Skip to Content

Entrepreneurs Challenge Aerospace Giants

February 22, 2011

By the late 1990s, after decades of consolidation, the aerospace industry in the United States was dominated by giant contractors Boeing, Lockheed Martin, and Northrop Grumman. Today, these and a few other companies, including Orbital Sciences and Space Systems/Loral, are responsible for constructing nearly all U.S. satellites and launch vehicles. The picture is similar globally, with only a handful of firms, such as Arianespace and Khrunichev, selling launch services and space hardware. But several startups, such as SpaceX and Virgin Galactic, have emerged to threaten their dominance by offering cheaper ways to get into space, even if only for a few minutes. SpaceX, for example, offers satellite launches on its Falcon 9 rocket starting at about $50 million, as little as half competitors’ prices.

History is not on their side. In the late 1990s there was a similar burst of entrepreneurial activity in the launch industry when telecommunications companies planned to launch hundreds of satellites to service mobile phones. When the growth of terrestrial cellular networks decimated the customer base, however, these ventures collapsed.

Although the number of potential customer is still a cause for concern (see “Will Customers Boldly Go?”), the new ventures are different from those that failed in the past. Many of them are focusing on suborbital spaceflight, which is cheaper and less technically challenging than sending vehicles into orbit and bringing them back (see “To the Space Station and Beyond”). Whereas SpaceX has spent close to $500 million developing the Falcon 9 and Dragon spacecraft, some suborbital companies, like XCOR Aerospace, peg their development costs at $20 million or less. On the orbital side, they also have a stable anchor customer in NASA, which is pumping billions of dollars in development funds and supply contracts into the private space industry. Several of the startups have the backing of wealthy founders who have deep personal motivations to develop spaceflight. The presence of such entrepreneurs reduces the danger that skittish investors will jump ship.

“None of these things are themselves guarantees of success,” says Charles Lurio, publisher of The Lurio Report, an industry publication. “But there are a lot more pillars supporting this set of ventures than there were in the ’90s.” Those factors are helping new companies attract business. Just days after the inaugural launch of the Falcon 9 last summer, SpaceX won a $492 million contract to launch Iridium’s next-generation communications satellites, beating competitors like Arianespace.

Meanwhile, the startups’ technical progress and the pot of NASA money have tempted established aerospace companies off the sidelines. Orbital Sciences is building a launcher and cargo spacecraft under a NASA contract that could be worth up to $1.9 billion, and Boeing has begun developing its own crewed spacecraft with $18 million in agency study funds. The United Launch Alliance, a joint venture of Boeing and Lockheed Martin that manufactures the Atlas and Delta rockets, has also received a study grant.

The result is a crowded marketplace, with many different systems in the works. NASA has previously acknowledged that a shakeout is likely in the coming years. If the resulting competition drives down the cost of spaceflight further, we may see more entrepreneurial activity in the future. Otherwise, it will probably be another 20 years before the giant aerospace contractors are challenged again.

Keep Reading

Most Popular

Large language models can do jaw-dropping things. But nobody knows exactly why.

And that's a problem. Figuring it out is one of the biggest scientific puzzles of our time and a crucial step towards controlling more powerful future models.

OpenAI teases an amazing new generative video model called Sora

The firm is sharing Sora with a small group of safety testers but the rest of us will have to wait to learn more.

Google’s Gemini is now in everything. Here’s how you can try it out.

Gmail, Docs, and more will now come with Gemini baked in. But Europeans will have to wait before they can download the app.

This baby with a head camera helped teach an AI how kids learn language

A neural network trained on the experiences of a single young child managed to learn one of the core components of language: how to match words to the objects they represent.

Stay connected

Illustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at customer-service@technologyreview.com with a list of newsletters you’d like to receive.