SpaceX charges less than United Launch Alliance for rocket launches -- but United Launch Alliance launches have been more reliable.
For the longest time -- at least as time is measured among newfangled space stocks -- this has been a truism in the space industry. It's the reason SpaceX is believed to be, at best, inconsistently profitable, whereas Boeing (BA 0.73%) and Lockheed Martin (LMT 3.15%), the two companies that form the United Launch Alliance (ULA) joint venture, pull down profit margins of anywhere from 6% to 9% in their space divisions, according to data from S&P Global Market Intelligence.
But the times, they are a-changing.
Image source: Getty Images.
SpaceX rockets past ULA
In fact, times just changed -- and it happened last night, when SpaceX launched its most recent successful "Starlink" mission to put internet satellites in orbit. Here's how that works:
Every time ULA launches a rocket, it adds another point to the board and publishes a press release boasting of how many times in a row it has launched a rocket with "100 percent mission success." As of Aug. 4, 2022, ULA's tally stands at 152 straight successes.
SpaceX, in contrast, does not keep track of its winning streak (or at least doesn't publish such a tally). But for the past several months, I have been keeping tabs as SpaceX inched closer and closer to overtaking its biggest rival in space launches. Here's how the math works:
Since beginning rocket launches (with a fireball) in March 2006, SpaceX had successfully launched rockets into orbit 179 times through last weekend. It hadn't successfully launched 179 times in a row, however, because one of its rockets blew up two and a half minutes into flight in 2015, and a second rocket blew up during fueling on its launchpad in September 2016. But ever since then, it's been nothing but success for SpaceX and its fleet of Falcon 9 and Falcon Heavy rockets.
On Sunday night, SpaceX booked its 180th successful launch -- and its 153rd successful launch in a row. In so doing, SpaceX eclipsed ULA's winning streak by precisely one launch.
Now, ULA may have a chance to tie SpaceX when it launches its NROL-91 mission next week (scheduled for Sept. 24) -- or it may not, because at the rate SpaceX is launching rockets, it could be even further ahead by then. It's also a definite possibility that at some point in the future, SpaceX (or ULA, for that matter) will suffer an "anomaly" and upset its winning record.
But as of today, SpaceX has the winning-est record in spaceflight.
What this means for SpaceX...and for Boeing and Lockheed Martin
But isn't all of this an academic discussion, you ask? Is there anything more to this than just watching the "horse race," and cheering on the winner? Actually yes, there very well may be.
NYSE: LMT
Key Data Points
Consider: ULA's own CEO, Tory Bruno, has argued in the past that his company's services deserve a "premium" price for their "reliability and schedule certainty." Teal Group analyst Marco Caceres agrees that "the service and the reliability that you get" with a ULA launch "justifies the price" being higher than what SpaceX charges.
Assume that's true, but now reverse it. In the past, ULA was able to charge premium prices -- and enjoy premium profit margins -- because it boasted better reliability and a better launch schedule than SpaceX. But now ULA's record looks relatively worse than SpaceX's -- and SpaceX is launching rockets as frequently as twice a week, while ULA often goes months at a stretch without launching a single rocket. Might that not have an impact on the prices the U.S. government will be willing to pay ULA, and the profit margins that Boeing and Lockheed Martin can expect to earn?
NYSE: BA
Key Data Points
I think it might. And while "space" isn't the biggest business at either of these companies (the division accounted for only about 18% of Lockheed Martin's revenues last year, and probably made up a similar proportion of Boeing's sales), even 18% of a $60-plus-billion-a-year business is a lot of revenue to be losing profit margin on.
Going forward, investors have to expect that SpaceX's eclipsing ULA's "100 percent mission success" record will have a noticeable effect on the bottom lines at both Boeing and Lockheed Martin.
