Lockheed Martin Commercial Guaranteed Launch

[edkyle99]

Lockheed Martin Commercial Launch Services offers "Refund or Reflight".  Self insurance for commercial Atlas 5 and Athena launches.  It will be interesting to see how the other commercial launch companies respond. 
 
http://www.lockheedmartin.com/us/news/press-releases/2014/march/0311-ss-reflight.html

 - Ed Kyle

[clongton]

Now that sounds like a commercial company that wants to keep its customers happy.
Very few people will shop in a store that doesn’t offer some kind of guarantee for its product or service offering. Why shouldn’t commercial launch services do the same? Kudos to LM.
 
I agree that it will be very interesting to see how the other launch service providers respond; and it's for sure that they will have to.

[Jimmy_C]

What does that even mean? It just seems like meaningless marketing-speak. Will they refund the launch cost or the entire payload cost too? What about lost revenue or the additional cost to build a replacement? Are they just refunding the costs of launching the rocket? (I would think every provider would probably offer launch cost reimbursement at least. Maybe I'm wrong.)

[Jim]

What does that even mean? It just seems like meaningless marketing-speak. Will they refund the launch cost or the entire payload cost too? What about lost revenue or the additional cost to build a replacement? Are they just refunding the costs of launching the rocket? (I would think every provider would probably offer launch cost reimbursement at least. Maybe I'm wrong.)

Payloads buy insurance to cover launch cost, payload cost, lost revenue and the additional cost to build a replacement.

This means they don't have to buy the launch cost portion.

[bad_astra]

"LMCLS is the exclusive provider of all non-U.S. government Atlas launch services"

I am confused. I thought ULA also handled commercial Atlas. Gass certainly made it seem so.  Guess not.

[Jim]

"LMCLS is the exclusive provider of all non-U.S. government Atlas launch services"

I am confused. I thought ULA also handled commercial Atlas. Gass certainly made it seem so.  Guess not.

ULA builds and operates Atlas for LMCLS.  They also do the same on Delta for BLS.

The US Gov't contracts directly with ULA and Boeing and LM share the profit
Commercial customers contract with LMCLS or BLS and they don't share the profit with each other

[BrightLight]

"LMCLS is the exclusive provider of all non-U.S. government Atlas launch services"

I am confused. I thought ULA also handled commercial Atlas. Gass certainly made it seem so.  Guess not.

I am also confused, I was led to understand that Lockmart had nothing to do with the operations and sales of the Atlas V?
Ah - I see Jim's post above.

[brihath]

I wonder whether Lockheed Martin will hold their suppliers' feet to the fire financially if they are found to be at fault for causing a launch failure.  I suspect it will also drive a push for an improved capability to capture the fault tree with greater presicion and certainty.

[Jim]

I wonder whether Lockheed Martin will hold their suppliers' feet to the fire financially if they are found to be at fault for causing a launch failure.  I suspect it will also drive a push for an improved capability to capture the fault tree with greater presicion and certainty.

LM's only supplier is ULA. 

[arachnitect]

I wonder whether Lockheed Martin will hold their suppliers' feet to the fire financially if they are found to be at fault for causing a launch failure.  I suspect it will also drive a push for an improved capability to capture the fault tree with greater presicion and certainty.

LM's only supplier is ULA. 

What about for Athena?

[Lar]

I wonder whether Lockheed Martin will hold their suppliers' feet to the fire financially if they are found to be at fault for causing a launch failure.  I suspect it will also drive a push for an improved capability to capture the fault tree with greater presicion and certainty.

LM's only supplier is ULA.

I wonder whether Lockheed Martin will require that ULA hold their (ULA's) suppliers' feet to the fire financially if they are found to be at fault for causing a launch failure.  Is that contractually possible?

I too suspect it will also drive a push for an improved capability to capture the fault tree better. Which is good for everyone.

[RedLineTrain]

This is interesting.  Who, if any, of LM's competitors would have problems matching this?

[Jim]

I too suspect it will also drive a push for an improved capability to capture the fault tree better.

Not really.  It already exists because of DOD and NASA involvement in the Atlas program

[Proponent]

Sounds to me like Lock Mart is trying to emphasize the one clear advantage it has over SpaceX, namely proven reliability.  It's been harping on about this for a while (remember those ads a couple of years ago that implicitly attacked SpaceX by showing a picture of a congressional hearing room with a caption like "Our competitor's idea of making noise" side by side with a picture of a ULA launch captioned "Our idea of making noise").  Lock Mart is right to trumpet Atlas V's good track record.  But if that's all they've got, then they're doomed, because someday SpaceX will likely have a good track record too.  I hope that Lock Mart and Boeing will soon come up with more forward-looking ways of competing with SpaceX.

