Astrium’s Bouvier Plots New Path In Europe

By | August 28, 2002 | Feature

Astrium is one of the main players in the European satellite manufacturing market. It has recently seen EADS take full control of the company. Astrium has undergone a widespread restructuring programme this year because commercial satellite orders have been few and far between. In an exclusive interview to Interspace Senior Editor Mark Holmes, Astrium CEO Antoine Bouvier talks about the change of ownership at his company and the role he expects it to play in industry consolidation.

Interspace: Could you tell us about the restructuring taking place at Astrium? What levels of savings are you going to make on costs through these efforts?

Bouvier: I became Astrium CEO in mid-January this year. At the time, the two shareholders, EADS and BAE Systems, asked me to propose a new organisation and restructuring plan for Astrium within the following few months. This new plan was approved in early June and has been effective since early July. One of its first objectives is to develop integration of the different activities within Astrium and of our different sites in the UK, France, Germany and Spain. We are deepening integration so that Astrium can act internally and externally as a single company. We also need to significantly reduce our cost base and substantially improve our efficiency to prepare for the new market conditions, which, as we all know, are extremely challenging. Astrium, with the rest of the space industry in Europe, has to become more efficient. We must reduce costs and lead times, and we have to adapt to the new market conditions.

We have set up four business divisions that will focus on operational activities, taking charge of business acquisitions, project management, etc. This will be a substantially different approach from our previous organisation, where all the business divisions acted more or less as subsidiaries. We now have four market segments – military communications, civil communications, Earth observation/science/navigation, and equipment and subsystems. We also want to actively seek out new business opportunities, expand our customer base and develop our activities. These are the key objectives defined by the shareholders, and the key motors of this new organisation.

Interspace: What benefits do you derive from EADS taking full control of Astrium? How will this improve the efficiency of the company? Will it affect the day-to-day running of Astrium?

Bouvier: It is important to keep in mind that this should not be seen just as a decision by BAE Systems to sell its shares in Astrium to EADS, but, rather, as part of a global scheme that includes Paradigm, the service company that will be set up for the provision of services to the UK Ministry of Defence’s Skynet 5 programme [see Interspace No. 749]. All the elements of this global scheme have to be taken into account to properly understand the spirit and intentions of this new organisation. EADS and BAE Systems will formally set up Paradigm, with a shareholding structure that is still to be defined. The strategy of BAE Systems is to focus on and develop services. It is switching its main interest from construction to services. The second thing to keep in mind is that long-term co-operation between BAE Systems and EADS will continue upon finalisation of the UK MoD contract for Skynet 5 with Paradigm. Both companies are reinforcing their space interests. I think it is important for the space community to understand that this is not simply the transfer of 25 percent of shares, but a complete reconsideration and reassessment of the respective roles of BAE Systems and EADS.

Interspace: Will it affect the day-to-day running of Astrium?

Bouvier: In the six months that I have been CEO of Astrium, dealing with both shareholders, what I have seen up to now is a close relationship between the two. In terms of establishment of objectives, responsibilities to the boards, and definition of long-term targets, I have strongly felt the convergent views shared by both shareholders. So in terms of strategy, financial targets and objectives, it will not make a big difference to have just one shareholder rather than two. What will change, however, is the fact EADS will now have the opportunity to finalise the reorganisation of its satellite and its launcher activities.

Interspace: How do you view potential consolidation in the satellite manufacturing market place? With the lack of commercial satellite orders, many see this as inevitable. What are your views on this subject? Do you see consolidation appearing first in North America or in Europe?

Bouvier: First, I would not question your statement that the market is very low, and that there are too many players competing in a depressed market. A new wave of growth will allow this market to have around 20 to 25 satellites in 2004-2005, which is the consensus view of the industry. But even with 20 to 25 communications satellites a year, we probably still have too many players. Consolidation is clearly inevitable in this industry. Nobody can say what is going to happen in the U.S., but it seems, from the discussions between U.S. manufacturers, that there is a possibility for a bundling of the U.S. interests. If we assume that consolidation takes place first in the U.S., then this gives an additional incentive for the industry in Europe to consolidate. Nevertheless, for the moment, there are no ongoing discussions between the two major European satellite manufacturers, Astrium and Alcatel, on a structural change or the potential for a full-scale merger. There are plenty of rumours, but there are no discussions between us.

Interspace: Is a link-up with Alcatel inevitable?

Bouvier: No. I would say that depending on what happens in the U.S., and in the context of consolidation at the wider industry level, which is probably inevitable, we may have an additional incentive to pursue discussions at the European level. But this is not the case at the moment. We compete fiercely with Alcatel on the telecoms market. The market is depressed and limited, which obviously raises the level of competition. It is a situation that is difficult for everybody.

Interspace: How many commercial satellite orders do you expect there to be in the next 12 months?

Bouvier: Since the beginning of this year, we have secured two orders for commercial satellites, one for Hispasat and one for Hellas-SAT. Our objective is to increase that number from two to three in 2002. This clearly depends on ongoing negotiations. Given the uncertainty of the market, this may lead to a transfer of orders from 2002 to 2003. We are ambitious and we would be more than pleased to secure a further order. Paradigm has also been granted the status of ‘preferred bidder’ for the Skynet 5 contract, which involves two satellites. Here, the objective is to wrap up the contract before the end of the year. This would give us a total of two commercial and two military satellites. The market is very volatile, but we do expect the number of satellite orders to increase in 2003-2004. We can already see some positive signals from various operators wanting to increase their fleets and develop new markets. But in terms of the recovery and the timing for an increased interest, we don’t know.

Interspace: Could you explain the significance of the contract award with the Hellas-SAT consortium? What do you see as your competitive advantages over other satellite manufacturers?

Bouvier: It is a very significant achievement for Astrium to have been selected by the Hellas-SAT consortium. The main objective for Hellas-SAT, which triggered the project, is to provide television and telecoms services for the Olympic Games in Athens in 2004. Obviously, beyond that, there is potential for new business in the region. Hellas-SAT is based on the Eurostar 2000+ model, and it will carry 30 active transponders. The Hellas-SAT joint venture is fully backed by OTE [Hellenic Telecommunications Organisation]. It is very important for us to have been selected by Hellas-SAT, as it is a mark of confidence in our Eurostar satellites. It is also a good sign for the market in general, as orders are very scarce at the moment. It is good for Astrium, and also for all satellite manufacturers, to get any positive feedback from the market.

Interspace: What role do you see Astrium playing in the development of broadband in Europe? Is success in the broadband area vital for the company’s long-term future?

Bouvier: One of the substantial drivers for telecoms satellites will be the development of broadband activities. What the timing and extent of this new business segment may be I don’t think anyone knows at this stage. There is a general impression that this market will develop, but I am not absolutely sure that anybody has all the elements to say there is a business model for operators to invest massively in these operations. This will be done step by step, probably through the progressive integration of activities in this new area of satellite business.

Interspace: What do you see as the main challenges ahead for the rest of the year and in 2003?

Bouvier: To act internally and externally as a single company, even if integration is not necessarily easy. But when you consider what Airbus has achieved, what its current market position is compared to Boeing, and its strength in terms of market approach, the right way for us to go is down the path of open integration, taking advantage of the diversity we have within our company. One of the most important challenges Astrium faces is to use that diversity and the talents of its people in different countries to create a company of excellence focusing on the needs of the customer.

Live chat by BoldChat