Graham Warwick/WASHINGTON DC

Lockheed Martin is continuing to face operating challenges, particularly in its space sector. Chief financial officer Bob Stevens says estimated free cash flow for the year has increased from $500 million to around $900 million, mainly due to the long-awaited advance on its contract with the United Arab Emirates for 80 F-16 Block 60 fighters.

The recovery of a restructured Lockheed Martin Aeronautics is underpinning the improvement. The company has a backlog of 233 F-16s, the F-22 programme looks likely to be fully funded this year, and US Congress is throwing its weight behind the C-130J.

Six C-130Js have been added to the fiscal year 2000 US defence budget, and two in FY2001 (to make a total of six).

With a further four to eight orders in the pipeline from international customers, the programme is approaching the 120-aircraft point at which it will become profitable, Stevens says.

Lockheed Martin's space business is recovering from last year's difficulties, when its three launcher types (Atlas, Proton and Titan) were grounded. Concerns remain over pricing and volume from launchers and commercial satellites. "The reduction in demand for low Earth orbit satellites has suppressed requirements for launch vehicles," he says.


The company is tackling the issue by reducing the cost of launchers through lean manufacturing, and reducing the risk to satellite service providers by diversifying launcher offerings.

"A resurgence of demand is unlikely, but we believe there will be a flight to quality, "Stevens says. "We will not sell a ride on a specific launch vehicle - Atlas or Proton. Instead we will sell a ticket to orbit and diversify the launch risk."

Issues to be settled in the space sector include restructuring Lockheed Martin's Evolved Expendable Launch Vehicle (EELV) contract with the USAir Force to drop development of a heavylift version of the Atlas V. EELV development and C-130J production will suppress company margins for two or three years.

Also critical to the firm's recovery are efforts to reduce debt by divesting non-core businesses. The sale of two businesses to BAE Systems should raise $2.24 billion, while the company's $500 million-a-year information management business and its environment re-mediation unit are also for sale.

Source: Flight International