XCOR Files for Chapter 7 Bankruptcy

Lynx suborbital space plane (Credit: XCOR)

MOJAVE, Calif. – Troubled XCOR Aerospace, a pioneer in reusable rocket engine technology, filed for Chapter 7 bankruptcy in federal court on Wednesday, according to court documents.

The filing will lead to the liquidation of the 18-year old company, whose engine technology was designed to power the two-person Lynx suborbital space plane XCOR was building. The vehicle, which was designed to take off and land on a runway, was only partially completed before most work on it stopped last year.

Court records indicate XCOR has assets worth between $1 million and $10 million and liabilities ranging from $10 million to $50 million. The estimated number of creditors range from 100 to 199.

The bankruptcy is the culmination of a series of financial setbacks for XCOR that saw the departure of three of its four founders and a series of layoffs.

In May 2016, the company laid off about half of its roughly 50 employees, with most of the cuts affecting the team developing Lynx. The company said it needed to focus on engine technology it was developing for United Launch Alliance’s reusable ACES upper stage.

In mid-June 2017, CEO Jay Gibson left the company when President Donald Trump nominated him to become deputy chief management officer at the Department of Defense. He was confirmed by the U.S. Senate on Tuesday.

Lynx engine hot fire. (Credit: XCOR)

Weeks after the announcement of Gibson’s departure, XCOR laid off its remaining employees due to financial issues. It hired back about half of the employees on a contract basis while interim CEO Michael Blum sought new investors. Gibson later said the layoffs were due to losing the ULA ACES engine contract.

XCOR was founded in 1999 by Jeff Greason, Dan DeLong, Doug Jones and Loretta “Aleta” Jackson after they had been laid off by Rotary Rocket, which was developing the reusable Roton rocket.

Rocket Racer (Credit: XCOR)

In 2005, the company demonstrated its EZ-Rocket during the Oshkosh Air Show in Wisconsin. The aircraft was a Rutan Long-EZ home-built aircraft with two small rocket engines in place of the propeller engine.

XCOR was back at Oshkosh three years later to demonstrate its Rocket Racer — a rocket plane built around a Velocity SE air frame with a XR-4K14 engine. The vehicle was built for the now-defunct Rocket Racing League.

Greason served as CEO and CTO until he was replaced by Gibson in March 2015. The goal was for Gibson to deal with the business side while Greason focused on a long-range plan for a fully reusable orbital system.

However, the new arrangement did not work out. Greason, DeLong and Jackson all left the company by November 2015 to form Agile Aero. Jackson, who subsequently married DeLong, died of cancer in December 2016.

The last of XCOR’s founders, Jones, accepted a position with the asteroid-mining company Deep Space Industries in July 2017.

The bankruptcy is a major setback for Midland, Texas, which had given XCOR a $10 million package to relocate there in an effort to wean its economy away from dependence on oil and gas. Only part of XCOR’s team moved to the West Texas city from the company’s headquarters in Mojave, Calif.

XCOR still has a hangar at the Mojave Air & Space Port. The company owes $42,322 in back rent to the spaceport, according to a financial update presented to the facility’s Board of Directors on Tuesday.

  • spacechampion

    I don’t know if it is worth noting but NASA administrator-nominee Jim Bridgenstine was one of those who was one of the initial, short-lived Rocking Racing League teams, Bridenstine Rocket Racing. People in that end of the spectrum of space commercialization fans seem to support him for the administrator job.

  • Vladislaw

    I wonder how much you could buy it up for .. along with all development and research notes etc..

    5mil? 10mil?

  • Henry Vanderbilt

    Well, damn. No surprise, but hardly pleasant news. There goes three years of my life plus a couple more years of my minimal income. Others put in and lost more, some far more.

    I’ve been keeping my mouth mostly shut while this all played out. But just to head off a couple of the most common misconceptions I’ve seen in other discussions of this:

    The company’s technology was not the problem. Quite the opposite.

