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Airbus Wants Some of Lockheed's 160 Million Space Dollars

Motley Fool - Tue Jan 24, 2023

One year ago, with tensions rising between Russia and the West, the Russian space agency made an alarming pronouncement: As early as 2023, it might remove its engine module from the International Space Station (ISS)...and set America's modules adrift.

Now, the good news is that Russia seems to have walked back its threat. It now looks like the ISS will remain in working order through 2025, if not later. And yet the risk remains.

To address this, last year NASA authorized an ambitious project -- actually, three separate projects. For a total cost of $415 million and change, NASA would bankroll commercial low-Earth-orbit (LEO) development projects led by three different corporate teams. The highest-profile of these would team up Blue Origin, Sierra Space, Redwire, and Boeing(NYSE: BA) to build a space station called Orbital Reef beginning in 2027.

Separately, Northrop Grumman(NYSE: NOC) would collaborate with spaceflight training facility Star Harbor to build a separate station out of used Cygnus cargo transports.

Finally, space conglomerate Voyager Space Holdings would partner with defense and aerospace giant Lockheed Martin(NYSE: LMT), utilizing $160 million in NASA funding, to design a space station named Starlab.

This is the station we'll be talking about today.

Entangling alliances are good news now

Not only is Lockheed Martin's Starlab the best-funded of the three NASA-backed projects (Boeing's Orbital Reef project was only awarded $130 million, and Northrop got a very precise $125.6 million), but it's also now proving the most popular internationally: Earlier this month, European aerospace giant Airbus(OTC: EADSY) announced it's joining Lockheed's team.

In a press release on the partnership, Voyager Space pointed out that its collaboration with Lockheed and Airbus makes Starlab the only one of the three ISS-replacement commercial space-station projects with international backing. Voyager hinted that its project may also enjoy support from the European Space Agency, whose mission Starlab will help serve in decades to come.

What is Starlab?

With the Starlab project showing a bit more momentum than its rivals recently, now might be a good time to take a closer look at the project.

As described in a Lockheed press release, Starlab will comprise "a large inflatable habitat" (for up to four astronauts) "designed and built by Lockheed Martin, a metallic docking node, a power and propulsion element, a large robotic arm for servicing cargo and payloads, and a state-of-the-art laboratory." Here, astronauts will be able to conduct both research and industrial activities in low-Earth orbit.

What happens next?

Nanoracks will take lead on developing Starlab's design, while Nanorack's parent company Voyager Space is responsible for overall project strategy. Later, Lockheed Martin will manufacture the various parts making up the space station. The Starlab team aims to reach initial operational capability for the space station by 2027, adding capability as time goes on.

As for Airbus, its role in Starlab isn't 100% clear just yet. As the majority owner of rocket company ArianeGroup, it might seek to provide transportation services to and from Starlab, as Boeing is presumably doing for Orbital Reef. Or, as a major manufacturer of satellites, it might assist Lockheed in manufacturing parts of Starlab itself. Or it could do both.

What's clear is that Starlab will benefit from adding a second $100 billion-plus company to its list of partners. (At Orbital Reef, only Boeing fits in this category, and Northrop Grumman's team has only Northrop Grumman itself.)

As NASA made clear in its original Commercial LEO Development announcement, its initial contracts were awarded only to "stimulate U.S. private sector development." The $415 million the space agency is paying won't be nearly enough money to duplicate the $150 billion International Space Station -- much less three separate ISS replacements.

Granted, NASA's plan of "partnering" with private industry does imply that further support may be forthcoming -- such as NASA contracts to lease space aboard private companies' space stations and make use of their facilities. But even so, Starlab will be in a much stronger position to see this project through; it can now draw upon Airbus' $60 billion annual revenue stream (according to data from S&P Global Market Intelligence), and Lockheed's $65 billion, to pay the initial costs of getting Starlab up and running.

As private companies launch their newest space race to build a replacement for the International Space Station, it's looking like Starlab and its backers have taken the lead. And for space investors the best news is this: With publicly traded Airbus now working alongside publicly traded Lockheed Martin, we now have two different ways to invest in it.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.

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