If Space Startups Fail, the Pentagon’s Going to Need Some New Plans

Literally and figuratively, there’s no area of military activity that’s further away from the coronavirus than U.S. military assets in space. But the economic effects of the counter-virus lockdown are causing potentially fatal problems for some young space companies and that could threaten the Defense Department’s plans.

Like a lot of tech startups, some young space companies are facing a capital crunch and may not make it through the year, like communications satellite maker OneWeb, which filed for chapter 11 bankruptcy on Friday. 

“If you look at OneWeb, it was shocking from some perspective. They had just launched a batch of spacecraft six days before they declared bankruptcy and we’re seemingly well capitalized,” Richard French, director of global government services at rocket-maker Rocket Lab, said during Defense One’s Tech Talk virtual panel discussion, on Tuesday. “It’s clear there’s a bifurcation between well-capitalized operations and not-so-well capitalized operations. That probably factors in well to discussions about OneWeb and other companies that may not have the strength to weather this storm.” 

Those companies that have a mix of government and business customers will fare better than those that don’t, French surmised. Rocket Lab is booked solid for launches in 2020. The government of New Zealand’s response to COVID-19 had caused a launch delay (Rocket Lab runs a lunch site in the country.) Still, French said he didn’t expect it to affect business. “We’re ready to get back to our high launch cadence. Back on track with our manifest,” he said. 

Todd Harrison, director of defense budget analysis and senior fellow in aerospace security at the Center for Strategic and International Studies, said that if more firms go under, the Pentagon’s ambitious space plans could suffer, in large part because they need a healthy commercial market so that they don’t have to be the one footing the bill for the entire industry to take off. 

“What I’m worried is we might see some other space companies might start to see their customer base is not showing up like they thought,” said Harrison. “Some of these companies could be hurt, could even go out of business and their could be ripple effects for DOD in programs where the military was expecting to leverage a robust commercial space marketplace to buy components, to modify satellites that were being built for commercial purposes and then to use for military purposes, to tap into a dynamic launch environment. There are a lot of ways this could have secondary or tertiary effects on the military going forward.”

Case in point: the Blackjack program, which seeks to use increasingly abundant commercial satellites for some military communication needs. “Blackjack seeks to incorporate commercial sector advances in low earth orbit [or LEO,] including design of LEO constellations intended for broadband internet service, of which the design and manufacturing could offer economies of scale previously unavailable,” according to the program description on the DARPA site. Those are exactly the sort of constellations that OneWeb was building. 

“Part of what was making these highly proliferated architectures more feasible was the developments we had seen in the commercial space sector, where companies like OneWeb were mass-producing satellites for commercial purposes. If that business is drying up then I think the Department of Defense is going to have to go back and look at their plans,” said Harrison. But the situation could create an opportunity for the military to pick up an interest in distressed commercial companies, he said. “If the Department acts quickly and smartly [it could] jump in and when these companies are in bankruptcy either buy up the technology and facilities, or if an investor comes in willing to buy them up, give them an immediate contract and put them to work for the U.S. government.”