[Satellite News 04-04-11] Sea Launch has emerged from bankruptcy and has received a vote of confidence from FSS giant SES which signed a framework agreement with Sea Launch regarding possible cooperation on future launches.
In an interview with Satellite News, Sea Launch President Kjell Karlsen discussed how many contracts the company will need to sign this in order to get back on track.
Satellite News: Where is Sea Launch in its return to full business operations and launches?
Karlsen: We will take it step by step. We will have two launches this year, three next year and then we are back to our full capacity of five by 2013. However, we can maintain a healthy business with less launches than that. At this point in time, we still need three missions for 2013. We have a couple of multi-launch agreements, which could put a couple of additional launches on our manifest.
Overall, we are very optimistic we will be able to build a long-term profitable business based on the support we have received in the market. I have met most of the operator CEOs in Washington, D.C., recently, and everyone is consistent in their message. Everyone wants to see Sea Launch back in the market to provide the necessary access to space. We are building our plans on long-term supply contracts managed by our Russian partner, Energia and are building up our backlog as we speak.
Satellite News: How soon do you think you could launch a satellite for SES?
Karlsen: We certainly hope sooner rather than later. We know that SES has multi-launch agreements with ILS and Arianespace. We believe that there could be some launches outside of those agreements, and we hope that we can take part in those competitions. SES’ support for Sea Launch in the Chapter 11 restructuring was helpful in bringing us back to the market. We have a launch agreement in place with our affiliate O3b Networks, and we remain interested in exploring any first step with SES.
Satellite News: Do you think SES’ contract with SpaceX signifies a change in approach for operators towards launch alternatives?
Karlsen: I think what SES is saying to the rest of the market is that the price for launching 3-ton satellites is too high, and if that does not change, we are willing to take the risk and go with SpaceX. I understand that the prices of launch services represent a significant element of our customer’s capital expenditure and closing business cases can be tough, however, I don’t believe they are justified to focus on this issue. What you have seen over the last 10 years is that the financial returns for the industry’s main launch service providers have been non-existent. At the same time, operators continue to deliver record financial results. That said, I don’t think it is in an operator’s long-term interest to have a duopoly launch industry structure. It is the nature of our business that from time to time, every launch vehicle has had issues and this could limit access to space and be detrimental for the industry. Our investors have made a significant investment in the restructuring of Sea Launch with the intent of being successful for the long term.
Satellite News: What impact do you think Sea Launch will have on launch pricing?
Karlsen: We need to provide a fair and reasonable return to our investors. Certainly, in the 16 months we were in Chapter 11, we received a lot of support from operators who are rightfully concerned about access to space in the heavy-lift segment. It is our intent to continue to focus on the overall value we bring to our customers and balance that with our need to provide a financial return to our shareholders. As we have done in the past 10 years, we will bring long-term value to our customers through increased performance of the Zenit-3SL vehicle and other service innovations we plan to rollout in the coming months.
Satellite News: Would India or China’s entrance into the U.S. market drive prices down?
Karlsen: We have not seen much of this to date due to the regulations on the export side here in the United States. I think overall what you are seeing in the Chinese market is that costs are going up there as well. A few years ago, the great fear was that Long March was going to come back into the market and completely be out of touch with the rest of the market. I don’t know if that is going to be the case anymore. Costs are increasing in China. So far, we have only seen them in deals where they are building the satellites for themselves or developing countries where there are some traditional trade benefits for China. They are launching a non-ITAR satellite for one of our European customers, but we don’t see a big trend on that. Until the export regime is changed, we don’t see huge competition coming from them.
Satellite News: What trends do you expect to see emerge in the launch service sector over the next year?
Karlsen: I see Sea Launch returning to operations, SpaceX continuing to prove-out their system and no substantive changes to how launch vehicles are priced over the next few years. While a lot of industry talk has been focused on pricing, our conversations with satellite operators continue to focus on traditional discriminators such as securing their preferred launch schedule, providing growing lift capability and dedicated launch capability.
