Impact Of Proton Failure Ripples Through Industry
[Satellite News – 3-25-08] The impact of the Proton launch failure continued to resonate through the satellite industry, with EchoStar insisting that the uncertain fate of the AMC-14 satellite will not delay the expansion of its high-definition offerings and rival launch providers ready to pick up the slack if the Proton rocket is grounded for any length of time.
EchoStar Bullish Despite Analyst Concerns
The March 15 Proton launch failure left the SES Americom satellite short of its planned orbit, and the operator has not yet made a decision on what to do with the spacecraft, which is stable and performing normally.
Dish Network Corp. still plans to increase its local HD offerings by more than 60 percent throughout the next two months. "The expansion of our HD programming over the next few months will proceed as planned," Charlie Ergen, chairman, CEO and president of Dish, said in a March 18 statement. "We are fortunate to have two more satellites scheduled for launch later this year to continue our HD rollout."
Jeff Wlodarczak, a media equity analyst at Wachovia Capital Markets, is among those who think the AMC-14 satellite will only modestly affect the pay-TV providers plans. “We think the satellite launch problem is a modest negative for Dish, however, there appears to be a good chance that Dish’s delay in the launch of additional HDTV programming could only be a few months and that there will be enough life left on the satellite for SES to build and launch a replacement,” he said in a research note.
Ben Swinburne, a media equity analyst at Morgan Stanley, believed the AMC-14 problems will have a more serious impact. “While steps made to shift the satellite to its intended geostationary orbit will likely result in a reduced operational life, we view the necessity for AMC-14 to reach the intended orbit in order to utilize its complete capacity as the more important issue for Dish,” he said in a research note.
Arianespace, Boeing Tout Their Rockets
This is the second failure since September for a Proton rocket carrying a commercial satellite for an International Launch Services (ILS) customer, and Sea Launch returned to service in January after being ground for nearly a year, meaning that among the three busiest heavy-lift launch providers, only France’s Arianespace has not suffered a launch failure in the past 15 months.
In the wake of the January 2007 Sea Launch failure, Arianespace was able to add extra missions to meet the needs of some commercial satellite operators, but Jean-Yves Le Gall, chairman and CEO of Arianespace, is not sure that the launch provider can pull off the feat again due to its normal launch commitments. Arianespace is fully booked for 2008 and almost fully booked for 2009 but has space in 2010, he said.
“We have faithful customers who have made reservations ahead of time to have launch slots. We are working with these customers. We have excellent customers who have made a one-to-two-year launch window for slots, but at the end of next year, and in 2010, we have a number of slots that are available because we have decided to increase our launch capabilities. There will be eight Ariane 5 missions launched in 2009. This means 15 or 16 launch slots. This latest launch failure will not have any implications for us in the short-term, but in the mid- and long-term, it will give us a premium to offer customers.”
Boeing Launch Services could take up the slack if Russia’s Proton rocket is grounded for an extended period, said Ken Heinly, president of Boeing Launch Services. The Delta 4 could now be “an attractive choice” for customers that can neither afford to wait until the Proton returns to flight nor find a slot with another commercial launch provider, he said.
“It may be a more uncertain period for the users than the launch providers as they see manifest changing and available launch slots becoming even more scarce,” Heinly said. “I am thinking the near-term future is to some extent in the hands of the users. There is additional launch capacity out there. Certainly the Delta launch vehicles are an example. They need to decide if they are willing to pay the premium to get the reliable Delta rockets into the mix.”
But before customers can even look at the potential price of a Delta 4 launch, Boeing will need to make itself more visible in the market, Heinly said. “I was recently at the SATELLITE 2008 conference in Washington D.C.,” he said. “In one of the panel discussions of launch procurers, when they discussed the list of available launchers, Delta wasn’t even mentioned. So we still need to work on that.”
Failures To Impact Insurance Rates
Space insurers will raise premiums up to 30 percent following failures in 2007, according to the new Aon Space Market Review, Aon Corp. announced March 20.
Claims for 2007 are estimated to reach $835 million, which includes the failure of the Sea Launch rocket carrying the NSS-8 satellite in January and the September Proton failure that destroyed JCSat-11. Another 2007 claim of up to $256 million was filed after the Rascom-QAF1 satellite suffered a helium leak in December, reducing its lifetime drastically.
Ultimately, insurers looking to win business need to persuade their management of the rationale behind offering competitive rates, the review said. While 2007 was an uncharacteristic year for space claims, when set against the more reliable experience and good market profitability of the previous five years it was not inconsistent with longer-term industry trends. If insurers perceive 2007 and early 2008 as an indication of higher claims patterns to come, this could lead to tough negotiations over the coming months.
“Competition will inevitably exert downward pressure on rates, but at present it’s a battle of wills between insurers’ perceived need to charge more in response to increased claims versus the laws of supply and demand,” Peter Elson, senior managing director of Aon Space, said in a statement. “Due to high capacity, competition will be rife on attractive business and where the sums insured are low. Conversely, for less proven technology or systems with reliability concerns — especially when combined with a need for high levels of insurance — the market will prove stickier in pursuing its price targets. We’re therefore likely to see more differentiation in pricing not only between risks but also amongst insurers for any given risk.”