International Launch Services (ILS) is turning up the heat on launch service powerhouse Arianespace this year. The provider, which usually secures around 40 to 50 per cent of satellite launch orders annually, is hoping to improve that performance this year. ILS has had some problems, though. Last November, its Proton K/Block DM rocket failed to place the Astra 1K satellite into proper orbit because of a malfunction in the rocket’s upper stage engine. A failure review panel determined that the Block DM upper stage engine experienced excessive temperatures and was destroyed during its second ignition.ILS, a joint venture of Lockheed Martin and Russia’s Khrunichev State Research and Production Space Centre and RSC Energia, has taken steps to correct the problem with the Block DM upper stage. At the same time, it is set April 29 to launch a Proton K rocket with a Breeze M upper stage from the Baikonur Cosmodrome in Kazakhstan, carrying the AMC-9 communications satellite for SES Americom. In an exclusive interview with Senior Editor Mark Holmes, ILS president Mark Albrecht talks to Interspace about the Astra 1K failure, as well how the company aims to gain its fair share of orders in 2003.

Interspace: It has been a turbulent few months for the satellite launch industry with the failures of the Ariane 5 ECA rocket with the Eutelsat Hot Bird 7 satellite and the Proton K/Block DM rocket with the Astra 1K satellite. What lessons have you learned from these launch failures?

Albrecht: The obvious lesson that everyone takes away is that reliability is still number one in customers’ minds. We think that the space business is a risky business and we work very hard to reduce that risk. Customers understand it, but when it comes to launch service, their number one consideration is reliability.

On an individual basis, with our incident with the failure of the Block DM upper stage, we have completed our Failure Review Oversight Board, and there really is no single root cause that we were able to determine. There were [a number of] potential root causes. I don’t think [upper stage engine manufacturer RSC Energia] will ever be able to sort out which one was the problem with the DM. To be quite frank, we have not seen corrective actions that we have sufficient confidence in, that would make us eager to fly a DM in the near future.

ILS is going forward with the Breeze M upper stage, which was flown successfully for Telesat Canada at the end of December. We will be flying AMC-9 with the Breeze M at the end of April. Our manifest for Protons thereafter are exclusively with Breeze Ms. We retain the capability of flying a Block DM, but we will not put a DM on a Proton until we are completely satisfied that we understand [what happened], and Energia has made sufficient corrective actions. We are not there yet.

Interspace: How long will these corrective actions take? Is it a case of weeks rather months?

Albrecht: It is hard to say. It will [be up to] Energia. As you know the problems with the [Block] DM, even the possible root causes, are primarily concerned with contaminants. So corrective actions will have to address all of those different failure modes because [it is difficult to] distinguish which one it was. It is a complicated issue.

The corrective actions should be two-pronged – firstly, corrective actions on a go-forward basis for newly constructed DM upper stages, and secondly, corrective actions that will be necessary for DMs that exist out there in the system. The corrective actions for those that have already been assembled and are at a launch site, or at a manufacturer other than Energia, haven’t begun to be addressed yet.

Interspace: Could you give us an update on your scheduled launch of the Greek Hellas-Sat satellite aboard an Atlas V rocket? When do you think this will take place? How many contracts are you hoping to win this year in terms of new satellite launches?

Albrecht: The delay in Hellas-Sat was driven by a very low-tech problem, which our quality assurance system picked up. It had to do with [a problem] on Centaur tanks that goes all the way back to the kind of water that was used in the cooling process during the welding. We are planning to fly Hellas-Sat in early May. Things are moving very well on that programme. The spacecraft is ready. We are ready to go. It is just a case of getting a new Centaur tank on the vehicle.

In terms of contracts, we are extremely optimistic for our prospects this year. We will see 10 to 15 contracts industry-wide this year. ILS has reliably held between 40 and 50 per cent market share over the last 2 to 3 years. We think we will do at least as well this year.

