Lockheed Martin To Sell ILS Stake, Market Atlas 5 Missions On Its Own

Lockheed Martin Corp. will sell its share of the International Launch Services (ILS) joint venture to a consultant who has advised the aerospace and defense giant on the launch venture, Lockheed Martin announced Sept. 7.

Lockheed Martin will sell its ownership interests in ILS and Lockheed Khrunichev Energia International Inc. (LKEI) to Space Transport Inc., a company being set up by Mario Lemme, who has been an advisor for Lockheed Martin and has served on ILS’s board for more than three years.

Lemme "has a long-standing knowledge relationship with the program and great relationships with the other two Russian owners," Susan Thurman, a spokeswoman for Space Transport, said. "This has been an interest of his for a long time, which is why he wants to see a continuation of this program and has a keen interest in it."

Space Transport, being set up in the British Virgin Islands, will not exist until the deal closes, which is expected before the end of 2006. Terms of the transaction were not disclosed, but Space Transport will acquire Lockheed Martin’s 51 percent interest in LKEI.

LKEI was formed as a joint venture between Lockheed Martin and Russia’s Khrunichev State Research and Production Space Center and S.P. Korolev Rocket and Space Corp. Energia, to sell Proton launch services to commercial customers around the world. LKEI, under the brand ILS, markets launches of Lockheed Martin’s Atlas 5 and Russia’s Proton rocket. ILS is a 50-50 joint venture between Lockheed Martin and LKEI, which means Lockheed Martin is selling more than 75 percent of ILS.

"From our perspective, there will be no operational changes, just ownership and focusing only on the Russian launch system," Thurman said. "Other than that, there will be no change in people. We are hoping to keep most of the people, and the headquarters will stay in McLean," Va.

"The commercial space market has matured," Tom Jurkowsky, a spokesman for Lockheed Martin, said. "There are more competitors in a smaller commercial satellite market. We have an obligation, like any well run company, to gauge the business environment and do what is necessary and take advantage of opportunities that will benefit the company.

After analyzing the current commercial launch services market, we decided this is the prudent time to make that step and to sell off our interest in Khrunichev and ILS."

Following the sale, ILS, which will no longer be affiliated with Lockheed Martin, will continue to market the Khrunichev-built Proton and Angara launch vehicles to commercial clients.

To date, ILS has launched 37 commercial Protons and has a backlog for 11 additional launches. "The Proton is a good, well-proven vehicle with a terrific history," Andrea Maleter, technical director of Futron Corp., said. "It’ll be interesting to see how they approach the marketing going forward, and how they [will] work in a competitive marketplace without a U.S. commercial partner. Technically, the Proton is well proven and highly reliable, so it should continue to have a strong presence in the marketplace. The question is how they meet the challenge to effectively promote and sell the Proton."

Commercial business for the Atlas 5 has been slower, with ILS performing only seven commercial Atlas 5 launches since 2002. The Atlas 5, along with Boeing’s Delta 4 rocket, was developed under the U.S. Air Force’s Evolved Expendable Launch Vehicle program. Both vehicles are considered too expensive too compete on the commercial market, which has faced severe pricing pressure due to too few satellites and too many launch providers. Boeing basically pulled the Delta 4 off the commercial launch market in 2003.

Lockheed Martin will retain all rights related to the commercial Atlas vehicle and will continue to offer commercial Atlas launch services through its subsidiary, Lockheed Martin Commercial Launch Services, Jurkowsky said. "In essence, we will be going head-to-head," he said. "It’s likely the two businesses will compete for the same contract. We believe there is still a market for commercial Atlas missions. We will continue to pursue those opportunities."

The change in ownership means that ILS will lose the backup capability provided by offering both Atlas and Proton missions, one of the hallmarks of its commercial service. The backup option will remain in place for launches already booked, but will cease once the deal closes, said Michelle Lyle, a spokeswoman for ILS.

"The Atlas is another really good launcher with a great track record," Maleter said. "Whether [Lockheed] is going to, as they are saying, continue to offer commercial services on the Atlas is a question. One of the advantages they had in the joint venture was to sell and provide backup. … That was a big selling point."

The Atlas 5 and Proton also compete against Sea Launch and France’s Arianespace in the commercial communications satellite launch market. Japan, China and India also trying to grab a share of the commercial market with government-owned rockets, and a new player, Space Exploration Technologies, a privately owned U.S. company, also is developing a rocket it hopes will compete in the commercial arena.

There is no connection between the sale of ILS and Lockheed Martin’s planned joint venture with Boeing to offer launches of the Atlas 5 and Delta 4 to the U.S. government market. The United Launch Alliance is awaiting U.S. government regulatory approval.

— Jason Bates and J.J. McCoy