Boeing’s Roger Krone: Military Space will Remain Profitable for the Commercial Sector

The acquisition of Hughes’ space and communications business in 2000 gave Boeing the critical mass it needed to secure a leading role in the space industry, according to Boeing President of Network and Space Systems Roger Krone, who told Via Satellite that he is happy with the journey that his company has taken toward developing its new 702-SP electric-propulsion satellite.
   The path to develop future technologies for the military market, however, is much more difficult for Boeing to map out as Congress’ direction on government budget cuts remains unclear.
   In the following interview, Krone discusses the factors that continue to make space a profitable business for the military and aerospace manufacturer in spite of grim projections for impact that budget cuts will have on the sector. 

Via Satellite: You recently unveiled a new electric propulsion satellite, the 702-SP. Is there a place for this model in the military sector?

Krone: Yes, though I do not think that all-electric will replace every military satellite. There are a couple of places in the space and missile defense world where our 702-SP model makes a lot of sense. There are certain orbital positions where all-electric makes a lot of sense. It all depends on the customer’s needs. If the money you save from the 702-SP’s low weight, electric propulsion and launch costs makes up for the extended time it takes to get to orbit, then it makes sense. Because the electric-propulsion thruster is not as powerful as traditional propulsion systems, the 702-SP will take longer to shift from its transfer orbit to its intended orbit. This lag is especially prevalent for the trip between transfer orbit and a GEO slot. 

Via Satellite: Is it difficult to develop new technologies like the 702-SP in the absence of government financial support for military contracts?

Krone: We’re investing our own money to improve our production line and develop new capabilities that would maintain the industrial base in the absence of new government-funded development programs. The 702-SP is, for us, one more offering that we have to provide from our product line. There is a significant market for the SP, but that doesn’t mean we will discontinue the 702-MP or the 702-HP. In 2006, Boeing made a conscious decision to establish a single satellite design center and operation, which Cooning now manages in California. We wanted one center, not five. We wanted one chief engineer as opposed to several engineering leaders spread out all over the United States. This consolidation gives us predictable performance and costing and enables us to accept fixed-price. That’s why we launched the all-electric satellite to fill out our product line. We can build for customers requesting a variety of sizes — from small nano-satellites all the way up to the big 702-HP.

Via Satellite: Is Boeing prepared with a new business model if military budget cuts are much more severe than expected?

Krone: Yes, and this is a lesson the company learned after the cancellation of the U.S. Air Force’s Transformational Satellite Communications (TSAT) program in April 2009. Our re-entry into the satellite design market came months later with the introduction of our 702B medium-power satellite model, which was implemented to offset the company’s loss from the termination. The WGS satellites we are building for the Pentagon, for example, are a result of our collaborative partnership with the Air Force and the technology we used to change the six-satellite contract to a fixed-price structure. This made us able to significantly reduce the cost of WGS by changing the way we operate, oversight, find suppliers and manufacture. The WGS satellite model is based on a commercial bus that we had already built and have placed into orbit. It has a very mature design and we know how to build it. All of these things really lend themselves to the different contract structure. Because we went with a fixed-cost contract structure, the Air Force now knows exactly what WGS is going to cost and when they are going to get it. We’re able to operate in a thinner oversight environment. The fewer reviews involved allow us to dedicate more people building the satellite.

Via Satellite: Do you think space will remain a profitable market for military manufacturers like Boeing and its competitors?

Krone: We still see space as a growth market for Boeing, but the rate of growth for space is not nearly as strong as that of the iPad 3 consumer market. The space market is still constrained by GEO slots. With land operations winding down and warfare happening more often in the cyberspace arena, I see WGS as a model for other programs under the government budget axe. We see WGS as having one of those models that emerged out of the issues surrounding the budget and the deficit. We think this model as a critical element of our success as we see military budget issues endure.

Via Satellite: Where do you see this growth happening in the military sector?

Krone: Overall, what I see in the space market is a replacement of transponders in GEO orbit. For example, we’re going to see [the U.S. National Oceanic and Atmospheric Administration] NOAA replace its Earth observation satellites. Even Iridium and the GPS constellation is all replacement and in some ways, [Wideband Global Satcom] WGS is a replacement for some of the Milsatcom. There’s going to be a sizable market for replacement and a sizable market for new satellite capabilities.