Will Trafton, President of Sea Launch, Looks Ahead Toward Successful Business Growth

Surviving a launch failure, especially early on the company’s development, can be the most significant obstacle to overcome. Such was the case facing Sea Launch. Indeed, Sea Launch President Will Trafton does not want his company to undergo that ordeal again.

Last spring’s launch failure aboard the company’s Zenit rocket not only cost ICO Global Communications Corp. [ICO] its maiden satellite, but resulted in a stand-down of Sea Launch operations. Five months later, however, the Zenit rocket once again blasted toward space as the company returned to flight with the successful July 28 launch of PanAmSat Corp.’s [SPOT] PAS 9 satellite.

Now, Trafton is preparing his company for another launch, possibly two, as 2000 nears its end.

Looking forward, Trafton relayed to SPACE BUSINESS NEWS Editor Nick Mitsis his near-term business focus and how he plans on staying successful in a highly competitive marketplace. This is what he had to say:

SBN: What does your launch manifest look like for the remainder of the year?
Will Trafton: During this timeframe, we have Thuraya planned for this month and beyond that we are looking toward one more launch prior to the end of the year.

SBN: What is the biggest challenge facing your business model in securing contracts?
Trafton: I believe the biggest challenge for us now is the highly competitiveness nature of the industry. The demand for launch services has put pressure on prices. Margins have been reduced by competition. Likewise, we are all struggling with what is a reduced demand for launch services. Our challenge is to continue to gain contracts while keeping our margins up.

SBN: Given the highly competitive nature of the marketplace, what are some things Sea Launch is doing to make themselves more attractive to obtaining customers?
Trafton: One thing we are doing is increasing our rocket performance. We are on schedule to increase performance to 5,700 kg by the first half of 2002. Likewise, we have transitioned to a 50-day turnaround cycle. In addition, we are reducing integration time from 12 to 18 months to below 12 months. Finally, we are cutting cost but not reducing margins and not increasing risk to our customers.

SBN: Do you believe that the launch market can sustain three global launch providers?
Trafton: That’s a tough question. I have said in the past that I believe there will be a shakeout in this industry in the next three to four years. At this rate, if the demand does not increase beyond 31 spacecraft per year as predicted by COMSTAC, it is going to be tough for everyone to stay in business. It is going to be the launch service providers that have a high reliability and can provide the most value that make it. The market is in transition as launchers are upgraded. I think Sea Launch is winning the heavy-lift race right now. We are going head to head with Arianespace.

SBN: Where do you see the satellite market migrating?
Trafton: I think we will see a trend of spacecraft migration toward the 5,000-plus kg category as everyone adds more power to the systems.

SBN: What effect has the lifting of the launch quota done to your business model?
Trafton: We were not impacted by the launch quota.Our competitors, however, were. But this has not altered our marketing or sales efforts.

SBN: How does Sea Launch deal with satellite delivery delays?
Trafton: We all face this issue. Launch lots are perishable and there is virtually nothing we can do at this point to speed up delivery. Manufacturers produce spacecraft at a given rate and we all work within those timeframes.

SBN: How is Sea Launch fairing in the insurance arena? Is your company coming in above or below market rates?
Trafton: Our rates did increase after our March 12 failure and I would expect our rates to come down as we put together a string of successes. Is insurance difficult to obtain? No. Rates do vary and I expect our to come down.

SBN: What concerns you most about the future of the launcher industry?
Trafton: What concerns me the most is the demand for launch services is less than originally forecasted in an extremely competitive business. I want Sea Launch to be standing when the dust settles. I think about that a lot.

I mean you look at some of our international partners. This business is their life. Sea Launch is keeping a lot of people in jobs in the Ukraine and I think that is important. Conversely, what excites me the most about this business is simply being in the rocket business. I sit in my office and I look out my window and across Long Beach harbor I can see our vessels and the sight excites me to be a part of a cutting-edge joint venture.

SBN: What was the biggest lesson learned from the March failure?
Trafton: There is no such thing as a small change. Ground software is just as important as flight software and it has to be treated with the same discipline. We zeroed in on procedural documentation and additional training. I think overall integration is much improved and I don’t think you will, no I know you won’t, see another failure in this vehicle for some time. We are a better joint venture for this. No one likes to see failure, but it is good if you can come out of failure stronger and better. And that is where we are.

SBN: In your near-term business plan, how many more launch failures can Sea Launch weather and still remain in business?
Trafton: That’s a tough one. Quite honestly, it is something I cannot answer. It is up to the marketplace, customers and the insurance community to determine that. I can hold the business case together if I have customers. But I am not going to have customers if they don’t have customers in us as a company and in the vehicle. We, obviously, don’t want anymore failures but another one would be difficult to deal with. We all recover from failure, it has been proven over and over again within this industry. We are planning for growth.