Dave Ryan became the general manager of Boeing Satellite Systems (BSS) at the end of February. He replaces Randy Brinkley, who is stepping down next month. The challenge for Ryan will be to keep the business ticking during the current economic sluggishness, while positioning the company for recovery. BSS derives around 60 per cent of its revenues from the government and military side. However, like a number of other players, it is desperate for the commercial market place to pick-up. In an exclusive interview to Interspace, Ryan outlines his vision for the company and identifies the challenges that lay ahead as BSS competes in a crowded and lean market place.

Interspace: How many commercial satellite orders do you expect to see this year? Pascale Sourisse of Alcatel Space believes there will be only around 12 commercial orders. What are your views?

Ryan: I agree with Pascale. We had been thinking there would be about 12 to 15 commercial satellite orders. Quite frankly, it looks a bit leaner. At Satellite 2003, there was a general consensus there was going to be around 15 satellite orders, plus or minus three. It could be because of the world economy being what it is. The fact we just went through a war with Iraq creates some uncertainty.

Interspace: Alcatel Space has just announced further restructuring due to tough market conditions. Is Boeing also looking to reduce staff? How difficult is it to build a profitable business in this area right now?

Ryan: We are staying pretty close to our current predictions. Our forecasts, even as early as last summer, were that we would be going into 2003 with roughly 6,000 people in BSS, not counting our two subsidiaries. We see that going down to something in the order of 4,500 to 5,000 by the end of 2003. [We will] probably be on the higher side of that window because we have had some additional government work that has come in.

Interspace: What percentage of your overall revenues come from the military sector? Do you expect that to increase this year and next? How have recent events in the Middle East, as well increased emphasis on national security, affected BSS?

Ryan: Around 60 per cent of work is on the government and military side … It will probably stay that percentage for the next 18 months or so. Historically, it has been just the opposite, about 60 per cent commercial and about 40 per cent military. It is a little bit early to tell in terms of the renewed emphasis on national security. We are working on some specific homeland defence issues.

Interspace: What are the major opportunities and challenges in terms of how you are going to grow the business over the next couple of years? When do you expect to see the number of commercial satellite orders reach previous levels?

Ryan: The commercial marketplace being what it is through 2004 going into 2005, I think it will be difficult to grow the commercial side of the business in the foreseeable future. We will continue to grow the military side of the business. This doesn’t mean that our emphasis will be any less on the commercial side. It is just that we suspect it is going to take a few years for the commercial market place to get back to the previous levels of 20 to 30 satellites a year worldwide. Last year was an unprecedented year, where there really were only three bids worldwide, of which we won one of them. I believe we won’t get up to the levels of 20 to 30 commercial satellite orders until at least 2006.

Interspace: How do you view the international opportunities for BSS, particularly in Europe? How do you see the satellite broadband market developing?

Ryan: The majority of our commercial contracts will continue to be international in nature, both in Asia and Europe. There will be some other orders that come out of other parts of the world too. We still see the replacement marketplace gradually coming back for some of the traditional service providers, SES, Intelsat, Eutelsat, New Skies Satellites as examples. The satellite broadband and Ka-band markets are developing, but they are going to develop more slowly than the community originally thought. My guess is that we will see continued strength in the C- and Ku-band markets.

Interspace: There has been consistent talk of consolidation in the satellite manufacturing arena because there are too many players fighting for too few contracts. Do you expect there to be consolidation and if so, when?

Ryan: Your guess is as good as mine at this point. I would have guessed that it would have happened a year ago. I think there are a couple of our competitors that are having difficult times financially, mainly because they don’t have the synergies we do with the government side of the business. With the commercial marketplace in such a downturn, it makes it more difficult for them to be viable. But, they are still hanging in there. I think there should be consolidation in the marketplace, but again we said that over a year ago.

Interspace: Will Boeing play an active role in industry consolidation? Do you expect it to happen with the U.S. satellite manufacturers first?

Ryan: As for Boeing’s view, we are always looking for strategic [partnerships] to make sure we can deliver the best quality, lowest cost products for our customers. We are always open to that. At this time, we are not looking to consolidate with any other companies. Boeing remains very dedicated to the commercial satellite marketplace and is here to stay. In terms of where it will happen first, that is an interesting one. There has certainly been indications that Astrium and Alcatel are continuing talks on possibly working together. So, it is possible that there could be consolidation in Europe before it happens in the U.S. We will just have to see.

Interspace: What do you see as your competitive advantages over other satellite manufacturers? What steps are you taking to improve on-orbit reliability?

Ryan: One of our continuing competitive advantages is that we work very hard to know our customers well. Our relationship with our customers is one of the most important things to us. We have developed over the years a very broad satellite product line with flexible capabilities on the payload that continue to be a hallmark of why people come back to Boeing for their satellites. Our competitive advantage will be and has been providing the right products to our customers. In terms of on-orbit reliability [problems], that is really localised to a couple of technologies that we put into service several years ago. Those technologies are now fully qualified and we are very confident of their performance in the future. For example, the 601HP continues to be a very reliable platform for us and a very popular one with our customers.

Interspace: What are the keys for BSS to grow profits in the next two years? How successful has last year’s realignment of Boeing’s space businesses been?

Ryan: Clearly, it is first-time quality and lean and efficient design and manufacturing. The intellectual capital we have here we leverage across the broader Boeing company, and we have been highly successful in doing that. Consequently, looking at it in a broader sense, we have very much helped Boeing in terms of increased sales revenues and earnings across the board. Boeing has taken two large military groups within the company, and combined them. That has been very successful in getting synergy with a more network-centric type of operation. [This has enabled Boeing] to give the government and military even more capabilities on their platforms so they could communicate with each other. BSS plays a key role with communications aspects enabling this to happen.

Interspace: As the new general manager of BSS, are there any major changes you are going to make in terms of the positioning the company going forward? What are the main challenges you see ahead for the company this year and in 2004?

Ryan: We are going to build on the legacy that Randy Brinkley started. We have many initiatives, which are focused on continued cost reduction and improved first-time quality in our products. This will result in even more flexibility for our customers and longer life of our satellites on-orbit. In a very lean and very conservative market place where our customers want tried and true technology, we will continue to develop next-generation satellite technology, but we will be very careful on how we put that into our offerings to make sure they are fully space-qualified and ready for flight before we offer those in the market place.

Contact: Richard Esposito, Boeing Satellite Systems, e-mail: richard.esposito@boeing.com