Aerospace companies in Colorado Springs are taking different approaches to the uncertain future of federal budgets: Some are looking overseas and others are seeking to build through acquisitions.
Both approaches — along with the status of aerospace in Colorado and news from the Air Force Space Command — will be the topics at the Colorado Springs Business Journal’s next power lunch, scheduled for 11:30 a.m. to 1 p.m. on Wednesday, Aug. 28, at the DoubleTree World Arena. On tap to speak are Maj. Gen. Martin Whelan, director of requirements at U.S. Air Force Space Command headquarters; Russ Anarde, corporate lead executive with Northrop Grumman; Vicky Lea, manager of the Colorado Space Coalition; and Frank Backes, CEO of Braxton Technologies.
As the nation enters what many call a “second Space Age,” Colorado is positioned to benefit from efforts to create a new spacecraft capable of carrying people to the International Space Station and beyond, and for new commercial uses such as the next generation of Global Positioning System satellites. The state has one of the most diverse aerospace economies in the nation — commercial uses like Dish Network and DigitalGlobe, space vehicle research and next-generation satellites and lasers.
And the Springs plays a crucial role, including the presence of major aerospace corporations like Northrop Grumman, Lockheed Martin and Raytheon. It’s home to the Air Force Space Command, Army space missions and the North American Aerospace Defense Command. It’s also the headquarters of smaller companies like Braxton Technologies.
And it’s home to the support and maintenance operations for the GPS, the constellation of satellites utilized around the globe.
“It’s the most critical satellite constellation in the world,” said Backes, whose company provides software at Schriever AFB and helps monitor and maintain the system. “It’s used for absolutely everything — banking, mapping, commercial uses. And there are military uses as well.”
That’s why Braxton finds itself in an enviable position even under current federal austerity measures. The GPS system is vitally important to the nation’s commerce, and the company is part of Raytheon’s team to create and support ground systems for the next generation of GPS satellites.
“We’re also supplying support for the military satellite communication network,” Backes said. “We have contracts for two of the highest-priority systems for the United States.”
Through the years, Braxton has grown both organically and through acquisitions, he said. The company recently closed on a deal to buy a Boulder-based company, and Backes said it was in negotiations to purchase a California-based aerospace company with 100 employees.
“We don’t know yet if we’ll be successful,” he said, “but if we are, then we’ll be moving them to the Springs, just like we moved Braxton here from California.”
And the sequester isn’t slowing down growth from acquisitions.
“We are seeing a lot of interest from companies whose owners just want to get out of the business now,” he said. “Baby Boomers who owned companies for years, and see the budget environment as a reason to retire. It’s really an opportunity.”
Northrop Grumman sees opportunity in the sequester as well — but not in the United States. Like other companies, Northrop is seeking a stronger presence abroad, thanks to uncertain domestic budgets.
“We’re in a challenging environment,” said Anarde. “So of course we’re looking to other markets. We need to look for opportunities internationally to offset what might be cuts to contracts here. But we have to do more than that. Tighter federal budgets lead to market uncertainty, and sequestration only increases that uncertainty for the industry. Moving forward, we all understand that the government will reduce what it’s going to pay — and industry is going to have to respond.”
The first waves of sequestration are now being felt locally by companies like Northrop, he said. But Colorado Springs isn’t alone.
“This transcends the Springs,” he said. “But the case here is that budgets are certainly going to be a problem. We have such a robust government presence here.”
To maintain their market share, defense companies will have to become more nimble, able to economize and innovate, Anarde said.
“Affordability and performance have become more important to the industry — even than they were in the past,” he said. “We always have to improve, give answers and solutions and cap costs. We have to be affordable. And to do that, we have to be innovative. We have to find more creative solutions for the government — different ways for the whole business to be affordable.”
Anarde, who is also on the board of the National Defense Industry Association, says the new budget environment means more collaboration with former competitors.
“We need to partner with industry, and with the military to collaborate and train and partner,” he said. “Nothing’s more important going forward.”
Aerospace in Colorado
$8.7 billion in economic output
3.8 percent of state’s GDP
$16 billion in sales
3,500 jobs added from 2008 to 2011
$92,500 average annual income
(Source: Brookings Institution)