The latest financial release from aerospace manufacturer Aerojet Rocketdyne reveals that the company spent none of its own money on development of the AR1 rocket engine this spring. Moreover, the quarterly 10-Q filing that covers financial data through June 30, 2018 indicates that Aerojet may permanently stop funding the engine with its own money altogether—a sign the company has no immediate customers.

Although Aerojet will continue to receive some funding from the US military through next year to develop its large, new rocket engine, this money won't be enough to bring it to completion. Instead of having a flight-ready engine for use by the end of 2019, the filing indicates that Aerojet now intends to have just a single prototype completed within the time frame.

Aerojet has been developing the AR1 engine under a cost-share agreement with the US Air Force, which had agreed to pay two-thirds of the cost. Aerojet originally agreed to pay nearly all of the remainder, with a small contribution from rocket manufacturer United Launch Alliance. This agreement, valued at $804 million, was in line with Aerojet's estimate of $800 million to $1 billion to develop the new engine.

The AR1 rocket engine, fueled by refined kerosene and liquid oxygen, is in the running to power United Launch Alliance's new Vulcan rocket, which is scheduled to make its maiden flight in 2020 or 2021. (The government is investing in the AR1 engine because it views the Vulcan as a potentially significant provider of defense launch needs.) The Colorado-based rocket manufacturer has said it prefers to use Blue Origin's BE-4 engine to power Vulcan's first stage but is considering the AR1 as a back-up option.

The financials

A final decision on this engine, expected within weeks, is being closely watched within the aerospace industry. It now seems all but certain that the decision will be in favor of Blue Origin's new liquid methane-based engine, which is about two years ahead of the AR1 in development.

Already this year, Aerojet has publicly acknowledged that it has renegotiated the 2016 deal so that the government will pay five-sixths of the cost of the AR1 engine. Not only does the document confirm this, but it also states that the agreement has been scaled back to less than half the funding needed to complete AR1 development and that Aerojet considers its financial contributions to the agreement completed.

"In June 2018, (Aerojet) and the US Air Force signed a modification to the existing OTA to modify the scope, funding, cost share, and period of performance of the AR1 engine," the financial document states. "The modified OTA is valued at $353.8 million with the US Air Force investing five-sixths of the funding required."

The document then goes on to state that of this $353.8 million, $192.3 million has been paid so far by the Air Force, $88.2 million by Aerojet, and $9.6 million by United Launch Alliance. The remainder of the contract will be paid out by the Air Force to Aerojet between June 30, 2018, and December 2019. Aerojet said that its cash contributions to the agreement "are now complete."

In response to questions about this new financial data, Aerojet responded to Ars with the following quote, which the company attributed to Aerojet Rocketdyne Chief Communications Officer Steve Warren.

"Aerojet Rocketdyne is focused on manufacturing our first engine that will be ready for full-scale testing in 2019," Warren said. "Together with the Air Force, we have invested several hundred million dollars to advance the state of the art for US rocket propulsion and develop the AR1. We are still in an active competition and cannot comment further on plans beyond first engine completion."

In regard to this "engine completion," however, it is notable that Aerojet no longer seems on track to deliver "flight-ready" hardware by the end of next year. In a May, 2017, news release, Aerojet Rocketdyne CEO and President Eileen Drake had said the AR1 development program remained "squarely on track for flight readiness in 2019."

Battling Blue Origin

The new financial document states that, under the modified agreement, Aerojet is now scheduled to "assemble a single AR1 engine prototype by December 2019." This appears to indicate that Aerojet will run out of time and money before it can hot-fire test a full-scale version of the AR1 engine.

This financial data provides some clarity on engine development efforts at Aerojet, which has a storied history and has fiercely lobbied the US government for support in recent years. While this approach might have worked in the past, it is difficult to compete with a company like Blue Origin, where Amazon founder Jeff Bezos has contributed hundreds of millions of dollars of his own money to design, develop, and test the BE-4 engine.

Bezos' commitment has provided the US government an engine faster than Aerojet could—and with minimal federal investment. Free and faster is a hard combination to beat. Until recently, the only question about Blue Origin is whether the new company could actually build such a powerful rocket engine. After nearly a year of full-scale testing in West Texas, however, it seems that this last question has been answered.