By Kelly Holder
Back in the 1990s money, along with champagne, was flowing through the halls of launch vehicle companies and the global satellite industry at large. Times were good. Those years experienced a significant increase in the number of commercial launches and everyone hoped it would last. This flow of steady business propelled the launch service providers to develop new and better rockets, which proudly stood ready for liftoff on their launch pads waiting for contracts to become final.
Today, there is no way to sugarcoat the problems that exist. Unlike the robust business of yesteryear, launch service providers find themselves contending with an industry where supply outweighs demand. "The number one issue facing the launch industry in 2004 (and beyond) is overcapacity," says Philip McAlister, director of Futron, a consulting firm based in Bethesda, MD. "Launch demand for the next decade will probably be between 40 and 60 launches per year worldwide, while the available capacity is anywhere from 100 to 150 launches per year. This is going to continue to put financial stress on the industry in 2004 and beyond."
This serious dilemma has left the world's space-faring nations caught in a cycle of price wars and a super aggressive market; each trying to distinguish itself from the other in order to win launch orders from fewer customers who are now more demanding of launcher services.
A Buyer's Market
While the pool of global launch service customers has shrunk, the power those clients hold has increased. They come to the negotiating table knowing exactly what they want and offer an impressive list of demands, keeping the checkbook out of sight until they are satisfied. Across the board, many of the satellite operators sing the same tune when it comes time to procuring a launch for their payload. Even though their list of criteria--reliability, flexibility, competitive and fair pricing, and a proven launch record--have not changed throughout the years, their scrutiny for detail has.
Having been in the satellite service provider business since the 1960s, Intelsat knows a thing or two about procuring launch services for its satellites. With the launch of its 10-02 satellite planned in the second quarter of this year, and the expected launch of Telstar 8 in mid-year--pending the final closing of its acquisition of the North American satellite assets of Loral--Intelsat keeps launch companies on their toes. "[We] select launch services based on an evaluation of technical/programmatic factors, contractual terms and conditions and financial aspects," says Terry Edwards, senior director of spacecraft and launch programs management for Intelsat. "The most important technical/programmatic factor is the heritage and launch record of the launch vehicle to be used for the launch service."
And make no mistake: launch procurers are acutely aware of the competition that is out there for their business. Bridget Neville, senior vice president for engineering at Panamsat feels as many others do. "Oversupply of capacity [is the number one issue facing the launch industry.] With fewer satellite launches and more launch capacity, there's more competition for each launch." Although its launch schedule for 2004 is small--just one launch, the Galaxy 14 later this year--Panamsat operates a fleet of more than 25 satellites in orbit. And like its brethren, Panamsat is a company making its demands known. "On a top 10 list, reliability would be numbers one through eight. Then price, then flexibility," says Neville.
With a global fleet of 16 geosynchronous satellites under its operation and a heavy launch schedule planned for 2004, SES Americom is a company that will hardly go unnoticed by launch service providers. "SES Americom has a very full launch schedule this year. In early February we launched AMC 10 and in mid-May we are launching AMC 11. This summer we have another two launches planned, Worldsat 2 and AMC 15," says Monica Morgan, vice president of corporate communications for SES Americom. Having its launch vehicle contracts already in place, SES Americom's deciding factors were similar to what launch providers continue to hear. "Reliability is our number one criteria, then flexibility and fair pricing," says Morgan.
Like SES Americom, Telesat Canada's feelings regarding the launch procurement process are much the same. According to Roger Tinley, vice president of space systems for Telesat, "The satellite industry needs another year of highly reliable services from the launch industry." With more than 30 years of experience, Telesat has successfully launched 12 Anik satellites along with two Nimiq satellites, and plans to further expand its fleet with the launch of Anik F2 this spring. "We look for reliability, a competitive price, flexibility and good customer service when selecting a launch service provider. In addition we are looking for offers with innovative methods to provide financial compensation should there be a launch failure," says Tinley.
Within the Asia-Pacific region not only are some of the regional operators echoing their global operators' sentiments, but forward momentum is on the horizon for this region's launcher business. Last year, China put its first human in orbit, rejuvenating the space-based business assets of the country, which include the Long March rocket. Chinese space officials hope to have the Long March garner a significant portion of the future commercial payload sector. "Asiasat has launched two satellites on Long March and for non-U.S. made satellites, Long March is very attractive now and continued success will obviously increase its competitiveness," says Peter Jackson, executive director of Asiasat. The Hong Kong-based satellite operator has a fleet of just three satellites and no launches planned for 2004. Asiasat, however, still has a strong voice at the negotiation table every time it enters the launcher boardroom. "Reliability, unchanged product and flexibility in contract terms" are what Jackson is looking for from launchers. "If all else were equal then price would be the deciding factor," he adds.
Shin Satellite PCL of Bangkok is gearing up for its much-anticipated launch of its IPStar satellite later this year. The IPStar satellite will offer telecommunications and multimedia services to households, businesses and public organizations.
In addition to the Long March, Japan's H2A rocket will also re-enter the playing field this year, according to industry executives. The Japanese government has decided to privatize the troubled H2A launch vehicle program by 2005. Isao Yamazaki, executive chief engineer for Mitsubishi Heavy Industries, says that the rocket would return to flight later this year, following last November's launch failure.
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