Latest News

EADS Astrium CEO Prepares For Long-Term Growth

By | November 15, 2004

      With private-equity (PE) firms investing heavily in such satellite operators as PanAmSat, New Skies Satellites and Intelsat, capital expenditures for ordering new satellites could be cut industry-wide. If capex plans for new satellites are scaled back, there will be more pressure to compete in an already bloated satellite-manufacturing industry because commercial contracts will be few and far between.

      However, there are signs for optimism. Government and military contracts are proving to be rich sources of revenue. Also, High-Definition TV (HDTV) and broadband services are emerging to help reduce the digital divide. Those services could lead demand for higher capacity satellites.

      One of the satellite manufacturers trying to maintain a strong business in difficult conditions is EADS Astrium. In a recent interview with Satellite News, EADS Astrium CEO Antoine Bouvier spoke frankly about the changing nature of the satellite-manufacturing business.

      Satellite News: What’s been happening with the company lately?

      Bouvier: We launched Eutelsat W3A, which was put into commercial service within two months. We have launched Intelsat 10-02, which was put into commercial service in two months. Furthermore, these two satellites validate the different design options of the E3000 product. Our experience is growing with the Eurostar E3000 through these launches and we are confident that we can maintain the Eurostar family’s high level of in-orbit reliability.

      We are by far the best in terms of in-orbit reliability record. This is measured by the ratio of the amount of claims we have compared to the value of the fleet in service. We are leading this industry in terms of in-orbit reliability, and we are fully committed to maintaining this position.

      We introduced two new technologies in these three satellites. Both Eutelsat W3A and Amazonas have Lithium-Ion batteries, a very efficient and mass-saving technology. We were the first – and the only company to date – to use Lithium-Ion batteries for commercial satellites after extensive ground qualification and testing. Intelsat 10-02, a very large satellite, uses plasma propulsion to maintain its orbital station and save fuel mass. Both Lithium-Ion batteries and plasma propulsion are working fine in orbit.

      Satellite News: At the EuroConsult ‘World Summit for Satellite Financing’ event in Paris a couple of months ago, a number of investment bank experts warned that companies that have been acquired by PE firms could have their capex plans cut. What ramifications could that have for the satellite-manufacturing field?

      Bouvier: We are positive about this new interest on the part of the financial community in the telecom and satellite sector. Previously, things had not been so good, with various programs where financial investors lost significant amounts of money, leading to the financial community decreasing its interest in the space industry. This renewal of interest is a very good thing for the industry, because it reflects the confidence of the financial community in the long-term perspective for the development of space activity.

      In the short term, it may not support an increased level of capital investment within the industry. The first objective of the new investors will probably be to rationalize these companies and to optimise the use of existing capacity. The PE firms probably don’t plan to stay around forever, so further consolidation within the industry could take place.

      We do not expect any markedly positive consequences in the short term for new satellite procurement, but for the medium and long term, this will mean a return of the growth potential for the space industry. It will make this industry stronger and more mature, and this is an additional lever for further consolidation.

      Satellite News: What levels of revenue growth are expected in the next 12 months?

      Bouvier: The telecom market is still quite depressed this year, as it has been for the last couple of years. This is true for both the military and civil telecom market. Nevertheless, despite these market conditions, EADS Astrium was able to stabilize its activities in 2002, and in 2003-04, we have even seen growth in terms of volume of sales, significantly replenishing the backlog. We expect a slight increase in our turnover in 2004 as compared to 2003.

      To be more specific, in the telecom market, which accounts for about one third of our business, we have the objective of consolidating our 20-percent market share — not to be considered on an annual basis because last year we sold six telecom satellites: four in the commercial market and two in the military market (Skynet 5). This year, we sold one Anik satellite to Telesat, and there are a number of ongoing Requests For Proposals with opportunities for further contracts in 2004.

      Satellite News: As we approach the end of 2004, how many contracts do you expect for this year?

      Bouvier: We have a very strong order backlog with 10 telecom satellites still to deliver, so we are not under pressure to post additional sales. But if there is an opportunity of extending our customer base and activities even further, we will not miss it. In parallel to telecom activities, we have made a number of quite interesting sales this year; one is an Earth observation satellite for Thailand. We have also sold two institutional programmes to the European Space Agency (ESA). Our objective for the long-term of securing our 20-percent market share reflects the success of Eurostar E3000.

