Are Private Space Transport Firms Today Where Microsoft Was When It Sold Stock In 1985?

Broader, Established Space Transport Industry Sees Revenues, Profits Soar More Than 40 Percent Over Two Years, According To FAA Report

The nascent private commercial space transport business has posted impressive growth, but that past showing will be eclipsed by a huge future expansion as entrepreneurial enterprises respond to lush opportunities, a new report suggests.

Indeed, the private commercial space transport business today may be in a position similar to the computer and software businesses more than two decades ago, when companies such as the then-fledgling Microsoft began selling stock that later made many millionaires out of ordinary investors.

"Private entrepreneurial ventures are reshaping the economic profile of commercial space transportation," according to a new FAA report titled "The Economic Impact of Commercial Space Transportation on the U.S. Economy." George C. Nield, deputy associate FAA administrator for commercial space transportation, described the report in an appearance before a Space Transportation Association breakfast Thursday at a Washington restaurant. To view his remarks, please go to http://www.faa.gov on the Web and click on News, then click on Speeches.

"Commercial space transportation is a growth industry, with trends overall on the upswing as the industry stands on the threshold of opening a whole new branch involving commercial human space flight," Nield said.

It already is clear that the private commercial space transportation sector is ready for liftoff, according to the report released Thursday.

"Private investors along with prize competitions have spurred technological advances with the potential for an even greater space impact on the economy," the report predicted.

"For example, individuals like Microsoft co-founder Paul Allen, video game developer John Carmack, and hotel entrepreneur Robert Bigelow have invested substantial sums on both launch vehicles and spacecraft," the report noted.

One also could point to pioneering aerospace designer Burt Rutan, who created the sub-orbital spaceplane SpaceShipOne, the Ansari X prize winner, and billionaire Richard Branson of Virgin Atlantic fame, who helped bankroll such efforts.

Clearly, the effort to form a private space vehicles industry has tallied some impressive successes.

And this isn’t the conclusion, but rather only the beginning of something very big.

While space travel is an expensive proposition, the report noted that multiple financial incentives have been posted to help spur investors to ante up substantial funds for spacecraft, rockets and more.

That referred to the $10 million Ansari X Prize for repeated private space flights, NASA seed money that has lured Space Exploration Technologies Corp., or SpaceX, and Orbital Sciences Corp. to begin developing vehicles to take cargo (and maybe someday astronauts) to the International Space Station, and the $30 million Google Lunar X Prize for any privately funded team that can be first to send a robot to the moon, which would travel 500 meters and transmit video and images along with data back to Earth.

"The core commercial space effort promises growth in other traditional businesses like food services and transportation for workers in the commercial space sector," the report predicted.

"Those include potential new spaceports, spaceflight training facilities, hangars, and terminals. Organizations such as the Orbital Commerce Project and the national Aerospace Training and Research Center are developing programs to train spaceflight participants.

"These developments will mean added economic activity as job and derivative business opportunities increase."

For now, the commercial space transportation sector remains so small it seems invisible compared to the established giants of the space business, such as companies making satellites, rockets and other hardware. The nascent business is so small it doesn’t even appear as a percent of the overall giant industry. But that tiny private space transport sector is poised for growth.

For example, "Overall since 2006, there have been 15 FAA-licensed commercial launches, including two just this week," Nield said. "We have also overseen 15 permitted launches, and have licensed the operation of the Oklahoma spaceport."

The FAA report also looked at the huge, established overall commercial space transportation industry, and found robust health and a bright future, an outlook that Nield detailed in his remarks.

Overall Industry Outlook

In 2006, the most recent year for which data are available, the commercial space transportation and related industries generated $139 billion of revenues, up a sizzling 41.8 percent in just two years, Nield reported.

That $139 billion is more than double the $61 billion in 1999, when the FAA report series began.

As for profits, they hit $35 billion in 2006, up 40 percent in the two-year period.

And all of this has been good not only for stockholders, but also for workers as well.

The industry provided employment to 729,000 people in 2006, a 32.3 percent advance from 551,000 jobs in 2004, and 47 percent more than the 497,000 in 1999.

"As the report points out — and these numbers demonstrate — commercial space launch activity plays a very important economic role in the United States," Nield said.

His report includes six industries, such as launch vehicle manufacturing, satellite manufacturing, ground equipment, satellite services, remote sensing, and distribution industries.

It measures the direct impact of these industries, as they buy raw materials, operate facilities, pay employees and the like. And it monitors their secondary economic impact, using a Commerce Department model, such as employees turning around and spending those paychecks.

Clearly, the report shows that vital economic health and a brilliant future are found throughout the commercial transportation industry, not just in one or two areas.

"Launch vehicle manufacturing was the only sector that did not show an increase between 2004 and 2006," Nield said. "Satellite services, on the other hand, experienced notable growth because of the continued and increasing demand for Direct-to-Home TV services and the expansion of satellite digital audio radio services, an area included for the first time in this report.

"In addition to the space-related industries, commercial space transportation also has an impact on other non-space sectors, which help to generate additional earnings and jobs."

Now, Nield conceded that the overall U.S. economy was in far better shape in 2006, compared to the difficult days now when subprime mortgages and soaring oil prices, along with a threat of inflation, are battering the U.S. gross domestic product and unemployment trends. And therefore, some might suspect that space transportation companies must experience tough times in 2008 and the near future.

But he counseled observers to step back and gain perspective, at least where the nascent private commercial space transportation industry is concerned.

If one examines good and bad economic periods, the worst and most devastating was the Great Depression. "While the worst of it was from 1929 to 1935, the 1930s generally had far more downs than ups," Nield said.

And yet the Depression showed that bad economic times don’t necessarily have to be bad for the industry.

"Strangely enough, those same years were broadly known as the Golden Age of Aviation," he said. "Between 1929 and 1934, Grumman, Hughes Aircraft, Eastern Airlines, American Airlines and United were either founded or incorporated. The DC-3 made its first flight and in 1936 Boeing and Pan Am got together to begin work on the B-314 Clipper.

"It’s true that aviation ultimately became a full-scale commercial transportation industry but nobody would argue it was anything like that when the Depression began," Nield said.

And the same can be true of the industry today, he said.

Nield observed that "some good ideas go forward even during difficult times. I expect that to be the case with commercial human space flight as well as cargo-carrying space vehicles.

"Commercial space is going to have an increasing and emphatic impact on the economy and the future of the United States," he predicted.