Washington Watch

Dec. 1, 2006

Now, a Space Monopoly

The federal government’s two main suppliers of satellites and medium and heavy rockets, Boeing and Lockheed Martin, have been cleared to merge their businesses into a space monopoly—the United Launch Alliance.

The Federal Trade Commission, which announced the decision in October, said it recognized that the move will hurt competition and boost costs, but believed it was necessary to maintain assured access to space. The two firms supply not only the Defense Department but also NASA and other agencies.

Boeing and Lockheed officials unveiled the ULA plan in mid-2005 and had been awaiting FTC clearance ever since. (See “Aerospace World: Competition in Space Launches,” March, p. 20.) The two companies, which have been competing against each other in the Evolved Expendable Launch Vehicle program, have been losing money on their launch and satellite operations because there hasn’t been enough business to justify their investment. They are now free to consolidate staffs and facilities.

The EELV program began in the early 1990s, when a forecasted boom in the satellite and launch business led the Air Force to structure its rocket competitions such that it would only pay for services, leaving development and infrastructure costs to be borne by the suppliers. It was expected that USAF would get a good deal on space services if it procured them from a humming assembly line of commercial sales.

However, the boom in the commercial space market never appeared and costs climbed rapidly on Boeing’s Delta II and Delta IV and Lockheed Martin’s Atlas V programs.

The new joint venture will be led by officers from both companies and will slim down to about 3,800 employees spread across Alabama, California, Colorado, Florida, and Texas. Launch facilities will be maintained both at Cape Canaveral AFS, Fla., and at Vandenberg AFB, Calif.

“The consolidation of the nation’s only two suppliers of government MTH [medium-to-heavy] launch services is likely to cause significant anti-competitive harm,” said the FTC. However, it noted that the Defense Department informed the FTC “that the creation of ULA will advance national security by improving the United States’ ability to access space reliably.”

The FTC said this will happen because “a single workforce … will benefit from an increased launch tempo and because ULA will integrate Boeing’s and Lockheed Martin’s complementary technologies.”

The Pentagon, the FTC said, had concluded that “the national security benefits of ULA would exceed the anti-competitive harm.”

The FTC’s permission came with some strings. The joint venture can’t favor its parent companies in future space vehicle contracts and must give other competitors “equal consideration and support” in launch services contracts. In other words, it can’t block other companies from using ULA space launch facilities.

Also, ULA must “safeguard competitively sensitive information obtained from other space vehicle and launch services providers.” That means it can’t take what it learns in confidence about other companies’ spacecraft and use it to improve ULA’s parent company products. The conditions specify that ULA can’t design its launch vehicles such that only Boeing or Lockheed Martin spacecraft can be mated to them.

The conditions were partly a response to a lawsuit from Northrop Grumman, the third-largest supplier of space systems to the Defense Department, which charged that the monopoly would shut them out of future competitions. Northrop Grumman became a major player in the military satellite market when it acquired TRW in 2002.

Kenneth J. Krieg, the undersecretary of defense for acquisition, technology, and logistics, said in a February budget briefing that the Pentagon believes in competition, but in the case of medium-to-heavy launch services, “it’s got to be competition for which there is real competition.”

In support documents supplied to the FTC by the Pentagon, Krieg’s office acknowledged that the merger will likely lead to higher launch costs in the long term and dampen innovation on the part of the rocket makers. However, the fact that ULA will maintain two different families of launch vehicles—the Delta and Atlas—eliminates the chances of a single-point failure in space access and was therefore a good trade to make.

Gen. Kevin P. Chilton, head of Air Force Space Command, said in September that the ULA arrangement is logical.

At AFA’s Air & Space Conference in Washington, D.C., Chilton said, “It makes sense to increase assured access to space and to focus teams working the same issues with regard to final assembly and how we produce those two vehicles.”

The costs of the merger will be better known when the government makes its next big block purchase of launch services, called Buy III. In this buy, the government will start picking up more of ULA’s launch infrastructure costs, which had been borne by the contractors. Consolidation of efficiencies and the reduced costs should permit the rocket launch business to become profitable again, which in itself helps preserve access to space, Pentagon officials have said, because it dissuades contractors from leaving the business altogether.

Beefing Up PACAF

The Air Force is building up its assets in the Pacific Theater, adding both greater numbers of systems and more capable equipment, while expanding its relationships with regional air services, reports the commander of Pacific Air Forces.

“We have modest growth” in numbers of systems, said Gen. Paul V. Hester, “but we have, I think, exceptional capability growth with the new platforms.” Hester spoke about changes and initiatives across his command in a September interview with Air Force Magazine coinciding with AFA’s Air & Space Conference.

PACAF has already traded some of its C-130s for eight new C-17s, as Hickam AFB, Hawaii, is the first beddown base for the large airlifter outside the continental US, Hester said. Alaska will be getting eight C-17s as well and preparations are being made to base 36 F-22s at Elmendorf AFB, Alaska, within the next two years, he reported. Hickam will also trade in its older F-15s for F-22s. In addition, the Air Force will permanently station three Global Hawks at Guam starting next year, building up to seven by 2009.

