By Andrea Shalal-Esa
WASHINGTON (Reuters) - Boeing Co <BA.N> said on Tuesday it expects only modest growth in its space revenues over the next five years with commercial orders seen accounting for a growing share as government orders decline.
Government orders comprised about 90 percent of Boeing's space business now, but would shrink to around 70 percent as defense spending flattened out, Craig Cooning, vice president and general manager of Boeing's space and intelligence systems, told reporters at the Satellite 2010 conference.
He said commercial sales would increase from 10 percent to around 30 percent of the total, bolstered by the need for many satellite operators around the world to replace aging spacecraft in coming years.
On the government side, Cooning said Boeing hoped to sell more of its Wideband Global Satellites (WGS) in coming years, noting that the Air Force had issued a request for proposals for up to six more WGS satellites and two were already included in the fiscal 2011 budget.
The company also saw some "opportunities" in the classified sector, he said, without giving any further details.
Overall, he said, Boeing would have 10 satellites available for launch this year, including two delayed from last year.
Stephen O'Neill, president of Boeing Satellite Systems International, told conference participants later that his company foresaw few if any new starts for either military or civilian government agencies.
Satellite orders had likely peaked around the world last year, but would likely stabilize at 20 or fewer longer-term, and the days of "Battlestar Galactica government programs" were likely over, O'Neill said.
O'Neill forecast greater government interest in so-called "hosted payloads" or sending specific sensors into space on other satellites. That would help the Pentagon meet its needs at a cost of just tens of millions of dollars versus hundreds of millions for new dedicated satellites.
Companies like Boeing were trying to innovate by responding to the military's changing needs and a shift in focus on more single-mission, single-customer satellites than the complex multimission spacecraft shared by multiple agencies that had sene problems in the past, he said.
He said industry was also doing its part to prevent the constant adding of new requirements by the military that had led to cost overruns and schedule delays in the past.
Cooning said Boeing was confident that it could "harvest" some of the capabilities developed for the now-canceled $26 billion secure, high-capacity Transformational Satellite program, and add them to the WGS satellite.
These included enhanced intelligence, surveillance and reconnaissance, mobile communications and anti-jamming, Cooning said. He said costs ballooned on the TSAT program due to the military's requirement that the spacecraft and systems could continue to function after a possible nuclear explosion.
The Pentagon spent about $3 billion on various technology demonstration projects for the TSAT program with Boeing and Lockheed Martin Corp <LMT.N>, and officials have said they expect to use technologies developed for that program on existing satellites, including Boeing's WGS and Lockheed's Advanced Extremely High Frequency program.
Boeing also expected the Air Force to issue a draft request for proposals for a follow-on Space-Based Surveillance Satellite (SBSS) as early as April, Boeing officials said.
Cooning said Boeing offered the Air Force a fixed-price contract for a second SBSS satellite at a significant savings of more than 10 percent. The first satellite cost around $800 million, including nonrecurring development costs, he said.
Such a deal would have allowed Boeing to maintain its production facility and personnel, saving money and allowing faster work on the second satellite, Cooning said, but the Air Force decided it needed to stage an open competition.
Boeing also stands to benefit from NASA's new drive to commercialize space transportation through its own work and a rocket launch joint-venture with Lockheed Martin Corp <LMT.N>.
(Reporting by Andrea Shalal-Esa; Editing by Richard Chang)