Boeing Co.'s sprawling satellite-making operation in El Segundo got a major lift Friday when it won a contract worth about $600 million to build satellites for British telecommunications giant Inmarsat.
The deal to build three communications satellites marks the second big commercial contract in as many years for the company, which has been beset by layoffs amid a dearth of orders.
“It’s good news for Boeing, which has hit a rough patch in the satellite business in recent years,” said Jay Gullish, a space and telecommunications analyst at Futron Corp., a Bethesda, Md., firm that tracks the industry. “It keeps production lines running, which had been a concern there for quite some time.”
Once the world’s largest satellite maker, Boeing has been gradually scaling back its El Segundo operations for the last 10 years. At its peak in the 1990s, the Chicago-based company employed more than 10,000 at the 1-million-square-foot facility near Los Angeles International Airport. Its workforce now stands at around 5,000.
“New business enables us to preserve critical and highly specialized engineering and manufacturing positions in El Segundo,” said Craig Cooning, vice president and general manager of the company’s Space and Intelligence Systems, which oversees the satellite unit. “We don’t foresee a staffing increase due to this award…. It enables us to maintain stability in our employment numbers.”
The Inmarsat order will keep engineers busy. Each satellite, which will provide global communications coverage for the U.S. military and commercial businesses, is estimated to cost about $200 million and take about three years to build.
It also puts Boeing’s backlog of orders at 26. Although that’s a far cry from Boeing’s heyday in the 1990s when that number consistently hovered around 50, it is about double the number just five years ago.
The company had been in the midst of a business drought and recovering from development problems with its new generation of commercial satellites up until last year, when it secured an estimated $800-million deal to manufacture four satellites for Intelsat, another telecommunications behemoth.
Before that, it had been almost two years since the company obtained a multisatellite deal.
But Boeing seems to be back in the game, now that both Inmarsat and Intelsat have signed multimillion-dollar contracts with the firm, said Tim Farrar, president of consulting and research firm Telecom, Media & Finance Associates in Menlo Park, Calif.
“The combination of the two deals is really significant,” he said. “Winning a couple of high-profile contracts like this puts them back on the map and secures the future of that facility.”
The order not only preserves high-paying engineering jobs in Southern California but also bolsters prospects for the more than 200 smaller firms in the region that supply parts for the satellites, Farrar said.
This is important because orders for commercial satellites are expected to slow in the near future, Farrar said. It is also significant because the aerospace industry is bracing for a pullback in Pentagon spending, which could mean fewer contracts for military satellites.
“It’s great timing to win this contract,” Farrar said. “It carries them through what may be a truly difficult time for satellite manufacturing business.”