Delta IV to be withdrawn from commercial market for five years in effort to cut costs

Slumping commercial demand and technical problems continue to plague Boeing's space operations, forcing the company to book a $1.1 billion charge in its second quarter results due out this week.

The company is withdrawing its Delta IV heavy launcher from the commercial market for five years and will focus on government contracts, effectively halving the number of launches.

"We've eliminated all [Delta IV] commercial launches for the next five years. Towards the end of the decade there are a handful of launches," says Jim Albaugh, chief executive of Boeing Integrated Defense Systems.

Including higher mission costs, this will cost the company $835 million. The Delta IIand Sea Launch systems will still be available for commercial customers. Albaugh says the changes will make space launches "about a break-even business".

He adds that difficulties with new technologies, such as phased- array antennas, on the latest generation of Boeing satellites are driving cost growth in the Satellite Systems division, which is taking a $265 million charge.

Boeing's established 601HP satellite bus has also been performing badly. PanAmSat reports that both primary and secondary ion thrusters have recently failed on two of its fleet of seven 601HPs, forcing it to use back-up thrusters that will reduce the satellites' lifespans. Albaugh says, however, that Boeing had anticipated the cost of thruster failures.

Since taking over Hughes Space &Communications for $3.75 billion in January 2000, Boeing has seen the commercial satellite market collapse. In April, the company was forced to take a $913 million charge to reflect the reduced value of the subsidiary. Under the terms of the sale, Hughes will also now pay Boeing $360 million in partial compensation.

Yet another problem facing the company is the charging by the US Justice Department of two former Boeing managers with conspiring to steal Lockheed Martin documents to gain an advantage in bidding for US Air Force evolved Expendable Launch Vehicle (EELV) contracts. Boeing's Delta IV won the bulk of the contracts over Lockheed Martin's Atlas V.

A USAF inquiry is due to finish soon, and may cost Boeing some or all of the EELV contracts, as well as other penalties.

Source: Flight International