International Launch Services arguably holds a unique position in the growing business of East-West satellite industry co-operation. With US government permission, ILS launches Western‚ satellites atop Russian launchers as well as managing Atlas launches out of Cape Canaveral, Florida or Vandenburg, California. According to Leonard Dest, executive vice-president at ILS, is considering an initial public offering, possibly as early as next year.

Speaking exclusively to Interspace at the recent Sesat launch from Baikonur (which was not an ILS-sponsored launch), Dest said ILS backlog of launch contracts is in a very health position. “ILS was created [in 1995] with a backlog of about $1 billion-worth of launch contracts. Today that backlog stands at about $3 billion, and total between 13 and 16 launch services, depending on how they are counted. The tasks are more or less equally divided between commercial Atlas and commercial Proton launches.”

ILS was born as a result of Lockheed and Martin corporations merging. Prior to that there were two independent companies, Lockheed Khrunichev Energia International (LKEI), a JV between Lockheed and Khrunichev Energia International, Russia. Independent of that were Martin Marietta’s Commercial Launch Systems which had, by heritage, control over the Atlas programme that came from Martin’s purchase of General Dynamics. In 1995 when Lockheed and Martin Marietta merged they took the two separate commercial programmes, CLS which was Atlas. and LKEI (which was responsible for Proton), put them together and created ILS.

Dest brings the story up to date: “As far as our relationship with Khrunichev and Energia is concerned, they are two pieces. Energia is a huge industrial outfit in Russia and they have a pair of Western joint ventures running. The first is with us, and the other is with the Boeing-backed Sea Launch system. Energia have indicated to us and to Khrunichev that they are going to put most of their future focus on the Zenit rocket and the Sea Launch activity. They are more and more a key supplier to ILS rather than a strategic business partner. Basically Khrunichev is taking their place and buying out Energia’s shares eventually.”

It is a matter of public record that Khrunichev is keen to increase its Western business relationships. Anatoli Kiselev, director general of Khrunichev, said in March that he wanted to develop a steady market for Russian launch services. ILS would agree, but there are limits to how many Russian launches the US government will permit. Indeed, as at the end of March there is even doubt as to what might replace the existing bilateral agreements covering US/Russian launches, due to expire in December 2001.

Indeed, reports suggest that if the US doesn’t come through with more generous arrangements, then Khrunichev might go it alone and sell its expertise on the free market. Certainly, visitors to Baikonur are impressed with the added sophistication now available for final assembly, fuelling and satellite integration. Even the EProton Club, the brand new conference, press and VIP facilities building, helps the overall impression.

ILS has adroitly parlayed its way through this minefield. Obliged to work through US department of trade restrictions, Dest says ILS cannot tell or show its Russian partners how to achieve these improvements “but we set minimum standards and requirements, and over the past five years they have stepped up to the challenge and made the sorts of improvements needed, including satellite processing, fuelling, electro-magnetic controls taking care of screening to a spacecraft’s complex electrical circuits. They are upgrading the integration area, where the satellite is mated to the upper stage, and now the last step is where the upper stage is mated with the Proton rocket.”

And clients like Loral, Hughes, Alcatel and Lockheed seem to be very happy with services offered. And, it is fair to say, with launch price and value for money. Not that ILS‚ Russian launches undercut the market. “We work with the Russians, but we also work within quotas set by the US, and part of those rules are that we operate on a wholly commercial basis, at market prices,” says Dest. “We have never been a price leader, that is undercut the market. We have the flexibility to encourage customers to make multiple purchases, block buys. We have a pricing strategy which builds in substantial discounts for multiple purchases for block buys. It is attractive to ILS and also Khrunichev, who have great difficulty in raising finance for these projects and are very dependent on cash payments made to them, so when a multiple launch order comes in, with its cash flow, this permits them greater working capital and a lower cost to the consortium, which can be passed onto customers. It works out at about 10-15 per cent saving. SES-Astra bought five of these launches, and although it has not yet been finalised the Luxembourg-based operator will likely be using its fifth Proton next year for Astra 1K. It is the same with Intelsat and the PanAmSat’s of this world..

And now ILS can offer buyers another juicy carrot, the ability at very short notice to switch between Atlas and Proton launchers. Dest: “It means customer X‚ might go for an Atlas 3, but if they choose 12 months before launch they want to switch to Proton, they can go on Proton. If we mutually agree, even as close as four to six months before launch, and agree that because of issues with, say, Atlas, then we can move to Proton.”

These benefits, plus the increases in power now coming on stream from Atlas and Proton, mean real benefits for operators. “With large propellant tanks Proton gives a satellite station keeping measured in the 20-plus years.

With ION‚ propulsion then it might give you 30 years life. Satellites are getting heavier, and our recently launched Garuda 1 weighed 5600kg, one of the largest-ever satellites to be launched. Proton, on June 4, will add the Breeze M stage which gives about 500-700kg life capability, and then in September we will introduce the Proton M, which when added to the Breeze M, on a standard trajectory, will take us to the six tonnes range, and with unique missions, will take us way over six tonnes.”