PanAmSat Puts In-Orbit Satellite Woes In Perspective

By | July 21, 2003 | Feature

PanAmSat [Nasdaq: SPOT] President and CEO Joseph Wright said that technical problems aboard two of the company’s Boeing 601 model satellites now in orbit will not disrupt services to customers or have a “meaningful effect” on its finances.

Insurance coverage should help to cushion PanAmSat from potential repercussions with one of the satellites. In addition, backup systems onboard each spacecraft should provide additional years of life for each faulty spacecraft. The satellites encountering problems with their electronic xenon ion propulsion systems (XIPS) that maintain the in-orbit position of the spacecraft are the PAS-IVR and Galaxy 6B.

The minimum additional fuel life for each satellite ranges between 3 to 7.4 years beyond the time when the XIPS are no longer operable, Wright said. PanAmSat officials acknowledged that the two satellites have “no book value” and no longer provide “primary customer service.”

PanAmSat took precautions in the design of those troubled satellites by ordering two separate XIPS on each spacecraft. Each unit is capable of maintaining the satellite in its intended position. As an additional form of redundancy, each of the five remaining Boeing 601 HP satellites operated by PanAmSat has an independent bi-propellant propulsion system for secondary use to extend the fuel life on the satellites.

The Galaxy 6B satellite is the one that is not insured but it has the 7.4 years of life-sustaining bi-propellant onboard, compared to the 3 years worth of bi-propellant remaining on the PAS IVR satellite, Wright said.

PanAmSat officials insisted that the bi-propellant and the reserve capacity be added when Boeing was manufacturing the satellite, Wright said.

“We’re managing to make sure that the operations of satellites are as risk-free as possible,” Wright said. “It means customer reliability.”

Indeed, PanAmSat achieved a reliability level of 99.999996 percent last year that would rival the performance of any top operator in the world, Wright said.

PanAmSat also reported rising earnings last week for the second quarter of 2003, despite revenues that dipped to $203.6 million during the second quarter of 2003 to $209.2 million for the second quarter of last year. Cost controls helped to lift earnings per share (EPS) for this year’s second quarter to 20 cents, up from 13 cents for the same period of 2002.

“The main difference in our revenues this year compared to 2002 is that we don’t have the World Cup,” Wright said.

With an expectation that 2003 would be a “tough year” for satellite operators, PanAmSat achieved strong bottom-line results anyway, Wright said. Costs continue to be reined in to produce a “meaningful increase” in earnings and allow a substantial pre-payment on the company’s debt, he added.

That kind of cost discipline should position PanAmSat well when the satellite marketplace inevitably recovers.

–Paul Dykewicz

(Joseph Wright, PanAmSat, 203/210-8606)

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