Lockheed-Boeing venture steps up to competitive challenge

By Andrea Shalal

WASHINGTON (Reuters) - United Launch Alliance, a joint venture of the top two U.S. arms makers, on Friday said it will slash costs and hunt out new customers to ensure continued growth despite the rise of a new rival, privately-held Space Exploration Technologies, or SpaceX.

Tory Bruno, who took over as chief executive of the 50-50 venture of Lockheed Martin Corp (LMT.N) and Boeing Co (BA.N) in August, told Reuters he was confident the company would survive increased competition and even prosper in the coming age of heightened activity and exploitation of space.

"We're not the least bit afraid of competition," he said in a telephone interview. "It's not a huge marketplace, but I'm happy to get in there to compete and fight for business."

ULA was formed in 2006 when Lockheed and Boeing realized there was not enough commercial demand to support two separate firms making the costly rockets used to launch heavy military and intelligence satellites into space.

Overriding concerns voiced at the time by the Federal Trade Commission, the Pentagon backed the creation of ULA as a monopoly launch provider to ensure continued production of two different rockets - Boeing's Delta 4, and Lockheed's Atlas 5 - that were powerful enough to hoist huge government satellites.

Nearly a decade later, SpaceX is on the verge of being certified to launch at least some of those spacecraft, which will cut into ULA's prospective orders at a time when future military launches are also set to taper off until the 2020s.

Further complicating matters, Congress - worried about escalating tensions with Moscow - has capped the use of the Russian-built engines used to power one of ULA's rockets, the Atlas 5, from 2019.

The changing landscape has raised questions about the future of the venture, and whether it can generate enough revenues and profits to keep both Lockheed and Boeing happy.

"Like any business, when the environment changes, you have to change with it in order to stay relevant," Bruno said, noting that he planned to transform the company by halving the cost and cycle time of current launches.

ULA has already added NASA as a customer, and is now courting firms in the telecommunications sector. It will also invest over $100 million to cut the number of launch pads from five to two, one on each coast, with each able to launch ULA's two current rockets and a new one due to begin testing in 2019.

Bruno said ULA would unveil details of its "next-generation launch system" in April, which includes a new engine being developed by Blue Origin, a venture run by Amazon.com (AMZN.O) founder Jeff Bezos.

ULA also plans a new a la carte pricing model to make it easier for commercial and government customers to develop launch plans, Bruno said.

Top Lockheed executives this week said they were keeping a close eye on the evolving rocket launch market, but ULA's future looked positive for now, given its contract to complete 36 rocket launches for the U.S. Air Force in coming years.

"Right now, it's a strong, successful joint venture and we're fully behind it," said Chief Executive Marillyn Hewson.

(Reporting by Andrea Shalal; editing by Andrew Hay)