Will SpaceX put ULA out of business?

SpaceX’s Falcon 9 and Falcon Heavy rockets cost $62 million and $90 million, respectively, and both rocket’s first stage is reusable. They are also developing a fully reusable Mars transportation rocket, Starship. 

Since 2006, ULA has had a monopoly over the US government’s launch contract. However, this monopoly changed in 2014, when the US Air Force certified Falcon 9 to bid on high profile launch contracts. 

So the question is, will SpaceX put ULA out of business?

In the short term, No. However, in the next 5 to 10 years, SpaceX and Blue origin will put ULA out of business. 

Let’s explain. 

United Launch Alliance (ULA) is the joint venture of Boeing and Lockheed Martin. Before 2006, these two companies were rivals, and we’re locked in bitter court fights.[1]

In 2006, they decided to end the court fight and form a 50-50 partnership company. So, they formed the ULA. 

At the time, SpaceX protested this partnership to FTC, arguing that this partnership violates antitrust laws, it would create a monopoly, stifle innovation, and increase the government’s satellite launch cost.[2] 

At the time, no one knew about Elon Musk and SpaceX. Furthermore, SpaceX did not even reach orbit. So, no one took the protest seriously. 

Boeing and Lockheed argued that a joint partnership between them would enable more significant innovation and bring both company’s expertise and experience into one company. 

Thus, ULA was formed. 

On various occasions, ULA CEO said that he is not worried about SpaceX. He does not believe reusable rockets are the future.[3] 

In every sector, we have seen disruption where a new and innovative company puts an industry incumbent out of business. 

No one took Google seriously, including Yahoo, the search engine giant at that time. Google’s founder even tried to sell it to Yahoo, but Yahoo refused to buy it.

Before Netflix, we had Blockbuster. In an internet-connected world, they did not see the potential of streaming services. Executives at Blockbuster thought their business would continue forever. 

When Steve Jobs announced the iPhone, many industry veterans, including Microsoft CEO Steve Ballmer, laughed at Apple. Blackberry criticized the iPhone by saying that it does not have a keyboard. Thus, it’s not a good email machine. 

Nokia failed to adapt to a changing smartphone market and lost total market share to Apple and Samsung. 

Kodak was very successful in selling celluloid films and celluloid cameras. However, digital cameras put them out of business. 

We have given all these examples to show that a company will go out of business if it does not innovate and change. 

Engine Development:

SpaceX designs and develops its rocket engine. 

For the Falcon family rockets, SpaceX developed the Merlin engine, which uses rocket grade kerosene (RP-1) and liquid oxygen (LOX) as fuel. During the Falcon first stage reuse, they realized that RP-1 is not the best fuel for reusable rockets. 

Therefore, they started to develop the Raptor engine in 2011, which uses Methane (CH4) and LOX. Now, SpaceX is using this engine in their Super Heavy and Starships.[4] 

On the contrary, ULA never designed any rocket engines in their entire existence. 

The Atlas V uses the Russian-built RD-180 engine; Delta IV heavy uses Aerojet Rocketdyne built RS-68A, RL-10 engine, and the next-generation rocket Vulcan uses Blue Origin’s BE-4 engine.[5][6]

From a rocket engine development perspective, ULA doesn’t have any competitive edge over SpaceX. 

Engines are the most expensive part of a Rocket. How can ULA compete with SpaceX’s in-house Raptor and Merlin engine?

Since 2006, ULA has never attempted to develop a rocket engine. And now it’s too late.

SpaceX vs. ULA rockets:

Currently, SpaceX has two operational rockets, Falcon 9 and Falcon Heavy. 

Falcon 9 can launch 22,800 kg / 50,265 lb to Low Earth Orbit (LEO), and 8,300 kg / 18,300 lb to Geo Transfer Orbit (GTO), and costs only $60 million per launch.[7]

The Falcon Heavy can launch 63,800 kg / 140,660 lb to LEO and 26,700 kg / 58,860 lb to GTO and costs only $90 million.

ULA also has two operational rockets. Delta IV Heavy, and Atlas 5 (also written as Atlas V).

The Atlas 5 can launch 20,520 kg / 45,240 lb to LEO, and 8,900 kg / 19,620 lb to GEO and costs $110 million.[8]

The Delta IV Heavy can launch 28,790 kg / 63,470 lb to LEO and 14,220 kg / 31,350 lb to GTO and costs on average $400 million.[9]

Here is the summary comparison between Falcon 9, Falcon Heavy, Atlas 5, Delta IV with launch price.

Launch VehicleLEO PayloadGTO PayloadPrice
Falcon 922,800 kg / 50,265 lb8,300 kg / 18,300 lb$60 million
Atlas 520,520 kg / 45,240 lb8,900 kg / 19,620 lb$110 million
Falcon Heavy63,800 kg / 140,660 lb26,700 kg / 58,860 lb$90 million
Delta IV Heavy28,790 kg / 63,470 lb14,220 kg / 31,350 lb$400 million

From the above table, it’s clear that SpaceX wins on every aspect of ULA’s launch vehicle. 

Moreover, SpaceX is now building and testing the Starship. Which can launch 100,000 kg /220,000 lb to LEO, and the aspirational launch cost is $2 million.

It’s clear that ULA’s rocket can’t even compete with SpaceX’s current rocket; it will fall far behind when Starship comes online.

Reusable rockets:

From the start, SpaceX is focused on reusable rockets. They made the Falcon 9 and Falcon Heavy in such a way that they can be reused up to 10 times with minimal refurbishment. 

