Blue Origin CEO on rocketry, space tourism and the relationship with Amazon – CNBC

Once super secretive, Jeff Bezos' Blue Origin has been steadily emerging from stealth.

Founded in 2000, the space company has been simultaneously working on various initiatives that together speak to its broader vision: human space flight capabilities that will help establish the infrastructure for humanity to colonize space.

Blue Origin, which has been almost completely funded by Bezos, has been gearing its suborbital New Shepard space tourism service, which will compete against newly public Virgin Galactic as soon as next year.

It's developing its orbital New Glenn rocket, targeting a first flight in 2021, that it hopes will win national security launch contracts, including the Air Force's already-contested Launch Service Procurement.

The company also recently submitted its bid for NASA's lunar lander competition, partnering with well-established space heavyweights Lockheed Martin, Northrop Grumman and Draper, and spearheading the effort as the team's prime contractor.

Blue Origin is also busy developing its rocket engines, which will power not only New Glenn but United Launch Alliance's next-generation Vulcan Centaur.

That engine business represents one of the first revenue streams for the company, and a key reason it's been investing $200 million to build its 200,000-square-foot engine factory in Huntsville, Alabama, and strike a deal with NASA's nearby Marshall Space Flight Center to refurbish a historic test stand.

CNBC's Morgan Brennan recently sat down with Bob Smith, chief executive of Blue Origin, to discuss everything the space upstart has underway. The following Q&A is a lightly edited version of the interview, which occurred in front of Blue Origin's lunar lander prototype Blue Moon, as it was on display at the International Astronautical Congress in Washington, D.C.

Morgan Brennan: I think the first place we need to start is what we're sitting in front of, and why it's so crucial to the future of Blue Origin.

Bob Smith: Well, this is Blue Moon, our cargo lander that we've been working on for several years that we developed for the purposes of sustained lunar exploration and resource exploitation. We're excited about the fact that now we have NASA saying we're going back to the moon with their Artemis program. And we're able to actually offer a variant of this as part of a national team ... where we're going to partner up with Lockheed Martin, with Northrop Grumman and Draper to actually produce an integrated landing system that allows us to go back to the moon this time to stay.

Brennan: This national team that was just unveiled is certainly getting a lot of attention. How long has that been in the works? And what is that going to enable Blue Origin to do in terms of Artemis?

Smith: We're working against really good aggressive schedules, and we're trying to do something that we haven't done in almost 50 years. And so we wanted to reach out to Lockheed Martin, who just landed on Mars multiple times, amazing accomplishments there. We have Northrop Grumman, who's been able to regularly deliver supplies to space station as well as was the first lunar lander provider in the Apollo program, and Draper, who's known internationally as a leader in guidance, navigation and control. This is an incredibly powerful team that allows us to go fast and allows us to actually produce.

Brennan: I think sometimes there's this perception around so-called new space companies versus "old space" companies. To see Blue Origin partnering up with some of these long-established space stalwarts, do you think that's the wrong way to frame the conversation?

Smith: I've always hated that dichotomy, because I think it's putting the wrong kind of dynamics into the discussion. What you have are incredibly accomplished organizations like Lockheed Martin, Northrop Grumman, and you go through the series of things that they've actually done it's absolutely stunning. And they've done it for decades. Everybody should be proud of their accomplishments in this space humanity. You also have companies that, like Blue Origin, have a longer strategic horizon simply because we're privately funded. We actually can stay on a different horizon, a different pace than necessarily those that are publicly traded and have some of those pressures that we don't have. So we can marry the capabilities together and actually do much better together.

Brennan: One of the reasons we're sitting down to have this discussion is because of Huntsville. The BE-7 engine [employed in Blue Moon] is being tested in Huntsville, also the lunar lander program in general is expected to take place out of Marshall. Why has it made sense for Blue Origin to make investments there?