[clongton]

This is interesting.  Who, if any, of LM's competitors would have problems matching this?

None of LM's competitors would find this particularly hard to match.
It's not so much the cost of the guarentee, it's the mindset change required to make this SOP.

[clongton]

I hope that Lock Mart and Boeing will soon come up with more forward-looking ways of competing with SpaceX.

There really is only one way to compete with SpaceX - cost.
ULA launchers currently enjoy an impressive history of launch successes, but that is short-lived. As SpaceX builds its own history of successes, ULA's history will become proportionally less important as a sales tool. In the end, because SpaceX will eventually also have such a history, it will all come down to cost. The sooner ULA takes serious steps to confront this challenge head on the better it will be for them. The longer they delay facing this issue, the stronger SpaceX's launch history will become, eventually negating completely ULA's single current advantage. Once that point is reached, if ULA hasn't sharply reduced its prices, they will be in serious difficulty. Not yet - but it's coming.

[butters]

Isn't this similar to how SpaceX proposes to handle DoD payloads, raising their prices by 50% to cover the risk of carrying uninsured payloads?

[Prober]

This is interesting.  Who, if any, of LM's competitors would have problems matching this?

None of LM's competitors would find this particularly hard to match.
It's not so much the cost of the guarentee, it's the mindset change required to make this SOP.

It's a gutsy move     

Some risk involved, but Atlas does have an excellent record.
In History this was tried before and the company is no longer with us.

[Jim]

Isn't this similar to how SpaceX proposes to handle DoD payloads, raising their prices by 50% to cover the risk of carrying uninsured payloads?

No, that is just the cost of doing business with the DOD. 

[edkyle99]

I wonder if this guarantee is optional, as in is it an option that adds to the price?

 - Ed Kyle

[Zed_Noir]

Isn't the cost of two Falcon 9 launches about roughly equal to a single Atlas V launch?

[Robotbeat]

Isn't the cost of two Falcon 9 launches about roughly equal to a single Atlas V launch?

Actually, closer to 3 or 4 Falcon 9s per Atlas V (541). http://www.nasa.gov/home/hqnews/2012/apr/HQ_C12-016_GOES-R_GOES-S_Launch.html

[Zed_Noir]

Isn't the cost of two Falcon 9 launches about roughly equal to a single Atlas V launch?

Actually, closer to 3 or 4 Falcon 9s per Atlas V (541). http://www.nasa.gov/home/hqnews/2012/apr/HQ_C12-016_GOES-R_GOES-S_Launch.html

Was thinking of the 401 and 421 configurations of the Atlas V.

[deltaV]

In Feb 2011 SpaceX's Falcon 9 page said: http://web.archive.org/web/20110103233204/http://www.spacex.com/falcon9.php

Reflight insurance offered at 8.0% of Standard Launch Services Price.

That language disappeared from that webpage shortly thereafter. I bet they still offer reflight insurance to interested customers but for whatever reason removed the mention from their website.

It sounds like SpaceX's guarantee offers reflight only (no refunds), which is a bit worse for the customer than LM's promise of refund or reflight.

[baldusi]

From a customer's POV it is, at best, a 3%~5% (or so) price reduction. Nothing more than that. The whole point of the insurance industry is to let companies focus on core competencies, and let risk managmeent upto the insurance companies. The main reason is that insurance companies can show much better chance of paying up, since each insurance claim is usually a very little part of their portfolio. A launch, even for ULA, might well be 10% or so of their annual cashflow.

[Elmar Moelzer]

I am pretty sure that Lockheed just essentially is paying for their part of the launch insurance out of their own pocket. The rest is PR.

[Jim]

I am pretty sure that Lockheed just essentially is paying for their part of the launch insurance out of their own pocket.

Or they could be self insuring.

[dcporter]

I am pretty sure that Lockheed just essentially is paying for their part of the launch insurance out of their own pocket.

Or they could be self insuring.

Just to check – "self-insuring" means no insurance, and planning to pay full price for a negative consequence, right?

[baldusi]

I am pretty sure that Lockheed just essentially is paying for their part of the launch insurance out of their own pocket.

Or they could be self insuring.

Just to check – "self-insuring" means no insurance, and planning to pay full price for a negative consequence, right?

Exactly. It's financially not the best solution, since insurance companies make sure their contingency funds have little correlation. But LM's cashflow will depend on the Atlas V performance, since ULA's profit are an important part of the division's profits. So, if I was the CFO, I'd rather eat the insurance cost than self insure. But that's a very technical financial discussion.

[simonbp]

Given how desperately few commercial launches Atlas has had recently, IMHO a failure bad enough to trigger this insurance might very well make LM take Atlas V off of the commercial market altogether and concentrate all of ULA on US government launches (like Delta IV is now).

