississippi cracked, proving they could not withstand the frequency of vibration, according to Rocketdyne spokesman Dan Beck.

After months of work to redesign and manufacture the blade, the RS-68 engine passed a series of combustion tests.

Meanwhile, Lockheed Martin’s Atlas V satellite-launching rocket program has advanced without any difficulties, Air Force officials said.

“We’ve advised Boeing that in order to protect the government’s interests, to get a satellite in orbit on time, we started down the road to prepare it to be launched on an Atlas V, if needed,” said Air Force Col. Bob Saxer, director of the Evolved Expendable Launch Vehicle systems program. “(But) we’re very optimistic that Boeing will launch the first satellite when we need them to do it. In the last few months, we think they’ve turned the corner and are starting to make really good progress. We’ve seen great performance out of the engine. It will be a challenge. But so far, we’ve liked what we’ve seen.”

Both companies were awarded $500 million development contracts in October 1998. Boeing also received a $1.67 billion contract for its 21 launching missions, while Lockheed Martin is under a $500 million contract to launch seven defense satellites from 2004 through 2007.

Under the EELV program, the Air Force chooses two primary contractors, each of which serves as a backup for any jobs that the other can not handle.

If Boeing misses its May 2002 blastoff date, Lockheed Martin will take charge of Boeing’s responsibilities on a launch-by-launch basis, in addition to the seven liftoffs it is contracted to complete.

Building and launching a rocket costs an average of $75 million, but can cost more than $150 million if the payload is so heavy that a strap-on booster rocket is required to thrust the main vessel into orbit.

Delta IV’s problems have already forced the delay of the first commercial satellite liftoff, which was originally scheduled for this month but has since been delayed until March 2002.

But Boeing officials downplayed the delay, citing the need to be accurate more than timely.

“We view the Delta IV program as the future of our expendable launch business,” said Walt Rice, a Boeing spokesman. “The most important thing to us and our customers is that when we do have our first (commercial) launch, it’s successful. Each launch needs to be successful if you want to stay in business. In the launch business, one of the most important factors is reliability.”

Preparedness for that commercial launch will play a large role in the Pentagon’s determination of whether Boeing gets to keep the contract for the first defense launch three months later. That decision is expected to come in June or July.

“If there are any kind of major problems, we will have to go back and reassess their entire ability to get to the first launch date,” said Saxer. “(Lockheed Martin) has not had any real technical problems at all. Their program has been on schedule from the beginning. All we’re doing right now is protecting our options.”

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