    – The (patented) rocket engine configuration has a remarkable combination of reusability with inherent extremely high combustion efficiency *and* combustion stability. (Usually, it’s pick one: Trade away efficiency to get enough stability.) Also, (patented) cheap efficient pumps at a small-to-medium size where turbines don’t scale well. Also, the package applies really well to hydrogen and thus high-energy upper stages.

    – Lynx, meanwhile, the key thing is, the aerodynamics *close*. IE, from takeoff through Mach 3 climb through vacuum coast, reentry, high-performance glide, and landing, the configuration had been thoroughly windtunnelled and is flyable and controllable. And the company’s expertise at doing this at ridiculously high op rates and low op costs was very real. And the fly-from-an-airport operational concept scaled up very nicely to medium-airliner size, with ability to put tens of thousands of pounds of payload out of the atmosphere, then either bring it back again to a soft landing, or send it on its way. The minimal size of the initial Lynx was a dev-cost choice, not a technical constraint.

    Yeah, I was never that impressed with the suborbital tourism market either. But there were other, considerably larger markets for larger, more capable versions. (Not least the various obvious theater defense applications.) But enough on all that for the moment.

    The problem was management.

    There is a tech-startup phenomenon that’s happened often enough before that there’s a name for it: Founder’s Syndrome, where as a company grows the tech visionaries who began it are too slow to recognize that they’re not as good managers as they are techies and that they’re running beyond their management limitations. Some companies survive it. Some don’t.

    My opinion: This whole mess has been a particularly prolonged, painful, and peculiarly convoluted example of Founders Syndrome. (More detail? Maybe some other time. It’d take a book.) FWIW, it looks to me like Jeff & Dan, bless their mad-scientist souls, eventually learned their limitations and are now implementing a characteristically ingenious workaround for them at Agile Aero.

    Meanwhile, XCOR getting all this technology done, including about 2/3rds of the system integration and construction of the first Lynx prototype, plus the previous flight vehicles, plus the various engine developments (including Lynx engines running closed-cycle at reduced power plus a subscale hydrogen engine demonstrator running closed-cycle at full power) for a total burn over the years that I’d estimate at about $50 million, is nothing short of a miracle of technical vision and skill by a LOT of very smart dedicated people.

    Which all begs the question: What happens to the XCOR IP now that it’ll be up for auction?

    I see two major chunks that may be of interest out there: The mass of data that defines and enables Lynx-type vehicles, and the patents and data that enable XCOR-type engines.

    ULA could obviously use the engine tech, to get them away from (I’ve heard) paying more for upper stage engines from the Aerojet monopoly than they do for main booster engines.

    Aerojet might also want the engine tech, if only (my opinion) to add to the pile of useful rocket patents they sit on troll-like without using themselves.

    SpaceX could undoubtedly develop pump-fed hydrogen upper stage engines for themselves, providing a significant additional capability in an area that’s one of ULA’s remaining competitive edges. But they don’t have unlimited development bandwidth and the XCOR engine IP would be a significant shortcut. (Hypothetical hydrogen engine usefulness aside, they might also be interested merely to deny the IP to ULA, if they wanted to play hardball.)

    As for the Lynx IP, any of the three major US government aerospace airframe houses – Boeing, Lockheed-Martin, Northrop-Grumman – might well be interested. It’s a niche vehicle, but it could well be a useful and profitable niche.

    And then the wild-card: Someone with deep pockets interesting in getting a fast start into the rocket propulsion and/or airport-ops reusable first stage business who’d been put off till now by all the apparent baggage that came with investing in XCOR as it was. The baggage is shed now. Could be the time to make a move.

    It’ll be interesting to see who comes away with the IP when the auction ends.

  • Jimmy S. Overly

    I know Gibson’s confirmation timing is purely coincidence, but I can’t help but feel it adds insult to injury.

  • Jimmy S. Overly

    “ULA could obviously use the engine tech, to get them away from (I’ve heard) paying more for upper stage engines from the Aerojet monopoly than they do for main booster engines”

    Damn, I heard RL-10 was expensive, but I didn’t know it was *that* expensive.

