Lockheed Martin Corp.‘s plan to unload its controlling share of the International Launch Services (ILS) joint venture has raised questions about the future of ILS and whether the Atlas 5 rocket will be a player in the commercial launch market.

Lockheed Martin will sell its share of ILS to Space Transport Inc., which is being set up by Mario Lemme, an advisor to Lockheed Martin on ILS and member of ILS’s board for more than three years. Following the sale, ILS will continue to market the Russian Proton and Angara launch vehicles to commercial clients, while Lockheed Martin will assume full control of its Atlas 5 launch vehicle.

"I believe it’s a financial decision," an industry source said. Lockheed Martin had "been in it for 10 years and enjoyed the cash flow but not the margins."

The Atlas 5 has not had much of a commercial impact under ILS, which has performed 37 commercial Protons missions and has a backlog for 11 additional launches. ILS has performed only seven commercial Atlas 5 launches since 2002. Lockheed Martin Commercial Space Systems will market the Atlas 5 to commercial customers, but Marco Caceres, a launch industry analyst with the Teal Group, does not have high hopes for the rocket commercially.

"I think any company has to have its core market, and certainly in the last year it’s become obvious that commercial is not where Lockheed’s going to get rich," Caceres said. "Satellites are bigger and more powerful, so while there’s need for more capacity and power, it’s relatively limited for the actual number of launches. You’re not going to get any more than, say, 10 contracts per year at the most. Knowing that they have to split profits with their Russian partners in the ILS, it’s probably not worth it if you don’t see a boom market on the horizon."

The future for the Atlas 5 most likely lies in serving the U.S. government market under the United Launch Alliamce (ULA) joint venture it is setting up with Boeing Co. The companies are waiting for the U.S. government to approve the joint venture that will combine their respective government launch efforts.

"They have the captive market for government contracts," Caceres said. "There’s more predictability in those markets. Now Lockheed (because of Boeing’s recent legal problems) has a bigger share, and there’s no need for marketing or competing for the government contracts."

The commercial market will remain crowded, with the Proton, Sea Launch and France’s Ariane rocket holding the majority of the market and Japan, China and India also trying to grab a share of the commercial market with government-owned rockets. 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.

"I’m not sure there’s any immediate impact on usk," Clay Mowry, president of Arianespace Inc., the U.S.-based marketing arm of Arianespace, said. " From our position, we see ourselves as the stable, well-established player with 26 years’ experience. We’ll continue to sell on those points. People know that we’re the ones who basically invented the commercial launch market. We think we can compete well on that basis."

ILS plans to remain competitive in the commercial market with just its Russian offerings. Mario Lemme "has been a party to this business for about 12 years," the source said. "He’s very familiar with the cash-flow potential. It’s a quality system that is well-used. How he will be able to continue to service the launch vehicle is the key. With the launch vehicles, the price range is in the $50 million to $70 million these days, so you’re talking pretty good money if you sell five to seven of these a year. Certainly as a entrepreneurial move it’s worthwhile. That’s big money."

The loss of the Atlas 5 and the backup service it provided may have a minimal impact on the company, Caceres said. "Certainly Proton has launched most of the commercial payloads [for ILS], and now they don’t have to split profits with their U.S. partner," he said. "… I think the [fall-off] will be very minimal. The potential downside will be the service to the customers. Will ILS keep its office in Washington and its U.S. staff? What will the face of it be, a Russian company or an international company? You can have a great vehicle, but if your customer service is not good, people will opt out as in any business, even to purchase a more expensive product.

–Jason Bates and J.J. McCoy