LMCLS simply cannot be making much, if any, profit at their current (commercial) launch rate.

[Robotbeat]

They can make profit on a single commercial launch as long as the infrastructure is already paid for by the government.

[Nomadd]

I am pretty sure that Lockheed just essentially is paying for their part of the launch insurance out of their own pocket.

Or they could be self insuring.

Just to check – "self-insuring" means no insurance, and planning to pay full price for a negative consequence, right?

It can get unbelievably complicated. Even though they're self insured, there are ways to spread the risk around. Self insured can mean anything from eating the entire cost of a payout yourself to pretty much being your own insurance broker and selling or trading some of the risk to financial concerns. A lot of it is simply confidence. I'm not sure about today, but 20 years ago Chevron was self insured while Exxon bought policies, mainly because Chevron was more confident in their ability to avoid disasters.

[Lar]

Self insurance works well when the risk pool is large and the loss payouts per incident are likely to be small. For example, IBM self insures use of rental cars (we consultants decline all coverage, and IBM pays any losses out of pocket) in many countries and in the US at least, self insures health for employess (it pays someone, in this case another insurance company or 3, to administer claims).  Given how many cars we rent and how many employees pay insurance premiums and then occasionally break arms (and the cost of a broken arm) this is a good bet.

Self insurance can be riskier when the risk pool is small (in this case, single digit launches per year *cough* for Atlas) and loss payouts are high (in this case many millions). BUT this is not a bad bet if you are a big corp that can absorb those many millions, as LockMart is... LockMart may be buying excess insurance from insurance companies to cover losses above a threshold. Berkshire Hathaway's General Re does just this sort of thing for many self insurers and also for insurance companies that want to lop the top off supercatastrophic payouts.

You'd have to know everything LockMart's CFO does to know if this is a good bet financially or not, but I expect they decided it at least wasn't so bad that the PR benefit wasn't offsetting enough.

[simonbp]

They can make profit on a single commercial launch as long as the infrastructure is already paid for by the government.

Not necessarily, no. They have to maintain the facilities to handle the commercial payload and be able to firewall them from national security payloads. There has to be a minimum level of commercial customers to make it worth it. There is a reason Boeing doesn't bother to market Delta IV commercially any more.

Commercial crew launch is the biggest potential market for Atlas V, but the requirements for that that are very different for Geo sats, and would leverage even less of the existing ULA infrastructure.

[Robotbeat]

Boeing doesn't market the Delta IV because it's operated by ULA, which Boeing co-owns. For commercial payloads, there's no reason for Boeing not to point customers to the cheaper and more provably-reliable Atlas V, which they also co-own through their stake in ULA.

Delta IV is no longer Boeing, it's ULA. Atlas V is now just as much Boeing as Delta IV is.


Also, there's not always a huge difference between military GSO birds and commercial GSO birds. Often they even use the same satellite bus. Processing could be quite similar.

[Lurker Steve]

Boeing doesn't market the Delta IV because it's operated by ULA, which Boeing co-owns. For commercial payloads, there's no reason for Boeing not to point customers to the cheaper and more provably-reliable Atlas V, which they also co-own through their stake in ULA.

Delta IV is no longer Boeing, it's ULA. Atlas V is now just as much Boeing as Delta IV is.


Also, there's not always a huge difference between military GSO birds and commercial GSO birds. Often they even use the same satellite bus. Processing could be quite similar.

Boeing doesn't market Delta IV because it was busy selling commercial launches thru ILS Sea Launch.

[newpylong]

I hope that Lock Mart and Boeing will soon come up with more forward-looking ways of competing with SpaceX.

There really is only one way to compete with SpaceX - cost.
ULA launchers currently enjoy an impressive history of launch successes, but that is short-lived. As SpaceX builds its own history of successes, ULA's history will become proportionally less important as a sales tool. In the end, because SpaceX will eventually also have such a history, it will all come down to cost. The sooner ULA takes serious steps to confront this challenge head on the better it will be for them. The longer they delay facing this issue, the stronger SpaceX's launch history will become, eventually negating completely ULA's single current advantage. Once that point is reached, if ULA hasn't sharply reduced its prices, they will be in serious difficulty. Not yet - but it's coming.

You're assuming SpaceX will not lose a vehicle or payload in the near future...

[Robotbeat]

I hope that Lock Mart and Boeing will soon come up with more forward-looking ways of competing with SpaceX.

