Two U.S. firms are striving to bring low-cost launchers to the market within the next 18 months.

Kistler Aerospace of Kirkland, Wash. plans to launch the fully reusable K-1 rocket by the end of 2005. El Segundo, Calif.-based Space Exploration Technologies (SpaceX) is hard at work on its low-cost launcher, the partially reusable Falcon 1, and is shooting for first flight this year.

A decade ago, the prospect of a thriving small-satellite market prompted a bevy of companies to design small launch vehicles, but then several multibillion-dollar satellite projects foundered. The launch market for modest-sized payloads collapsed. Several rocket ventures closed their doors forever, and Kistler slid into bankruptcy. Today, Kistler and SpaceX have something the would-be launcher companies of the 1990s did not have: signed contracts.

In Kistler’s case, NASA has agreed to pay $227.4 million for data from five flights of the K-1. NASA says it needs the flight data as it looks for ways to ease the space shuttle’s international space station resupply burden.

SpaceX, meanwhile, has announced three contracts of its own, including a roughly $6 million deal to launch an experimental Pentagon satellite on the Falcon 1’s maiden flight. SpaceX recently sold its second Falcon 1 launch to what the company would only describe as a non-U.S. space agency.

But both Kistler and SpaceX must clear considerable hurdles before reaching the launch pad with their vehicles.

SpaceX President Elon Musk said his company’s hurdles are solely technical at this stage. Development of the Falcon 1’s turbopump-fed Merlin engine is taking longer than expected.

“The engine qualification program is what’s driving the schedule right now,” Musk said in an interview. “The thing that threw us for a loop is the turbopump. People said it would be hard and they were correct.”

Musk said his team has solved the turbopump problems, but needs to complete tests of the Merlin engine before setting a launch date. He said he still hopes to launch out of Vandenberg Air Force Base, Calif., by the end of the year.

Musk, a multimillionaire by age 30 who has been funding the Falcon 1 development for the past two years out of his own pocket, originally hoped to launch by the end of 2003.

Kistler Aerospace has also seen a number of launch dates come and go in its nearly 11 years of operations. With 75 percent of the K-1 built, company officials say, its hurdles today are chiefly financial, according to company officials.

Kistler filed for Chapter 11 bankruptcy protection in July 2003, owing more than $600 million to creditors. The company has spent more than $700 million on the K-1 to date and estimates that it needs to raise a further $450 million to complete the vehicle and conduct the first launch. Kistler expects to emerge from bankruptcy stronger, its fortunes buoyed by the NASA contract.

George Mueller, Kistler’s chief executive officer, said he hopes to have the company’s financial reorganization plan approved by this autumn. The launch of K-1 would follow 13 to 18 months after that.

Between those two milestones lies the task of raising that $450 million.

That job falls to Doug Teitelbaum, the director of New York-based Bay Harbour Management LLC.

Teitelbaum said raising the money Kistler needs will be “a serious challenge” but expressed confidence in his chance of succeeding. “I’ll get it done,” he said in an interview. “I put together a $4 billion financing for NextWave that everyone said was impossible, but I did it.”

Bay Harbour is Kistler’s largest secured lender, having already invested more than $150 million in the company.

The private-equity firm stands to be Kistler’s majority owner after the reorganization, Teitelbaum said.

Teitelbaum is bullish on K-1’s market prospects both as a satellite launcher and space station cargo ship. He said Bay Harbour’s intent is to finish the K-1, not liquidate the company.

Kistler is also awaiting a ruling from the U.S. General Accounting Office (GAO) on a protest of its NASA contract.

NASA announced in February that it intended to exercise a 2001 contract with Kistler to buy pre- and post-flight data from five K-1 demonstrations.

That contract was awarded competitively under the Space Launch Initiative, a multibillion-dollar technology development effort. NASA has abandoned that initiative in favor of building a government-funded crew exploration vehicle. NASA says the Kistler data would not only be helpful to the new effort, but would also help it decide whether it can safely offload space station resupply duties to a vehicle other than the space shuttle.

SpaceX has protested on the grounds that NASA should have held a full and open competition before selecting Kistler to provide the flight data for space station resupply decisions.

NASA says in papers filed to the GAO there was no need to hold an open competition because it already had a contract with Kistler for flight data and none of the other firms that expressed interest were far enough along to demonstrate the technical ability to carry cargo to and from the station as soon as Kistler.

An attorney with the GAO’s procurement law group said a decision would be rendered by July 9, 100 days from the date the protest was filed.

Kistler officials expressed confidence that their award will be upheld. “I think this protest is without merit at best and won’t be met with any success,” Teitelbaum said.

Musk told Space News he harbors no ill will toward Kistler or NASA, but wants a fair shot at selling NASA the flight data it needs.

He also said his protest is driven more by principle than concern that the award would give Kistler a competitive advantage over SpaceX.

Meanwhile, Musk told Space News that he is looking into the possibility of buying out some of Kistler’s creditors.

“SpaceX is investigating whether or not we can offer a better deal to Kistler creditors and investors than Bay Harbour,” Musk said, “as well as whether or not such a deal would make financial sense.”

Teitelbaum said Musk was more than welcome to size up Kistler’s debt.

“My job is to maximize value,” Teitelbaum said. “We are ready to finance [Kistler] and the company has to look at whatever’s in its best interest.”