News > Companies
How high the moon?
If NASA sets its sights on Mars or a moon base, that should be great for Boeing and Lockheed. Right?
December 12, 2003: 11:38 AM EST
By Chris Isidore, CNN/Money Senior Writer

NEW YORK (CNN/Money) - If it seems the possibility of a U.S. mission to Mars or the moon would be a boon to the nation's aerospace industry, industry officials and the analysts who follow it are more down to earth.

NASA may soon be looking at a manned mission to Mars or a permanent moon base.  
NASA may soon be looking at a manned mission to Mars or a permanent moon base.

NASA won't comment on reports that the Bush administration could announce a new goal for the nation's space program -- perhaps as soon as next Wednesday, the 100th anniversary of the Wright Brothers' first flight -- other than to say that a multi-agency task force is weighing options.

Putting the first human on Mars or a permanent manned base on the moon are among the options being weighed.

But analysts in the sector said profit margins would be relatively thin for whatever company is awarded a prime contract for such an effort, which would probably be Boeing Co. (BA: Research, Estimates) or Lockheed Martin Corp. (LMT: Research, Estimates)

"Neither of those companies makes a significant portion of their money in the segment," said Deutsche Bank Securities analyst Chris Mecray. "It's a low-margin business. It's not bad business, but it's not going to move the needle more than a big defense contract, (or) maybe even a medium-size defense contract."

Contractors believe plans for a shuttle replacement won't be derailed by efforts to go to Mars or back to the moon.  
Contractors believe plans for a shuttle replacement won't be derailed by efforts to go to Mars or back to the moon.

Even company executives, while expressing interest in any big new human space flight effort, agree that the impact on their bottom lines would be limited.

"I personally don't see a huge increase in NASA's budget, or a huge windfall for contractors," said Michael Coats, a former astronaut who is vice president of advanced space transportation for Lockheed Martin Space Systems.

Part of the reason is that Coats and others doubt that NASA will ever see the significant commitment of resources to human travel that it saw during the space race of the 1960s and 70s, when NASA's budget reached as high as 4 percent of the federal budget. The Mercury, Gemini and Apollo programs combined cost $23 billion then, which would equal hundreds of billions in today's dollars.

Related stories
Shuttle contractor stocks lower
Your next vacation in space
Space: The final ad frontier

Even with inflation and the growth of the federal budget, NASA's budget for human space flight is currently about $6 billion a year, and the agency's total budget is less than 1 percent of the entire federal budget.

"They had virtually an unlimited budget, an open check book," Coats said, referring to the race to the moon. "We're not going to have that."

Still, the contractors are likely to see benefits from such an effort, just not immediate or dramatic benefits easily measured on their bottom line.

"The work you do for NASA doesn't look that attractive on a straight profit investment standpoint. But it allows people like ourselves to develop technologies we would not have developed otherwise, and really pushes the technology envelope," said Richard Aubrecht, vice president of strategy and technology at Moog Inc., a subcontractor on the space shuttle and other NASA spacecraft dating back to Mercury.

"If you can use the technology you're developing there, then it's a very good deal for everyone for your company, for NASA and for the country."

Click here for a look at aerospace stocks

There is a risk that a new major mission to the moon or Mars could divert resources away from existing programs. that Both Boeing and Lockheed are competing to develop a shuttle replacement known as the Orbital Space Plane by 2008. Plans for the project were in the works even before February's Columbia disaster.

"I guess my belief is the space plane will be part of whatever plan is put forth," said Lockheed Martin's Coats. "What I don't want to see happen is a delay in the program while they figure out what the overall scheme is."

Aerospace Engineering
Financial and Business Services
National Aeronautics and Space Administration (NASA)
Defense Equipment

One of the keys for the contractors' returns from such any new effort in space is whether the program is an ongoing one or if it's scaled back once its initial goals are reached.

Mike Mott, Boeing's vice president of space systems, is hopeful that whatever goal is set this time, it's more long term than the drop-off of funding that followed Apollo.

"What I have not heard is that it would be a one-shot deal. It would be a different vision for the future," said Mott. "I would be very surprised if we go to the moon, declare victory and then come home, like we did in '69."  Top of page

Chris Mecray owns neither Boeing nor Lockheed shares, although Deutsche Bank Securities and its affiliates own more than 1 percent of each company's shares and have investment banking relationships with both companies.

  More on NEWS
Premier League revenues hit record high $6.4 billion
Window seat or aisle? After Southwest incident, some fliers think twice
Oops! Deutsche Bank accidentally sent a $35 billion payment
Wells Fargo will be fined $1 billion
YouTube ran ads from hundreds of brands on extremist channels
Oops! Deutsche Bank accidentally sent a $35 billion payment

graphic graphic