There really is only one way to compete with SpaceX - cost.
ULA launchers currently enjoy an impressive history of launch successes, but that is short-lived. As SpaceX builds its own history of successes, ULA's history will become proportionally less important as a sales tool. In the end, because SpaceX will eventually also have such a history, it will all come down to cost. The sooner ULA takes serious steps to confront this challenge head on the better it will be for them. The longer they delay facing this issue, the stronger SpaceX's launch history will become, eventually negating completely ULA's single current advantage. Once that point is reached, if ULA hasn't sharply reduced its prices, they will be in serious difficulty. Not yet - but it's coming.

You're assuming SpaceX will not lose a vehicle or payload in the near future...

They probably won't, not in the near-future at least.

[newpylong]

Says who?

Edit: I hope they don't. But like we all know, space is not easy.

[Robotbeat]

Says who?

Says statistics. If the next 6 launches have a 90% chance of succeeding per launch, then they most likely will get through a year without a failure. I think 90% is pessimistic, probably more like 95% of succeeding after you get past the first 3 or so launches in a family for a modern launch vehicle and perhaps even better than that. And if it's 95%, then (excluding the Falcon Heavy test launches, which will have higher probability of failure) they would probably make it through this year AND next year without launch failure.

Unless you happen to think SpaceX is a bunch of amateurs which seems pretty unlikely at this point. Unless you're trollin'.

They got through the first few flights of Falcon 9 without a main mission launch failure. That's a pretty big accomplishment and shows they know what they're doing. The first launch of Ariane 5 was a failure, the next launch a partial failure, and the first Ariane 5 ECA was a failure, too, and no one would point to Ariane 5 and say it has even a 95% failure rate right now (discounting those early flights).

[newpylong]

Oh no, I am certainly not trolling. I agree, at this point the chance of failure will only decrease.

I am just making the point that you never know what can happen... failures certainly occur in the middle of a good string. Let's hope this is not the case.

[Robotbeat]

Oh no, I am certainly not trolling. I agree, at this point the chance of failure will only decrease.

I am just making the point that you never know what can happen... failures certainly occur in the middle of a good string. Let's hope this is not the case.

Indeed, I was merely making a probabilistic statement.

As I edited in my above post, even for a currently very reliable vehicle like Ariane 5, early failures do seem much, MUCH more common than later failures. I would say that the risk of a SpaceX failure in the next two years is probably greater than an Ariane 5 failure, especially if we include the Falcon Heavy test launch.


BTW, I think the reason SpaceX avoided early launch failures with Falcon 9 is their /extensive/ ground-testing program that they put in place after their 3 consecutive failures for Falcon 1. They test the /crap/ out of their rockets, now.

[edkyle99]

Boeing doesn't market the Delta IV because it's operated by ULA, which Boeing co-owns. For commercial payloads, there's no reason for Boeing not to point customers to the cheaper and more provably-reliable Atlas V, which they also co-own through their stake in ULA.

Delta IV is no longer Boeing, it's ULA. Atlas V is now just as much Boeing as Delta IV is.

Boeing Launch Services markets Delta 2 and Delta 4 for commercial launches.  At least it says it does.
http://www.boeing.com/boeing/defense-space/space/bls/

BLS would not sell rides on Atlas 5.  Only Lockheed Martin's commercial launch service entity does that.

ULA builds and launches the rockets.  Boeing and Lockheed co-own ULA, and share the costs/expenses of the company for government contracts, but do not share earnings on commercial launches when and if they occur.  There has to be some kind of cost sharing arrangement via. ULA for this to happen.

 - Ed Kyle

[edkyle99]

Boeing doesn't market Delta IV because it was busy selling commercial launches thru ILS Sea Launch.

That (the Sea Launch part - there is no "ILS Sea Launch") might have been true a few years ago, but no longer.  Boeing lost its shirt when Sea Launch declared bankruptcy.  Boeing is suing its former Sea Launch partners for hundreds of millions of dollars.  Notice that there are no Boeing built satellites on the Sea Launch manifest?  The next Sea Launch mission could be its last, at least out of Long Beach.

"ILS" was International Launch Services which used to be partly owned by Lockheed Martin.  Lockheed Martin sold its share several years back.  ILS is now entirely Russian-owned.

 - Ed Kyle

[MP99]

If LM needs to re-fly a payload, ISTM some costs don't repeat. And, of course, LM only loses cost, not retail price.

I'm guessing payload integration will be much reduced, with perhaps a clause that re-flight is for the same payload.

And, if paying flights are already covering overheads for the year of the re-flight I'm not sure if they would need to account for them as part of costs for this flight?

But, ISTM this is largely a marketing exercise. Aren't Atlas capturing part of the commercial market because they're seen as a safe pair of hands after some launch failures recently? This is highlighting their confidence in their product.

Cheers, Martin

[beancounter]

When do you reckon SpaceX will match ULA?