Investing in Space: Why ULA needs to launch its second Vulcan rocket as soon as possible

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CNBC's Investing in Space newsletter offers a view into the business of space exploration and privatization, delivered straight to your inbox. CNBC's Michael Sheetz reports and curates the latest news, investor updates and exclusive interviews on the most important companies reaching new heights. Sign up to receive future editions. It's easy to lose the forest for the trees when reporting on the day-to-day of the space industry. I often find myself needing to step back and walk through why an event or announcement matters, because often what a space company or agency thinks has obvious importance doesn't immediately resonate with CNBC's audience. A great example of that from this week is United Launch Alliance's Cert-2 mission. If you're in the weeds of the space world, hearing CEO Tory Bruno announce that ULA is going to bite the bullet and fly Cert-2 without a customer payload is a wild declaration. After all, aren't rockets expensive? Don't rockets often wait months or even years for spacecraft to be ready to launch? Why send a $100 million empty Vulcan into orbit with nobody paying for it, especially if ULA's sold more than 70 launches to customers? The simple answer is that Cert-2 does have a customer: The Pentagon. But let's unpack that. National security missions are the most lucrative launch contracts, to the tune of billions of dollars a year in rocket orders. Some of them are low-cost, experimental missions, but the majority are expensive, top secret satellites the Pentagon isn't willing to let just anyone fly. Enter the National Security Space Launch (NSSL) program. ULA and SpaceX are both already in the NSSL program, but any time they bring a new rocket to market, Space Force requires that specific rocket complete launches successfully before certifying it to fly a NSSL mission. Hence the name of Vulcan's second mission, Cert-2. The rocket launched for the first time in January, which was the first launch toward certification. "What Space Force is looking to see with Cert-2 is another successful flight just like Cert-1," Bruno said during a press conference Wednesday. After Cert-2, ULA will send the Space Force "gigabytes of data for all of the instrumentation on every part of the rocket," Bruno said, and, assuming they "find no surprises," Vulcan will be clear to start launching NSSL missions. ULA was planning to fly Sierra Space's inaugural cargo Dream Chaser spaceplane on Cert-2, but Bruno said the latter company's CEO Tom Vice "felt that he was putting a little too much schedule risk against my needs." Dream Chaser is stepping aside, to be replaced by an "inert payload," also known as a "mass simulator" (think big block of concrete and metal), so that Cert-2 can launch by September. Why the rush? Well, the Pentagon's already bought a whole bunch of Vulcan launches and expects two of those missions – USSF-106 and USSF-87 – to fly before the end of the year. Already, Air Force top brass Frank Calvelli put pressure on Bruno and ULA in a letter sent last month to the rocket company's joint owners, Boeing and Lockheed Martin, outlining concern "due to Vulcan delays." The Air Force also imposed a financial penalty on ULA, of an undisclosed amount, due to Vulcan's delays. One question mark that had been hanging over the next three Vulcan missions is at least largely settled: Blue Origin's ability to deliver BE-4 engines for the rockets. The company delivered to ULA the six engines needed for its three launches, and Bruno noted he has "a great deal more confidence" in that relationship. A year ago that wasn't the case, Bruno said, noting his company had "a big concern" about securing the engines ULA needed. That was back when Blue Origin had a BE-4 engine explode during acceptance testing — an engine that was intended for the Cert-2 launch. Timely deliveries of the BE-4 engines becomes even more important next year, as Bruno expects ULA to make 20 launches in 2025, half of those on its Atlas V rockets and half with Vulcan. The company overall has 16 Atlas V rockets remaining to launch, before it's all-in on Vulcan. The Pentagon is ULA's most important customer. So, while the military may not be paying for Cert-2 directly, the backlog of NSSL orders is why ULA is willing to pay out of pocket to launch the mission. Oh, and there's the other open question about the long-rumored ULA sale process. I thought, as did others, that Vulcan's successful debut earlier this year would close a deal. Additionally Jeff Bezos' raft of stock sales earlier this year made Blue Origin look like the likely winner. I'm speculating, but whoever wants to buy ULA may be waiting until after Cert-2 – or for perhaps a more friendly FTC if there's a change in the White House this November.