* Talks over financial fallout from engine failure
* No final decision until Q4-Air Force’s Hyten
* Lockheed says inspecting similar satellites (Adds details, quotes, byline)
By Andrea Shalal-Esa
WASHINGTON, Feb 15 (Reuters) - The U.S. Air Force said Lockheed Martin Corp (LMT.N) may face significant financial consequences after an engine failure that prevented a new communications satellite from reaching its intended orbit.
The Air Force said it was in the middle of active negotiations with Lockheed about a problem with the $1.7 billion Advanced Extremely High Frequency satellite, which is designed to provide jam-resistant communications for high-priority military missions.
“It’s going to significant,” Air Force Major General John Hyten, director of space programs for the Air Force acquisitions office, told Reuters after a briefing on Tuesday.
Hyten declined to give any details, saying the Air Force wanted to be sure the satellite actually worked once it reached the right orbit before making an agreement with Lockheed.
That means final decision will not be made until after the satellite reaches its proper orbit, something that is now being accomplished with electric thrusters and should be achieved in the fourth quarter of fiscal 2011.
Once it reaches the correct orbit, the satellite still faces a 4-month check-out phase.
The first of six planned AEHF satellites was launched last August, but a blocked fuel line caused the satellite’s main engine to fail. That in turn will delay the launch of the second and third satellites in the program, Hyten said.
The second satellite is now slated to launch in the second quarter of fiscal 2012, a year later than planned. The third satellite should be launched eight months after the second.
Lockheed declined to give any details about its contractual negotiations with the Air Force, but said any complex “first of its kind” satellite, like the AEHF, faced inherent risk.
Lockheed spokesman Steve Tatum said the revised orbit-raising process for the satellite was on track and the company was confident it would successfully reach orbit.
He said Lockheed understood the most probable cause of the engine failure and would carefully inspect all satellites being made that were based on the same A2100 structure. It would also change the process for building future satellites.
Air Force Undersecretary Erin Conaton said the service remains committed to the AEHF satellite program, despite what she called “a very serious error.”
She said the Air Force is asking Congress to approve a revamped acquisition approach that would allow it to buy two AEHF satellites in fiscal 2012 that begins Oct. 1. The Pentagon requested $974 million for the AEHF program in a budget plan released Monday.
Conaton also praised the “incredible work and ingenuity” of Air Force officials to nudge the satellite into the correct orbit using smaller thrusters.
Without those efforts, the Air Force would have faced “a catastrophic failure” since the satellite would have remained in a useless orbit, unable to do the work it was built to do, Conaton said. (Reporting by Andrea Shalal-Esa; Editing by Gerald E. McCormick and Tim Dobbyn)