Moreover, “we’re into our third year of continuous bomber rotations” at Guam for several months at a time. Every type of US heavy bomber—B-1s, B-2s, and B-52s—has cycled through Andersen AFB, Guam, he noted.

“We have an appropriate number of six to eight KC-135s to support those bombers, and then twice a year we have rotations in there of fighters,” he continued, noting that F-15Es deployed to Guam last year and more are coming soon. Also, “we see a much more frequent presence of Navy fighters that drop in to the Andersen ramp and do business out there and do exercises out there as well.”

The number of personnel deployed to PACAF bases will not increase much, though, Hester said. The new systems require less of a personnel “footprint.”

Hester said he has been frustrated in his efforts to engage with China in military-to-military relations.

“We have hosted multiple Chinese delegations of various sizes and numbers of flag officers in Hawaii,” Hester reported, adding that he has then permitted those delegations to tour range and base facilities in Alaska. Chinese observers have also been permitted to watch exercises in Guam.

“We are all waiting for an opportunity to visit [China] and have more substantive discussions about how to start building our relationship,” Hester said. He said he might have the chance to go “in early spring” of 2007.

Asked if he is particularly concerned about China’s rapid modernization of its air forces, Hester said, “Every nation has the inherent right of self-defense” and said he’s less concerned about the lack of visibility into China’s defense budget and plans than the “building of a new generation of fighters.”

The US, he said, is “interested in learning from them what is their vision of the future and why they are building particular kinds of capabilities across all of their services.”

Japan remains the “key alliance” for the US in the Western Pacific, Hester said.

The US has not sent its bombers to Japan, Hester noted, because while there is no restriction on such aircraft in mutual defense agreements, “there just has been no need for us to go to Japan with our bombers, and … because they don’t have large bombers in their inventory, we’re sensitive not to take those bombers there.”

Bombers likewise haven’t been landing in South Korea—again, not because of any restriction, but because it hasn’t been necessary. The big bombers do exercise in the air above South Korea, training along with tactical air control parties on the ground to coordinate air strikes, but they usually make a pass, drop or simulate the release of ordnance, and fly back to Guam, Alaska, or wherever they staged.

Hester said that, to his knowledge, there are no plans to change the scheme of control of air forces in Korea. Discussions about handing control of joint forces in Korea over to the South Korean government, he said, “would be for the ground maneuvering units … [and] would exclude air forces.” However, he said, discussions about command and control of forces on the peninsula are ongoing.

“If in fact the airpower remains under our control, I would keep it under 7th Air Force,” Hester said.

Exercises on the Rim

Alaska has become the main exercise destination for Pacific-based forces, in a recurring exercise once called Cope Thunder and now known as Red Flag-Alaska. It is a complement to the Red Flag-Nellis air wargames that have been held in Nevada for three decades.

“We have a very close relationship, now, with Red Flag-Nellis, and we will then be broadening the opportunities for international cooperation at either Alaska or Nellis,” Hester explained.

A number of Pacific Rim nations have sent aircraft to participate in the exercises, and Hester said he is hoping to expand the number of guests. He would like to have India as a guest at Red Flag-Alaska, possibly in 2007.

“We’ve been to India twice, now, in the last three years, with F-15s from Alaska [and] F-16s from Misawa [AB, Japan] this last trip. That’s an opportunity to start a growing and significant relationship with our Indian counterparts, and we expect that will continue on an every-two-year basis,” Hester said. The US fighters have been allowed to exercise at two different ranges in India.

While PACAF units have had some chances to fly with Australia’s Air Force over that country, such opportunities are “few and far between,” Hester noted. “The greater exercise opportunity is with Singapore,” he said.

Such exercises are all over water, owing to Singapore’s small land area, Hester said, “so there’s no bomb-dropping. It’s strictly air-to-air.” The US has no permanent base in Singapore, but both USAF and Navy aircraft are frequent guests there.

“They are gracious to let us be there to exercise with them up to four times a year, in what we affectionately call ‘Singapore Slings,'” Hester said. Recently, he sent a unit usually based in South Korea to the tiny country at the tip of the Malay peninsula. Thailand has hosted two exercises with PACAF in recent years—Cobra Gold and Cope Tiger.

Cobra Gold, once a combat exercise, became a humanitarian and disaster relief exercise following the 2004 Indian Ocean tsunami disaster. Cope Tiger, once an air-to-air wargame, added an air-to-ground element last year and featured the first ever deployment of A-10s to Thailand, Hester said. In late September, he did not know if the new Thai government, following the recent coup, would continue the exercises, but had received no messages saying the new government would discontinue them, either.

The US has not deployed any fighters to the Crow Valley flying range in the Philippines since the eruption of Mt. Pinatubo caused the Air Force to vacate Clark Air Base in 1991. (See “Clark Digs Out of the Ashes,” March 2000, p. 40.) PACAF has been using the Alaskan range complex ever since.

Hester said that Guam is also being used as a flying range and offers opportunities for joint exercises with the Navy and other countries. Japan, he said, is excited at the prospect of doing flying exercises at Guam.