  • For all of those reasons, then why not Sierra Nevada?

  • Excellent connection!

  • Henry Vanderbilt

    Or for that matter Orbital ATK.

    Lots of parties could use their own hydrogen upper stage propulsion technology. Buying XCOR’s IP for less than a few Aerojet RL-10’s? Priceless.

    FWIW, I was hearing quite recently something less than twenty million for XCOR to develop a flight-qualified RL-10 replacement. Not just a test-stand prototype, flight qualified. Not just an internal wishful-thinking guesstimate either; there was some highly qualified external input to that.

    It’d be more now, given last spring’s XCOR team is now scattered to the four winds. But still a bargain compared to the alternative.

  • I agree that for the propulsion technology, OATK would be a slam dunk. Are the technical principles willing to shepherd the technology to the new owners?

  • Kenneth_Brown

    There were many innovations at Xcor that were offered as sub-systems on their web site, but I remember one day wanting another look at their piston pump and found all of the ala carte tech no longer listed. There is an opportunity there for the right company to continue the R&D and license components to other companies if nobody wants to resurrect the Lynx spacecraft.

    It tough to put together an entire spacecraft if you have to develop everything yourself. It’s much easier if you can pull together the component parts that you need to build a craft suited for its intended task. This could make space projects more like an Arduino micro-controller where you bring together the modules for your inputs and outputs, download some drivers and spend the majority of your time creating the parts that make your product unique rather than re-inventing a lot of base layer tech.

    It would suck to have the IP purchased by a company that only wants to deny it from everybody else.

  • Dave Salt

    Nice summary, Henry.

    I really do hope Mr Bezos has the foresight to spend a fraction of his money in this direction… it would make a really nice ‘Plan B’ option for a highly reusable launch system.

  • Henry Vanderbilt

    The numerous-at-this-point technical principals would have to speak for themselves. My thought on the matter: Many are no doubt hireable. Probably not cheap, after the roller-coaster ride they went through to gain their expertise, but hireable.

    It’s also my understanding that a considerable amount of effort over the last year went into getting the IP organized and recorded. It is not, after all, as if this outcome has not been one of the obvious potential outcomes for a while now.

    My guess is, between those two factors, it’s eminently doable to spin up one or more of the key tech efforts again. It would cost considerably more than it would have to just hire the organization that existed till a few months ago. But it’s doable.

  • Henry Vanderbilt

    I’d be surprised if Blue Origin were interested enough to bid seriously. They have their own in-house hydrogen expertise already, not to mention a functioning hydrogen engine in the BE-3. A bit on the large size for a lot of applications, true. And XCOR’s IP could be a short-cut to developing a range of smaller engines – piston pumps scale across the small-to-medium engine range far more easily than turbines – also well-suited to highly-reusable in-space operations over the longer term.

    Nevertheless, I’d be surprised. I would expect them, should they see the need for such engines, to develop them in-house. It’s been their pattern so far.

  • Dave Salt

    I was thinking more along the lines of him investing in a Skunk Works type set-up that would work separately from his current development path.

    I’m still convinced there’s a place for small highly reusable systems that fly daily out of conventional airfields, as opposed to larger systems that fly weekly out of dedicated ranges. I’m also convinced that with the sort of funding Mr Bezos could provide, XCOR’s designs/IP could deliver such a system in a reasonable timescale (3-5 years?) and thereby provide a truly ‘airline-like’ transportation service to LEO.

  • The primes are notorious for arriving late to a party, but when they do, they bring $. Who buys them (and for how much) will be a big signal of what is to come over the next 5ish years.

    OATK – upper stage for NGL
    Sierra Nevada/Boeing – more spaceplanes (Dreamchaser/X-37)

    Those seem like the most likely thing to me.

  • Henry Vanderbilt

    A second string to his bow? I’d love to see that happen.

  • duheagle

    Sierra Nevada already bought Orbitec to get liquid propellant engine technology. So even should SNC be among the bidders for XCOR’s engine IP, it probably wouldn’t be willing to go as far to get it as might an outfit like Orbital with both deeper pockets and a deeper need.