      Satellite News: In terms of revenues, what is the balance between the commercial and institutional sides?

      Bouvier: We have three main lines of business: commercial telecom, defense and institutional (navigation, Earth observation, science). These three lines of business each account for around one third of our business. Our objective is to support their growth and to maintain an equal balance between them in the short to medium term.

      We have more than doubled sales in defense, which two years ago represented less than 15 percent of our turnover. This is mainly due to the Skynet 5 contract. We have also developed a series of new military applications for the French MOD, known as ‘military demonstrators,’ for new applications such as Early Warning. We are developing new programmes for future network applications.

      On the institutional side, we are partners in Galileo Industries, and we have a strong presence in the Earth observation and science with two ESA contracts won this year.

      Satellite News: In terms of technology, could you tell us your thoughts on Ka-band satellites as well as the potential HDTV could have on satellite manufacturers?

      Bouvier: Broadband and HDTV are the two most significant areas for growth and for development in this industry. We have seen positive initiatives, particularly in the United States and in North America. There is significant potential for growth in these new services, which will present significant potential for the satellite manufacturers.

      Broadband will deliver new applications and demand, which will generate the need for additional capacity. The introduction of WildBlue will be very closely monitored by the whole industry. HDTV will also require additional capacity; the recent DirecTV deal and the different projects in North America demonstrate a need for larger satellites, specifically Ka-band. This will fuel growth in the industry.

      Satellite News: What are major focuses for the company in terms of research and development during the next 12 months?

      Bouvier: During the past four to five years, we have absorbed the bulk of investment to renew and update our product. Now, we are reaping all the benefits of the investments we have made in the past few years with a product that will gain technical maturity and will accumulate in-orbit experience quite quickly. We have a new and updated satellite family, which will be our workhorse for a number of years.

      In terms of payload, we have the technology available for classical C-, Ku-, Ka-band missions. We are investing to improve flexibility for our customers throughout the mission lifetime. We develop a number of new technologies, including integrated RF technologies, digital signal processing and active antennas.

      Satellite News: Could you give us an update on the Amazonas situation?

      Bouvier: A few days after the launch in August, we identified a decrease in pressure in one of the two oxidizer tanks, which has been traced to a microleak of pressurant gas. We are implementing a technical investigation to fully understand the anomaly, and we are defining recovery actions that will reduce to a minimum the impact on in-orbit life.

      Hispasat has communicated that they are fully confident that Amazonas will have an orbital life of more than 10 years. This anomaly is something we have managed with the highest level of priority and attention.

      Satellite News: Do you believe the industry can continue to sustain the number of players currently involved in satellite-manufacturing?

      Bouvier: The consensus has been the market cannot sustain five or six competitors. However, it is a paradox that for a number of years there are still the same number of players. The basis of the analysts’ findings and the rationale remains the same: This market is extremely competitive and not large enough to accommodate so many competitors.

      This is also not in the interests of the customers. Customers have long-term interests to have strong manufacturers, capable of entering into a real production approach, which means increasing the volume of activity so as to be more efficient and to generate revenue for investments in the long term.

      Satellite News: What are the major challenges for EADS Astrium during the next year? What role do you see the company playing in satellite services in Europe?

      Bouvier: We have three major objectives. First, we want to continue to deliver our main programs within schedule and to the satisfaction of our customers. We have several launches this year and a number of important ongoing programs, so our first priority is to deliver.

      Second, we want to win new business, even if the market is depressed and difficult, and to prepare for the long-term growth and development of this company in defense, telecom and institutional business. We want to develop the right products and technologies to lay the foundations for the future.

      Third, we want to improve industrial efficiency through process- and product-line rationalization. In telecom, we have successfully introduced a new product line, Eurostar E3000, which is well-positioned in terms of quality, costs and reliability. It allows EADS Astrium to offer with one modular product a wide range of capacities from 4 kW to 12 kW. It has been our approach to address the most significant part of the market through a single product that offers a clear competitive advantage.

      (Contact: Remi Roland, EADS Space,

      Leave a Reply