SpaceX is now developing the Starship. Both the first stage and the upper stage of this rocket are reusable. It’s a big deal because, in the Falcon family, only the first stage is reusable. 

On the contrary, ULA does not have reusable rockets. Though both companies started their journey around the same time, ULA never had a plan to build reusable rockets. 

In 2016, even when SpaceX proved that orbital class rocket landing and reusability is possible, ULA had no plan for reusable rockets. Only in 2018, they finalized their partial reusable rockets plan. However, that rocket would not fly until 2024. 

The rate of innovation at ULA is disappointing. By the time ULA comes out with their Vulcan rocket, SpaceX would launch a fully reusable cargo Starship for Mars. 

Moreover, Blue Origin is also developing its reusable rocket, New Glenn. 

Therefore, ULA will lose to both SpaceX and Blue Origin in the reusable rocket race. 

Culture:

ULA, and its parent companies, Boeing and Lockheed Martin, spend tens of millions of dollars lobbying the US government each year. 

These 3 companies employ more than 100,000 employees in numerous states; thus, many senators favor ULA. Moreover, top military officials often become ULA, Boeing, and Lockheed Martin employees after retirement. So, during the procurement process, they favor ULA. 

In 2014, ULA and the US Air Force tried to enter into a long term procurement contract. In the process, the US Air Force refused to certify Falcon 9 rockets to bid on military launch contracts. 

SpaceX sued the US government for this unethical practice. Later, the US Air force settled with SpaceX outside court.[10]

After the settlement, USAF awarded 60% of the contract to ULA and 40% to SpaceX. However, when we compare the launch cost, we see that USAF pays 50% more money to ULA than SpaceX for the same type of missions.[11] 

USAF faced criticism for this. However, they defended by saying that nurturing the culture of at least two launch providers is essential for mission assurance. The funny thing is they didn’t think about 2 launch providers when they wanted to enter into a long term agreement with ULA in 2014. 

Top executives at Boeing, Lockheed, and ULA were angry because they lost launch contracts and money due to SpaceX. But instead of innovation and developing next-generation rockets, they started lobbying effort and opinion articles to sway public sentiment against SpaceX.[12] 

During the NASA commercial crew program, Boeing lobbied that SpaceX is a new and inexperienced rocket company. Therefore, Nasa should not award SpaceX any money for the crew program. Instead, Boeing should get all the commercial crew contracts. They reasoned that they have more experience since they have been in the space industry since the 1960s. However, NASA disagreed and hired both SpaceX and Boeing.[13][14] 

Later, an investigation found that Boeing charges NASA $90 million per astronaut, whereas SpaceX charges $55 million. In a tweet, Elon Musk showed disappointment at this price disparity.[15] 

SpaceX won the race and sent astronauts to the international space station first, beating Boeing. 

Furthermore, Boeing failed to demonstrate its crew capsules capability successfully. After an accident during their demo, NASA started an investigation. NASA found more than 80 problems with Boeing crew capsules Starliner.[16] 

Because of cozy relationships, NASA let their guard down, and Boeing cut corners to save money. The same thing happened with the Boeing 737 Max airlines, where Boeing cut corners, and the FAA let their guard down. 

ULA is 50% Boeing. Therefore, it’s culture runs through ULA. 

Therefore, instead of innovation, ULA lobbied the US government to keep them afloat and get military launch contracts. This stagnation of innovation will lead to ULA’s bankruptcy.

Revenue sources:

SpaceX has three revenue sources. Rocket launch, satellite design for the US military, and satellite internet, also known as Starlink. 

For the LEO broadband internet, SpaceX designs, develops and launches satellites. Users have experienced that Starlink provides faster internet than traditional satellite internet, for example, HughesNet. SpaceX is rapidly expanding its satellite constellation for worldwide internet coverage. There’s no doubt that soon, SpaceX would emerge as a dominant ISP in North America. 

Until a few years ago, the Russian space agency Roscosmos was dominating the private space launch market. They had more than 60% market share. In the US, ULA used to get all government launch contracts. 

However, Now SpaceX has more than 60% market share worldwide, and Roscosmos has almost zero.

ULA’s revenue also shrunk significantly over the years. It’s because of the launch competition with SpaceX.

Unlike SpaceX, ULA doesn’t have any revenue source except rocket launch. 

While SpaceX has diversified its revenue, ULA did nothing. Even Blue Origin started to sell their rocket engines for profit. Unfortunately, ULA doesn’t even make engines that they could sell for profit. 

Development approach:

SpaceX makes all of its rocket parts in-house. They are more vertically integrated than ULA. SpaceX follows silicon valley culture; build fast, fail, and iterate. 

This fast and iterative approach allowed SpaceX to test more different technologies to see what works and what doesn’t. 

On the other hand, though ULA has a lean manufacturing process, they are not as vertically integrated as SpaceX. 

ULA is an aggregator. They work with more than 4000 contractors for parts supply. ULA designs their rocket and builds it using those 3rd party parts. As a result, ULA rockets cost more. 

Bottom Line:

In short, because of ULA, Boeing, and Lockheed Martin’s enormous lobbying power, ULA will continue to survive. However, once Blue Origin’s reusable rocket New Glenn and SpaceX’s Starship come online, ULA would face a tremendous challenge. Due to competitive disadvantage, ULA would go out of business between 2025 to 2030. 


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