Will Northrop Join Space Travel Race?

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The lure of outer space always has been powerful for science fiction fans and stargazers, but now the future business of space tourism may have drawn in one of L.A.’s biggest companies.


Los Angeles aerospace giant Northrop Grumman Corp. agreed recently to buy Scaled Composites LLC, the Mojave company that built the first private manned rocket to reach space.


The deal pairs an aerospace powerhouse and an emerging player in the nascent space tourism industry whose highly respected technology is advancing at a steady clip. But the acquisition has some wondering if a $30 billion company like Northrop, whose primary business includes shipbuilding and aircraft technology, will be interested in continuing with

Scaled Composites’ ambitious agenda of advancing the science of private manned rockets.


“I can’t imagine that they really want to get into space tourism because it’s so much out of character from what they normally do,” said Paul Nisbet, an analyst with JSA Research who tracks Northrop. “It’s a rather out-of-the-way acquisition that they’ve made. I have to think that there’s some technology here that may apply to some of their classified work that we are unaware of.”


Northrop reported $3.3 billion of revenue in 2006 from its space technology division. About 90 percent of that came from government contracts but after the company lost a bid to build the successor to NASA’s space shuttle, the company has not announced plans to build manned rockets. The company is, however, developing unmanned vehicles, as well as satellite and space radar technologies.


Northrop spokesman Dan McClain declined to characterize Northrop’s interest in space tourism. However, he said the company was not seeking any specific technology by buying Scaled Composites. He also said the deal would not affect Scaled Composites’ operations and its entire management team would remain intact.


“We really value their current mode of operation,” he said. “Northrop has always valued the innovative and entrepreneurial qualities of Scaled Composites and we think it’s a good fit with our company’s ongoing efforts with aeronautics and space flight.”


Burt Rutan, the highly regarded aviation engineer who founded Scaled Composites in 1982, declined to comment for this article.


Northrop has not disclosed the financial terms, but McClain said the deal, which is awaiting regulatory approval, is expected to close in August.


Northrop first invested in the company in 2000, but through this transaction has agreed to increase its stake from 40 percent to 100 percent.


It was unclear weather the acquisition would be affected by an explosion July 26 at a Kern County rocket engine test facility that killed three Scaled Composites workers and injured three employees critically.



Into space

In 2004, Scaled Composites’ SpaceShip One vehicle, funded by Microsoft Corp. co-founder Paul Allen, became the first private manned rocket to cross the Karman Line, the 100-kilometer-high boundary considered the separator between Earth’s atmosphere and space.


The company has since teamed with Virgin Galactic, a space tourism company started by British entrepreneur Richard Branson, to develop a second-generation rocket to take travelers on sub-orbital space trips for $200,000.


The companies have previously said they expect to conduct test flights of SpaceShip Two later this year or early next year, with commercial flights beginning in 2009 or 2010.


During a July 21 speech at the Space Frontier Foundation’s NewSpace 2007 conference in Washington, Virgin Galactic Chief Executive Alex Tai said he is happy with the deal and he does not expect it to have an impact on his company’s partnership with Scaled Composites.


It is unclear whether Northrop intends to throw its hat into the space tourism ring, but some are skeptical about whether Northrop would devote much of its resources to an industry estimated to reach about $700 million in the next 15 years a relatively small amount for Northrop.


But the industry is attracting some big names. United Launch Alliance, a joint venture of Lockheed Martin Corp. and Boeing Co., announced in late 2006 a partnership with Bigelow Aerospace Inc. to pursue technology necessary to build a low-cost, manned space vehicle to be used for commercial flights.


The aerospace giants have mostly remained peripheral players, though, as space tourism can be a risky venture, with potential liabilities ranging from lawsuits to cost overruns.


Northrop’s previous investments in emerging space companies have not been entirely successful.


In 1999, Northrop poured $30 million into Kistler Aerospace Corp., a Kirkland, Wash., company developing reusable launch vehicles that could deliver satellites to low-earth orbit. Kistler attracted a number of high-profile investors, including Lockheed and Honeywell Aerospace, but collapsed under its own weight and filed for bankruptcy in 2003, having amassed some $588 million in debt.

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