  • duheagle

    The rumored price is north of $40 million a pop.

  • Yeah. That’s why I was saying each organization would buy it for different reasons. Sad to say, but the I think the AmRoc IP will go down as having helped SS1 and only a little bit SS2. Hybrids had their go this generation, but I don’t think they are going to stick this time.

  • ThomasLMatula

    How sad, I hoped they would make it, they had a lot of good ideas.

  • ThomasLMatula

    Depends on what the various creditors will settle for.

  • Henry Vanderbilt

    No, generally in these things, it depends on what other competing bids you have to top. AIUI, creditors take their legally-determined share of whatever the bankruptcy trustee can get for the assets, and have little say in the matter. (Unless they had an agreement linked to a specific asset?)

    I’m not an expert on bankruptcy. I’ve avoided having anything to do with it, till now at least. I know the allocation of the fire sale proceeds is fairly strictly predetermined – secured creditors, then unsecured ones, then theoretically various precedence classes of stockholders if there’s that much money out of the fire sale, which there almost never is.

  • No wonder you never see a 2 engine Centaur these days!

  • Henry Vanderbilt

    The last rumor I heard was $25 million a pop, but that was a few years back. A few years before that, I heard $15 million, FWIW.

    If that trend is real and not just rumor, it seems a reasonable inference that Aerojet’s pricing policy looks something like taking their annual expenses, dividing by the number of legacy engines they sell, and adding a markup.

    It would explain why Delta 4 is so expensive – Aerojet engines bottom and top. So they sell still fewer RS-68’s, so the RL-10’s cost even more.

    (Are there any other major engines they currently sell to anyone? Aside from the occasional son-of-SSME to NASA – not much of a flight rate there.)

    Anyway, it all sounds like there’s room to undercut them and still make a handsome profit, for anyone who has the technology…

  • Paul Bev.

    $38 million a pop back in 2012 according to this article,
    http://beforeitsnews.com/environment/2012/12/we-need-a-new-cheaper-upper-stage-engine-2457418.html

    Why such an expense for building the RL-10’s aside from tagging on annual expenses? Do you believe that an alternative to the RL-10 can be manufactured for a lot less…. millions less? It seems so. A close alternative was DARMA Technology which was marketing their upper stage rocket engine for $3 million a piece back in 2011.

  • Bill

    Forgot about that – makes me like him even more. Not many NASA Administrators have flown their own rocket planes. Here he is with the DKNY Bridenstine Rocket Racer: https://uploads.disquscdn.com/images/1cd7cb918910f6609e48046c9e247d9e327bc8a63d8afa99c2d9a11cc3615c40.jpg

  • ThomasLMatula

    The firm that would be the most to benefit from buying it out would be Scaled Composites using money from its parent Northrop-Grumman. It would give Sacled Composites the engine IP it needs while with Scaled Composites experience the Lynx could be quickly flying.

    The other logical firm would be VG. It would give Sir Richard the opportunity to offer dual rides in both the Lynx for a highly personalize experience and SpaceshipTwo for a group experience. It could give them a competitive edge over NS. Their engine technology could also produce a second generation reusable rocket for Launcher One.

  • duheagle

    For a lot less than a single RL-10 if the lurid rumors about the unseemly price of the things are even approximately correct.

  • duheagle

    Not looking like it, no. The scale-up issues just seem insuperable.

  • duheagle

    Yeah, Carlsbad Caverns worth of room I’d say. With a full shipset of engines for an Atlas V likely costing ULA more than SpaceX charges a paying customer for an entire mission, one appreciates the magnitude of the game of catch-up football Tory Bruno is manfully attempting to play. Vulcan may not prove to be enough of an answer, but getting rid of AJR engines top and bottom would certainly go a long way toward making up the yawning cost chasm now separating ULA from SpaceX.

