McDonnell Gets Lift From Rocket Launch : Delta’s Success Raises Hopes for Landing Satellite-Boosting Business

When the top brass of McDonnell Douglas Astronautics Co. gathered in Cape Canaveral for last Friday’s launch of two “Star Wars” satellites, there were more than a few nervous stomachs and clammy hands.

The launch represented an important chance for the aerospace company to showcase its Delta rocket before defense and space leaders make several key, far-reaching decisions that will set the course of the nation’s civilian and military space program.

Once the workhorse of the nation’s space program, the Delta--manufactured at McDonnell Douglas Astronautics’ main facility in Huntington Beach--slipped into obscurity about five years ago when virtually all satellites were scheduled to be launched from the reusable space shuttle. In 1984, the Delta production line was shut down.

But in the political and technical fallout from the explosion of the Challenger space shuttle seven months ago, rockets have been reborn as satellite launchers.

And space contractors, while still uncertain about the future direction of the space program and hurting from the break in action, are coming to realize that the disaster did provide at least one opportunity: the chance to get into the satellite-launching business for commercial customers.

Few Beneficiaries

However, while space contractors are eager to blast off, analysts caution that the window of opportunity for commercial profits in space is fairly narrow. Beneficiaries of the new policy, they warn, are likely to be few and, possibly, foreign.

“It’s fine to go looking for silver linings in all this,” said Wolfgang Demisch, an aerospace analyst for First Boston in New York. “But the fact is that everyone has gotten wet from all the upheaval in space.”

The latest round of scrambling started about three weeks ago, when President Reagan said the National Aeronautics and Space Administration’s space shuttle would no longer launch satellites for paying customers, such as weather and communications payloads for private industry and foreign governments.

The order, which reversed a longstanding government policy, opened the way for private companies to enter a market estimated to be worth as much as $1 billion over the next five years.

For McDonnell Douglas Astronautics, Orange County’s largest NASA contractor and one of the most prominent space builders in the nation, the latest shift means that the company must pin its immediate hopes on the Delta, a 115-foot-tall rocket with an 8-foot diameter and a 93% success rate in its 179 launches over the last 26 years.

However, company executives and analysts agree that commercial space launches are not likely to compensate McDonnell Douglas for its recent $150-million investment in new satellite-boosting technology or for the revenue that it stands to lose because the shuttle remains grounded until 1988 and will only take military payloads when it resumes flying.

Nevertheless, McDonnell Douglas is trying to put on the best face possible. And Friday’s launch, at least, gave them reason to smile.

Unlike last May, when a Delta rocket fizzled shortly after liftoff, the latest launch was unblemished. And following it, NASA confirmed widely rumored accounts that it would buy, for about $100 million, three additional Delta rockets for future satellite boosts over the next three years to replace previously scheduled satellite launches from the shuttle.

February is the next important date for the Delta and other rockets. McDonnell Douglas is bidding in a four-way competition for a potential $1-billion Air Force contract. The contract, which is also being bid on by Martin Marietta, Hughes Aircraft and General Dynamics, calls for the winner to provide up to 20 rockets to put navigational satellites into orbit during the next five years.

The winner of the Air Force contract, analysts agree, will stand the best chance of luring commercial customers. With the military work helping to defray the astronomical costs of revving up a rocket production line, the successful bidder will be able to offer the most competitive prices to potential commercial customers.

“You can’t make a business out of commercial launchings without some military or government business to underwrite the fixed costs,” said Joseph Campbell, an analyst with Paine Webber in New York.

C. James Dorrenbacher, vice president and general manager of McDonnell Douglas Astronautics’ main plant in Huntington Beach, said last week that if the company wins the Air Force contract, it will enter the commercial launching business on its own. Without the military contract, he said, the company may sell its rockets to Transpace Carriers, a Washington firm that has already announced that it has reservations for two commercial launches.

Until the January explosion of the Challenger, McDonnell Douglas had been expecting to participate in nearly two dozen satellite launches from the space shuttle. With the end of commercial satellite launches from the shuttle, Dorrenbacher said, the company stands to lose potential revenue of between $80 million and $160 million.

In addition to the lost revenue, the company may also have little business for a piece of sophisticated equipment that it calls the Payload Assist Module, or PAM.

The apparatus, which can boost satellites into orbit from either the Delta rocket or the shuttle, cost the company about $150 million to develop, none of it underwritten by the government, the company said.

Dorrenbacher said McDonnell Douglas Astronautics is talking to its PAM customers to determine whether there is a market for the equipment in commercial satellite launches.

On the surface, he said, it would appear that there are possibilities to make money. Of the estimated 1,500 private and government-owned satellites now orbiting the Earth, McDonnell Douglas experts estimate that at least 20 commercial units will need routine replacement between 1988 and 1991.

“The revenue stream from those satellites is significant,” Dorrenbacher said, estimating that the cost to put the payloads in orbit could range as high as $1 billion. “They must be replaced, and the only question is how it will be done and by whom.”

Until the Air Force contract winner can get its rockets off a production line, analysts said, the most likely passage into space for commercial satellites will be on a French-made Ariane rocket. The rocket, which is heavily subsidized by the French government, is also said to be a likely winner of even more business because of its artificially low prices.

And even if the Ariane does not get as much business as expected, analysts said, its prices could set off serious--potentially deadly--price cutting by American companies.

As the opportunities and hurdles are assessed, the prevailing mood is not upbeat. “The commercialization of satellite launches is still being sorted out,” said Paine Webber’s Campbell, “but I don’t see it as that big an opportunity.”