Arianespace CEO Boosted By Recent ESA Backing

By | July 2, 2003 | Feature

Arianespace is trying to get back on track after a turbulent few months. The high profile launch failure in December of the Ariane 5 10-ton rocket with Eutelsat’s HOT BIRD 7 and the French space agency CNES’ STENTOR satellite onboard hit the company hard. However, things are beginning to look up. In May, European Space Agency (ESA) member states announced further financial backing, which should guarantee the long-term viability of the company. The challenge is to build a profitable business and remain a major player in the increasingly competitive launch services market. Jean-Yves Le Gall, CEO of Arianespace, talks to Interspace Senior Editor Mark Holmes about the ESA’s decision and the company’s plans to bounce back from a difficult year.

Interspace: From Arianespace’s perspective, could you tell us the importance of ESA’s announcement to provide further financial backing to Arianespace? How vital was this for the future well-being of the company?

Le Gall: Arianespace in the last weeks and months faced three crises. The first crisis was related to the market, which is shrinking. Three years ago, we had 30 spacecraft to launch and now we have just 10. The second crisis is about our competitors. A few years ago, we were almost alone, but now we have in front of us the Sea Launch, Delta 4, Proton, Atlas 5 rockets [as competitors]. So, we have many competitors in a market that is completely depressed. The third crisis Arianespace had to cope with was the failure of the first flight of the heavy-lift version of Ariane 5. We have worked a lot with the European Space Agency and its member states in order to solve these three crises. We were completely satisfied because ESA gave clear answers to all three of these crises. In terms of the market, it has been decided to deeply restructure the industry and so the resolutions of things such as Galileo will give us some comfort. To allow us to face the competition, ESA decided to implement what is called the EGAS (European Guaranteed Access to Space) programme. It will give us the same conditions as our competitors. And finally ESA decided to fund the recovery plan of Ariane 5. With the funding of this recovery plan, which is now secure, we will have the heavy-lift version of Ariane 5 taking flight next year. This point is quite important for us. The recent [ESA meeting] has been a great success since it has brought very clear and concrete answers to the questions we had to face.

Interspace: How much is the recovery plan worth?

Le Gall: The recovery plan for Ariane 5 is worth around 500 million euros ($586.4 million). The EGAS programme is worth 192 million euros ($225.1 million) per year for five years.

Interspace: Could you tell us about the importance of being able to operate the Soyuz launcher at the Spaceport in French Guiana? How will this benefit Arianespace? What impact will this have on your ability to generate further revenues?

Le Gall: Our competitors are marketing families of launch vehicles. Boeing Launch Services (BLS) has the Sea Launch and the Delta 2 and different versions of the Delta 4. ILS has different versions of the Proton and different versions of the Atlas vehicle. It is clear that we cannot compete with these competitors with just one launch vehicle. This is why it has been decided that Arianespace will have three launch vehicles. Ariane 5 is our core business. Besides that, we will have the Soyuz launched from French Guiana. The construction has begun for flights in late 2005 or early 2006. We will also have the small launch vehicle, Vega, with its first flight in 2006. Having the Soyuz gives us the capability to launch medium-class spacecraft for scientific and Earth observation purposes. This is today a market where we are not present because Ariane 5 is too big. The second thing is that Soyuz will bring us some flexibility because of its capability to launch small spacecraft to GTO [geostationary transfer orbit].

Interspace: In an interview we did with ILS president Mark Albrecht at the end of March, he said one of ILS’ competitive advantages is that it has dedicated launch vehicles, which reduces the “problem of insurability that dual manifested missions have due to the high value of their payloads.” Do you believe ILS has a competitive advantage in this regard?

Le Gall: I don’t think so. I think the key advantage of Arianespace is that we have a family of launch vehicles, which are operated from the same launch base. ILS has three different launch bases for its launch vehicles. We consolidated everything in Kourou, French Guiana, which is quite important.

Interspace: Could you tell us about the benefits of the 10-ton Ariane 5 ECA rocket and how you hope to get it back on track? Considering the initial launch failure, do you think it will be difficult to persuade satellite operators to use this version of the Ariane rocket?

Le Gall: The heavy-lift version of Ariane 5 is not really a new launch vehicle because we have a very conservative approach. In fact, the different versions of the Delta 4 and the Atlas 5 are much more different from their basic versions than the difference between the versions of Ariane. I am quite confident in this launch vehicle. We would hope to have two flights next year.

Interspace: Has the generic Ariane 5 been affected by what has happened to the Ariane 5 ECA? Over six months later, what would you say are the consequences of that launch failure? You told us in January that “the company expects to be back in the black in 2003.” Are you on track to meet this prediction?

Le Gall: No, the problem with the ECA has now been completely identified. It is limited to the nozzle of the new engine of the first stage, which is different from the Ariane 5 generic version. So, I am not concerned about this question. Today, we are recovering. We have a recovery plan, which is quite robust. We have the funding. We have had successful flights recently. In 2002, we halved our losses and we plan to be in the black this year. These are very concrete results. We are the leader in this market and we will stay the leader.

Interspace: How many orders are you hoping to gain for the rest of the year? You had 11 orders out of a total of 15 in 2002. What do you hope the 2003 figure to be? Do you expect revenues to be flat in 2003? What are your expectations for the rest of the year?

Le Gall: We have already signed three contracts and there are more contracts in the pipeline. It will be quite a depressed market this year so I do not expect as many contracts as last year, but I expect to gain the same percentage of contracts we gained last year. As I said, we plan to have the bottom line in the black by the end of 2003. The volume of the revenues will depend on the number of launches we have performed. Of course, it will be less than last year, but we expect to have quite good turnover. In 2003, we are expecting to have overall revenues in the range of $1 billion.

Interspace: Can you give us an update about the Rosetta comet exploration mission that was postponed because of the Ariane 5 trouble? When do you expect it to be launched?

Le Gall: It will fly on February 26, 2004.

Interspace: You recently won two launch contracts in India. Could you tell us the significance of the Asia-Pacific market for Arianespace?

Le Gall: I think the Asia market is quite important for us. As you know, on our last flight we launched two spacecraft for the Asia market. They were Optus C1 for Australia and B-SAT 2c for Japan. The next flight will be an Indian spacecraft. We want to continue to be present in this market.

Interspace: What are the major financial challenges facing the company for the rest of 2003? What are the strategic plans of the company?

Le Gall: We now have to integrate the results of the ministerial conference and we plan to have a seminar on this question in the coming days. But, I should tell you, I think we are now back on track. We are now completely focused on the return to flight of the heavy-lift version of Ariane 5. I am quite satisfied with our current situation.

(Contact: Mario De Lepine, Arianespace, e-mail: m.delepine@arianespace.fr)

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