Smith: Huntsville is known as the Rocket City, and it's deserving. That's where much of the U.S. rocket capability actually came from. You go back to the '50s and '60s, that's where it all started. It has this great receptacle of talent there that you can tap into, and it's been decades in building. We wanted to go to where the talent is. And you get great support from the government everyone from Gov. Ivey to Sen. Shelby all the way down to Mayor Battle have been great supporters of actually developing the space economy there. We're going to produce a world-class factory there 40 engines a year, which is a remarkable number of engines for spacecraft, as well as then testing on a historic site there. They have a large test and on 4670 that tested the Saturn V, as well as the shuttle engines. We're going to make that engine stand roar to life again.

Brennan: When do you get to 40 engines a year?

Smith: We're going to be there when we are at-rate and flying, so in '22 and '23. We are opening the factory there this coming first quarter.

Brennan: Have you been able to easily tap into the labor pool? What is it about the area that makes it so special?

Smith: Well, the people down there are absolutely well-schooled in this entire area. You don't have to do a lot of training from the standpoint of what is a rocket engine ... so there's a certain intuitive sense that's there in the employment base itself.

Brennan: Blue Moon, if it wins this NASA contract will it be built there as well?

Smith: BE-7 engine [the engine for Blue Moon] is one that we're figuring out where we will get that production. We're certainly doing the testing there today.

Brennan: In terms of the BE-4 engines: you're building them for your own orbital rocket, New Glenn, but also building them for ULA. How do you think about that breakdown in terms of production? And how big of a revenue opportunity is it to supply another company?

Smith: Customers always make you better so we're really excited that United Launch Alliance selected us. I mean, they are the premier national security launch provider today. We're going to learn a lot from them, and so it's a great opportunity not only to get really good at building the engines that we need for New Glenn, but also be a great supplier for them. And it actually does make us a much more self-sustaining business, which is where we're heading at Blue Origin. So that's one of our first big contracts, as well as the other satellite operator contracts that we started to sign as well as the United Air Force Launch Services Agreement contract that we have as well for New Glenn. So we're starting to get some progress.

Brennan: I am going to ask you the same question that I asked the CEO of ULA and that is, this relationship between Blue Origin and ULA: frenemies?

Smith: I think that the aerospace industry has always been about who do you compete with on one day, who do you partner with on another day. It's always had this environment in which and one day you can be competing hard against them and in other spaces you're not. Boeing and Lockheed are great customers of us potentially for launching. We're always going to have that dynamic and our relationship is really good, and they continue to challenge us to be a better supplier to them, which we welcome.

Brennan: Over the next couple of years, where do you see the biggest opportunities in terms of customers for New Glenn

Smith: We're already seeing some good take up from the market. Three of the top 6 satellite operators have already signed on New Glenn. United States Air Force obviously gave us one of the three large awards. We hope to extend our relationship with the Air Force in the coming years. I think those two areas are often very, very baseload for us. But we can also think about the intelligence community as well some of the larger payloads are very well suited for our larger vehicle, as well as some of these large constellations that are being proposed and going to be launched. ... So those could be very, very big opportunities for us as well.

Brennan: You've come out in recent weeks and suggested that the Air Force could think outside of the box a little more in terms of launch service procurement, and how they're going about facilitating future rockets.

Smith: This is a dialogue that I'm encouraging us to have, which is we've lost the sight of what is the simple problem. There's only one hard problem and that's getting to orbit. Once you get to orbit, we can do a lot of things. If you go back in the '60s and '70s, we had a lot of rockets, we had a lot of capability. But we've now narrowed that down, and now we think that the market continues to ask for more. If you look at what the market is today, about 25% is really around NASA and security launches. Seventy-five percent of it is commercial. That's the addressable market for U.S. providers. Our view is, that if you're going to select for national security capabilities, you want to get something that is commercially viable, because you want to take that large fixed cost and spread it off as many customers as you can. You shouldn't go buy a bespoke system unless you absolutely need one. And what the data shows is that there's a commercial market there that's viable, support a lot of different providers and that way you can get the competitiveness, the pricing and other things that you want from a good supplier.

Brennan: Is the U.S. doing enough to secure space?