“The weather’s good, the flying’s good, there’s also a bombing range there, [and an] unrestricted opportunity to fly supersonic there.”

Hester noted that the Japanese have sent their F-4Js to Guam two summers in a row, and they have dropped live weapons on both occasions.

The exercises with Japan are not necessarily nation vs. nation, Hester said. The two air forces “blend our airplanes for the specific [missions] we have. … They can take their F-4s, we can escort them with F-16s, and we can oppose them with F-16s.” The exercise “allows us to work side by side, increase interoperability, learn from each other,” and develop common techniques and procedures. He expects that Japan will in the future deploy its own aerial tankers and AWACS aircraft for the exercises. The additional assets will allow a “larger, more complex scenario.”

Given that Guam is becoming such a strategic hub for USAF and Navy operations in the Pacific, has anything been done to give it greater protection

Hester said that Guam benefits from “the tyranny of distance, the vastness of the ocean. The distance … from other land masses [such as] Japan, the mainland of China, or the Philippines, gives it its own level of protection, just because it’s ‘out there.'”

Still, if tensions rose with China over Taiwan, for example, “clearly, we could deploy Patriot [air defense missile batteries] there,” Hester said. Also, “we do have an air defense capability with airplanes that we can deploy into Guam to sit air defense alert, not unlike how we sit air defense alert in Hawaii.”

F-22 Multiyear Approved; Countdown Begins

Congress in October approved the Air Force’s bid to buy the F-22 Raptor under a multiyear procurement contract, guaranteeing the production of the last 60 airplanes now on order but also starting the countdown to the closure of the F-22 production line.

The approval for the MYP came when President Bush signed the 2007 defense authorization bill and gave the go-ahead for Lockheed Martin to produce 20 F-22s per year in 2007, 2008, and 2009. That buy will bring the F-22 buy up to 183 aircraft—the most allowed under last year’s Quadrennial Defense Review findings. (See “Washington Watch: Accommodating the QDR,” February, p. 14.)

The Air Force, however, has never fully accepted the 183 number, consistently disagreeing politely with Pentagon leadership that the service needs 381 Raptors to meet all its obligations. In the QDR, compromise language gave the Air Force permission to keep buying F-22s if there are delays or setbacks in production of the F-35. The Air Force insisted that it have a warm stealth fighter production line—what it calls a “fifth generation” manufacturing capability.

Assuming that the F-35 remains on track, though, the last F-22s, in Lot 9, will be delivered in December 2011. The long-lead parts suppliers for the aircraft, however, will start “turning off” in 2007 or 2008, according to Larry Lawson, Lockheed Martin’s executive vice president and general manager of the F-22 program.

Lawson, in a September interview with Air Force Magazine, said the most problematic manufacturing item for the F-22 is titanium, which has been in artificially short supply recently as Russia has reduced its output. He believes the market will correct by adding production capacity, “but you really have a ‘hard stop’ right after that, … and I really have to go turn off the supply base” in about 2007-08, he said.

The situation could prompt a revisit of the horse trading seen this September, when Congress, in the 11th hour, voted to add 10 C-17s to the Air Force’s budget request, extending the production line nearly a year, until 2009. The extension was seen, among other things, as a way to give Boeing time to line up additional international customers for the airlifter.

However, the F-22 will not, apparently, get a lifeline in the form of export orders. Under the Obey Amendment, the F-22 may not be marketed overseas. Rep. David R. Obey (D-Wis.), author of the language, said it makes little sense to sell the Air Force’s top technology to foreign countries if there is a chance the US could someday come up against it in battle.

Obey stands to become the chairman of the powerful House Appropriations Committee, which oversees defense funding, as the Democrats won the House in the November elections.

In its language approving the F-22 multiyear deal, the House-Senate authorization conference encouraged the Air Force to “continue to seek improved efficiencies in this program.”

The Air Force had testified that the MYP, by giving contractors assurances of the number to be built, could save up to $500 million on the F-22 program. However, Lockheed Martin’s Marietta, Ga., facility has been cranking out two per month, and a reduction of four airplanes a year will not lower overhead costs. The F-22 factory was designed to accommodate as many as 36 Raptors a year. The original, “most efficient” rate of production was 48 per year, before both senior Pentagon leaders and Congress reduced the program.

“Going from building 24 a year to 20 … will be tough, but we’ll make that adjustment,” Lawson said. “Obviously, there isn’t a capacity issue.”

In exercises in Alaska this summer, a squadron of F-22s racked up an air-to-air combat record of 241-to-two against F-15s, F-16s, and F/A-18E/F Super Hornets. Other Raptors demonstrated bull’s-eye hits on some 20 targets at Hill AFB, Utah, dropping satellite guided Joint Direct Attack Munition bombs from 50,000 feet and at speeds in excess of Mach 1.5.

Lawson said, “I don’t get a lot of questions anymore about how effective the [F-22] is. … The demonstrated effectiveness in multiple deployments gives you a strong feeling that this airplane can go to war.”