    That said, the inside story on just why ULA canceled the XCOR engine contract would be something worth knowing. Given the track records of the crew that pushed Greason out, it would be easy to believe that, even with the tech more or less in-hand, that XCOR 2.0 still found a way to terminally screw the pooch managerially that finally exceeded ULA’s considerable previously demonstrated patience.

  • duheagle

    And yet Dream Chaser seems to need one. That has to play merry hell with its economics. Probably the biggest ball and chain that project is currently dragging around with it.

  • ThomasLMatula

    That is if it actually goes to a court sale and no white knight comes forward before then. The prospect of getting zero money from a sale often results in creditors become realistic in what the assets are actually worth. Hostess in its 2012 bankruptcy a good example.

  • Henry Vanderbilt

    There is good reason to believe that, corporate overhead entirely aside, an equivalent (or slightly better) engine could be manufactured for a lot less than an RL-10, yes.

  • Henry Vanderbilt

    I don’t have the inside story from ULA. But just looking at public info, it seems obvious that ULA’s owners (Boeing and Lockmart) continue to treat it as a short-term disposable cash cow, extracting hundreds of millions a year in profit while starving long-term ULA R&D.

    They have begun paying lip service to developing a new launcher since this parental abuse was written about a couple years back (http://www.space-access.org/updates/sau136.html, ” US Launch Development Policy”.)

    But given the amounts of cash they’re still extracting every quarter (public records), the major ULA layoffs, and the lack of recent announcements of progress on *any* aspect of the ACES upper stage, it seems reasonable to infer that ULA is being forced by minimal R&D funding to develop Vulcan first, then after that ACES.

    Rather than (as would make far more sense if their corporate parents were serious about ULA having a life after Atlas 5) developing Vulcan and ACES in parallel. Because ACES is what would actually give ULA a serious competitive advantage over SpaceX in performing more complex missions beyond LEO.

    Given that, starving XCOR becomes just an unfortunate side effect of Boeing and Lockmart starving ULA R&D. Seems the most likely explanation to me, FWIW.

    I don’t give high scores to XCOR’s second-gen top management either, mind. Looks to me they did a truly terrible job of communicating the company’s real assets to potential customers. But I don’t think ULA bailing out is on them.

  • Henry Vanderbilt

    At least before the XCOR propulsion team was scattered to the four winds this summer, that would have been so. Now, somewhat more – but still a bargain, for someone.

  • Rocketplumber

    Alas, he paid RRL for a team, but never got a chance to fly the aircraft.

  • Thanks for that informative summary of the successes and failures of XCOR.
    I think their main problem is that they aimed from the beginning to be a manned suborbital flight company. The examples of Virgin Galactic and Blue Origin show this requires deep pockets.

    They should reorganize to focus on the small satellite market. The number of start-ups focusing on small launchers suggests this is a real market. Their knowledge and experience with small engine development would definitely help in this regard. Plus, their knowledge of winged rockets might allow them to beat their competitors in this market in pricing by having a winged, reusable booster.

    Then, once they succeed at building a small, orbital launcher, they can proceed to building a larger booster by acquiring further investors. Remember SpaceX had to build the Falcon 1 before they could proceed to the Falcon 9. It was only after SpaceX succeeded in launching the F1 that SpaceX was able to acquire further outside investment to build the F9.

    Bob Clark

  • Agreed. If Virgin Galactic had decided to go with liquid fueled engines, they would already be flying customers by now.

    Bob Clark

  • I’m fairly sure that’s for the entire Centaur upper stage, not just the engine.

    Bob Clark

  • Jimmy S. Overly

    “…it seems obvious that ULA’s owners (Boeing and Lockmart) continue to treat it as a short-term disposable cash cow, extracting hundreds of millions a year in profit while starving long-term ULA R&D.”

    Yup, you can’t pick your parents…

  • Henry Vanderbilt

    Not a huge difference between the Centaur stage cost and the engine cost, I would expect, given the rest of the stage is mainly lightweight tankage, rcs, and a guidance package. Mainly built in house at ULA too. I expect the RL-10 is the large majority of the overall cost these days.