Exclusive: Antitrust probe of Lockheed-Boeing rocket venture

[Buster's Uncle]

Exclusive: Antitrust probe of Lockheed-Boeing rocket venture
By Andrea Shalal-Esa | Reuters – Wed, Jun 12, 2013...

The Orbital Sciences Corporation Antares rocket is seen as it launches from Pad-0A of the Mid-Atlantic Regional Spaceport (MARS) at the NASA Wallops Flight Facility in Virginia, April 21, 2013. REUTERS/Bill Ingalls/NASA/Handout

WASHINGTON (Reuters) - U.S. regulators have opened a probe into whether a Lockheed-Boeing joint venture that launches U.S. government satellites into space has flouted antitrust laws.

The Federal Trade Commission (FTC) is investigating whether United Launch Alliance (ULA), a joint venture of Lockheed Martin Corp and Boeing Co, violated federal antitrust laws by "monopolizing" or restraining competition through an exclusivity agreement with the maker of the engines used in its rockets, according to a FTC document obtained by Reuters on Wednesday.

RD Amross, a joint venture of Russia's NPO Energomash and Pratt & Whitney Rocketdyne, a unit of United Technologies Corp, provides RD-180 engines for ULA rockets.

Industry sources say ULA is preventing RD Amross from selling the engines to other rocket makers, including Orbital Sciences Corp, which is trying to break into the lucrative market for government rocket launches.

Jessica Rye, spokeswoman for ULA, confirmed the investigation and said the company was cooperating with antitrust regulators.

"ULA's contracts to purchase the RD-180 engine are lawful, pro-competitive and designed to provide the most reliable launch vehicle possible for critical U.S. government missions," Rye said. "Because this is ongoing investigation, it would be inappropriate for us to comment on specifics."

Pratt & Whitney spokesman Jay DeFrank said his company is aware of the investigation and cooperating with U.S. regulators.

The FTC declined comment.

Barry Beneski, a spokesman for Orbital Sciences, said the company had been contacted by the FTC about the probe.

"We have been contacted by the FTC about their investigation. However we can't be more specific than that," Beneski said. "In general, the company supports efforts to ensure there is an open and fair competitive environment in the market for launch services."

Lockheed and Boeing formed the joint venture in 2006 after years of competing for contracts under the Air Force's Evolved Expendable Launch Vehicle (EELV) program, which provides launch services for large military, intelligence and NASA satellites.

The companies won U.S. government's approval for the venture by arguing that there was not enough demand for heavy lift rocket launch services to support two competitors since the commercial demand they had expected had failed to materialize for such large rockets.

The U.S. Air Force, frustrated about the high cost of EELV rocket launches, has in recent years tried to infuse more competition into the launch service market.


ORBITAL'S ENGINES

Industry sources said the FTC investigation follows repeated unsuccessful efforts by Orbital to buy the RD-180 engines for its new medium-lift Antares rocket, which was developed in partnership with NASA to haul cargo to the International Space Station. The first Antares rocket was launched from a new commercial spaceport in Virginia in April.

Orbital ultimately used the AJ-26 engine, a refurbished Russian engine that is supplied by Aerojet, a unit of GenCorp Inc, to power the rocket. But that engine is no longer in production and there are only limited supplies available.

To be a viable competitor in the future, industry sources say Orbital needs access to the RD-180 engine, the only liquid propulsion engine in production that is commercially available and can be used for Orbital's Antares rocket.

Orbital developed the Antares rocket together with Aerojet and Alliant Techsystems as a replacement for the Delta II rocket built by Boeing that has been retired.

Orbital has enough AJ-26 engines to support its resupply missions for the space station but needs more engines to be a viable competitor for launches of medium-sized satellites that do not need larger and more expensive boosters.

Orbital is not seeking to compete directly with ULA for heavy lift rocket launches, but says it could save the government money by using the Antares rocket, which costs under $100 million, to lift smaller payloads into space.

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