Smith: I think that space control, space exploration, space commercialization is all been something that we started to talk about more today. I think we're getting a much better understanding of how important space is every day, whether it's GPS that's guiding your Uber, or what you're doing from a credit card processing from trades on the stock market that are actually timed using space assets. All of those are integral to our economy. And so if we're not conscious about what that commercialization of space means to our economy every day to everybody in the United States is around the world as well as what we need to go to protect those assets, and now what is it been tested environment now that we have near peers that actually threatening those space assets this becomes even more important that we have a robust set of launch vehicles.

Brennan: There are quite a number of satellite constellations, thousands of satellites, being proposed by different companies for broadband service, communications. Do they all become viable business models? And if so what does that mean in terms of launch possibilities?

Smith: The launch possibilities are large. How many of those their business plans actually convert? I don't have enough details as to whether they're going to convert. And I think they, as we talked to more of them, they all have different timing and different approaches of how they're going to go to market. But I think the fundamentals here are very sound and the fundamentals behind their premise is that the need for data worldwide continues to just escalate. I don't know how much of that will be carried on terrestrial networks and how much will be done in space. What I do know is that data demand is high. The fastest way of getting data around the world is going through free space is actually going to space and in low earth orbit, and where you don't have much lag in terms of the amount of time that it takes.

Brennan: Blue's sister company, Amazon, has actually proposed Project Kuiper as well a satellite constellation. Got some more details on that via FCC filings recently. Will Blue Origin rockets take those satellites to orbit?

Smith: We hope to. Amazon's a publicly traded company, we continue to go and engage them along with all the other Leo constellation providers and anybody else. We're a merchant launch service provider and we hope to win their business.

Brennan: Is there a lot of talk between, or work or collaboration between the two companies?

Smith: It's a publicly traded company. If we got into that kind of situation, it would not be good. We collaborate in the same way that we collaborate with any satellite operator.

Brennan: And just in terms of Amazon, publicly traded. Would there ever be a scenario in which or a timeline in which Blue Origin would become public as well?

Smith: The only reason why you ever become public is that you actually need to go get funding. I don't think that's a problem for us, honestly. So I mean, you kind of trade some control for getting funding. Our path is really to become self-sustaining business by ourselves so that we don't have to rely on private funding.

Brennan: So would Blue Origin ever open itself up to investors or VC round, for example?

Smith: We might, I don't know how long we can see out there. But unless we can't become a self-sustaining business, or we need some other infusion of cash, I don't know why we would.

Brennan: I want to get an update on New Shepherd. Certainly, it's being watched very closely. First crewed flights expected next year?

Smith: We were planning on this year; unfortunately, it's very unlikely we're going to get in this year. We need a few more flights to make sure that we're all comfortable with the verification. We hold ourselves to very, very high standards here, we're never going to fly until we're absolutely ready. I think we have a very, very good amount of confidence around the system itself, I think it is working very, very well. But we have to go look at all the analysis, and then convince ourselves that we're ready to go. ... So it probably will be next year.

Brennan: Tickets in the hundreds of thousands of dollars is that the right range, at least initially?

Smith: Any technology that starts off starts off at a high price point so we're going to start at a high price point and go down from there, but it will be in the hundreds of thousands of dollars for the initial tickets.

Brennan: Lastly, long-term vision for Blue Origin five years, 10 years, 20 years, where do you expect the company to be

Smith: Well, I think the things that first ground everybody on is what we're doing today, which is pretty ambitious and terrific. I mean, we're going to be flying people in space on the suborbital tourism vehicle on New Shepherd. We're going to be building a very, very large New Glenn vehicle that is going to really shake up I think the market in terms of its overall capabilities. We have our own engine production and what we were just talking about in Huntsville, this large, modern facility there. And we're going to the moon, that's going to keep us busy. I mean, that's going to keep us busy quite a bit. And as we actually go develop all these capabilities, we will become a more self-sustaining business, which is also part of where we need to be so. So yes, so that's where I think we're going to be.

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Blue Origin CEO on rocketry, space tourism and the relationship with Amazon - CNBC