Interspace: What levels of revenues are you expecting this year compared to 2002? Are you expecting revenue growth over the course of the year?

Albrecht: Our financials depend on the number of launches, and that is, of course, contingent in some regards on when satellites and spacecraft are ready. Right now we are looking at up to 10 launches between Atlas and Proton, but satellite delays, which are common, could reduce that number. And, there is always the possibility that accelerated schedules could move satellite launches [further] into the year. But, revenues should be around the same. The market is flat and the expectations are that as well.

Interspace: What are the major financial challenges for your company? With the satellite industry still going through some tough times, do you expect any internal restructuring to take place?

Albrecht: Like everyone else, we are looking at our cost structures to make sure that we have a continued effort towards reducing costs, but at the same time not increasing risk. That is one thing in our business that is vital. You want to make sure that you do nothing that compromises 100 per cent mission success. I don’t foresee any major financial restructuring this year, other than a consistent and continuous look at our cost basis, to make sure we are being efficient as we address the market.

Interspace: Insurance for new satellites is likely to increase significantly because of recent failures. What impact will increased insurance premiums for fixed satellite service players have on launch service providers?

Albrecht: Rates are going up. It comes back to reliability and the track record of the specific vehicle. Atlas over 10 years has had 63 successful launches with 100 per cent reliability. The Proton core vehicle has flown almost 300 times, and 27 times in row successfully. You look at what you have in terms of real reliability, and that is obviously going to influence rates. I think there is a capacity problem. That means insurers are going to be a little bit wary about dual-manifested payloads, because you have two satellites worth hundreds of millions of dollars on one vehicle. That is a serious problem for our competitors.

Interspace: What opportunities do you see in the military sector for ILS, particularly given your recent announcement concerning the launch of a U.S. Air Force communications satellite?

Albrecht: We estimate that the U.S. government [launches] in the intermediate-to-heavy range about 10 satellites a year. We currently compete with Boeing’s Delta 4 for those launches. We anticipate in the long-run, we will have about half of those.

Interspace: In terms of the launch market, do you think recent failures will impact your ability to generate further revenues going forward? Does the whole industry now face a credibility question? What do you see as your competitive advantages in the market place?

Albrecht: I anticipate before the end of the quarter, we will have up to three new Proton M/Breeze M orders. I think that will be ample reflection on what the market place is thinking about vehicle and reliability. It is not inconceivable that we will [get a majority of new] orders. Repeat customers are coming back, and that is evidence that the market has accepted [the Proton] as a reliable vehicle.

We have two of the world’s most reliable launch vehicles, and that is an extremely important element. Plus, they are dedicated launch vehicles, which means that we are not going to have the problem of insurability that dual-manifested missions have due to the high value [of their payloads]. We also offer mutual back-up, which means customers can be very confident that when their satellite is ready for launching, it will be launched in a very short period of time. This is extremely important for services operators as they look at business plans that get tighter and tighter. Our two vehicles are government-supported – in the sense that the Proton vehicle is used for Russian Federation missions, and the Atlas is available for U.S. government missions – so that means to the customers that these vehicles will be in the field for the long run. Mutual back-up guaranteeing schedule assurance is really the cornerstone of what our business is based on and we have been rewarded in the market place with that formula. We are confident that it will be rewarded continuously in the future.

Interspace: What are your hopes and ambitions for ILS going into 2003?

Albrecht: We like to have a very steady tempo of launches. We think that aids reliability. We would never want to get in a position where our launch vehicles are only launched once or twice a year, because it does really question the underlying reliability and the capability and confidence of the launch crews. So, we hope to have another double-digit launch year with multiple launches from both of our vehicles. We expect to capture our traditional 40 to 50 per cent, or maybe even a higher percentage, of orders this year. We will continue with our formula, which is being copied by other providers because it is such a successful formula. The problem is, you cannot create reliability. You cannot manufacture reliability. Reliability is something that comes over time with many, many launches.