By James Careless
Arguably, buying a rocket these days just got more interesting. With the virtual disappearance of the non-geosynchronous (NGSO) market and a cyclical downturn in geosynchronous (GSO) launches, the world's big three launcher companies--Arianespace, Boeing (including its Delta program and its partnership in Sea Launch), and Lockheed Martin/ILS--are in a fight for survival.
"Right now life is pretty tough for the launcher industry, and I don't think things are going to improve in the next few years," observes Phil McAlister, director of Futron Corp. "The problem is that we have a growing overcapacity of vehicles, at a time when demand is going in the exact opposite direction."
Of course, for commercial satellite owners, this "capacity glut" is good news. The reason? In an effort to capture what business remains, the big three have slashed launcher prices. To say the least, "vendors are definitely willing to compromise on price these days," observes Darlene Freeman, SES' vice president of global sourcing.
Price, however, is not all that commercial satcom customers are asking for. At SES, for instance, "We want a complete commercial package: launching us on time, to specification and within budget," Freeman says. "We also want a vehicle to have achieved two successful commercial launches immediately prior to our launch. Finally, we want an open, frank relationship with our launch supplier. We expect access to their facilities, information and people throughout the process: especially if there has been a recent anomaly with one of their vehicles.
"We have two spares to launch, namely AMC 16 and AMC 18," she adds. "As AMC 16 will require a heavy lift booster, SES Americom will go with the Atlas 5, Proton, Ariane 5, Sea Launch or the Delta 4. AMC 18, which is expected to be in the 2,100 kg (4,630 lbs.) range, lends itself to a smaller launch vehicle. This said, we have a proven flight history with Arianespace as well as ILS, and consider both to be key strategic partners."
The same launch procurement standards also apply at Intelsat, another commercial satcom customer. In order to win Intelsat's business, however, launcher companies must compete in a Request for Proposals (RFP) process. Moreover, the range of satellites Intelsat uses means that one launcher does not fit all. This is why "Ariane 4 was selected for Intelsat 907," says Intelsat spokesperson Jodi Katz, "while Sea Launch and Proton M/Breeze M were chosen for the Intelsat 10s."
Clearly, as far as launchers are concerned, it is a buyers' market. Unfortunately for the big three, the cost of launching satellites has not dropped in tandem with the prices they are able to charge. Nor have any of the other costs dropped that are associated with attracting and keeping clients, such as customer service and support.
Worse yet, the usual way out for similarly cash-strapped companies--consolidating with a competitor to achieve economies of scale--seems to be a no-go as far as the launcher industry is concerned.
Granted, Boeing has saved some money by creating Boeing Launch Services, which combines the marketing and sales departments for its Delta 4 family and the Sea Launch partnership, but that is as far as the company is prepared to go. The same is true for Lockheed Martin/ILS and Arianespace, neither of whom are willing--or perhaps able--to surrender independence in return for a measure of financial relief.
The Global Launch Market: Hard Times Now, And Ahead
As reported in last month's issue of Via Satellite, 2002 was a hard year for the launcher industry, and 2003 does not look much better. "First and foremost, the collapse of the NGSO market is probably the largest contributor to the launcher industry's woes," says McAlister. "Five years ago, when the industry was gearing up to launch NGSOs for Iridium- style companies, this market looked like a winner. Now, however, that they're ready and able to service it, the big NGSO market has all but disappeared.
"We're also experiencing a predictable downturn in GSO launch demand," McAlister adds. "It's part of the natural cycle, now that many old GSOs have already been replaced in orbit. Unfortunately, when combined with the failure of the big NGSO market, the launch industry's being hit with a double whammy."
Then there is the combined telecom bust and the dot.com bomb. Collectively, these have effectively dried up venture capital for new satellite projects. Not surprisingly, this translates into fewer launches.
Finally, today's GSO satellites are lasting longer, which means they do not need to be replaced as often. Once again, fewer replacements mean fewer launches. The bottom line: according to the latest figures (2002) from the Commercial Space Transportation Advisory Committee (COMSTAC), and the FAA's Associate Administrator for Commercial Space Transportation (FAA/AST), the next 10 years is going to be relatively flat for launches.
The numbers: from a 2002 total of 27 GSOs and five NGSOs--some of these leftovers from delayed 2001 launches--COMSTAC and the FAA/AST only expect 19 GSOs and five NGSO launches in 2003. From here, the predicted annual average through to 2011 is 20.5 GSOs and 6.3 NGSOs a year.
To put this in context, in 2001 COMSTAC was predicting an annual average of 24.1 GSO launches through to 2010, while the FAA/AST was predicting annual NGSO launches of 6.7 to the same date.
For the big three, losing the NGSO business is not fatal. But still, it hurts. "Big NGSO was an important piece of our growth projections, but it wasn't everything," says Jim Rymarcsuk, ILS' vice president of business development. "We still have a solid base in the GSO market, and there's sufficient demand in this area to support the industry's main players."
"The big NGSO market may come back in the near term, but we're certainly not building it into our business plan," adds Will Trafton, president of Boeing Launch Services, vice president of Boeing Expendable Launch Systems (Delta 4), and chairman of Sea Launch. "We can respond if things change, but frankly we're not counting on it over the next two to three years."